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First Calgary's CEO Blamed for Failing Gas Operations in Algeria

03-25-2008

The battle between management of First Calgary Petroleums Ltd. and a dissident shareholder group has intensified with the resignation of three directors from the junior gas explorer's board.

The resignations are part of a dispute over the pace of development of a massive natural gas field in Algeria and set the stage for a confrontation over the election of a new board of directors at the annual meeting on April 8.

Waterford Finance & Investment Ltd. - a British private equity firm that represents a largely Russian clientele - said it has been alarmed by the erosionn of its investment and is seeking not only a new board but the removal of First Calgary chief executive officer Richard Anderson.

That move was supported by three First Calgary board members - including former Russian oil minister Yuri Shafranic - who have links to the Waterford group. As a result, First Calgary did not recommend those members for re-election at the meeting, and they have consequently resigned, the company said. The other departing directors are Alastair Beardsall and Keith Henry.

"Those three gentlemen were clearly aligned with the hostile shareholder group," First Calgary vice-president Jeffrey Angel said in a telephone interview. Along with company management, Mr. Angel is meeting with shareholders in London in order to build support in the forthcoming votes.

The company has proposed Roy MacLaren, a former federal cabinet minister; Stuart McDowall, an oil patch figure and former diplomat; David Savage, the firm's chief financial officer; and Kenneth Taylor, who was Canada's ambassador to Iran during the U.S. hostage crisis in 1979. A fourth director is required because one has left for personal reasons.

First Calgary doesn't currently produce any oil and gas. It raised over $250-million in a late 2007 bond deal to cover immediate project financing costs for the Algerian gas field, and expects to secure more funding later this year that should cover the costs of bringing the $1.3-billion MLE field on stream.

While production is expected by 2010, investors in the company have had a bumpy ride so far. A failed attempt to sell the firm in 2005 led to the share price plummeting from a high of $24.90 in February, 2005, to less than $3 today.

In an interview yesterday, Waterford founder Michael Kroupeev said that while the private equity firm is convinced about the strength of First Calgary's assets, the company "needs strategic guidance" on how to bring those on stream. In particular, he criticized the timing of the late 2007 bond deal, given that shares were trading at lows when it was issued. "I'm a long-standing investor who is not happy with what [Mr. Anderson] is doing," he said. "I don't want to run the company ... [but] I'm not willing to pay for his learning curve."