AS investors demanded improved results, the directors of Icon Energy were forced to defend the company’s capacity to deliver on its potentially multi-billion dollar Chinese export deal.
With the December 31 deadline looming for China’s Shenzhen SinoGas to sign off on the China LNG Gas Sales Agreement, some shareholders expressed concerns about Icon’s poor performance at its 2010 annual general meeting.
The agreement to sell 40 million tonnes of LNG to China could potentially earn the company $32 billion by 2020, but since the announcement in April shares have dropped more than 40 per cent to a lowly 19 cents.
Icon investors were sceptical that the company could even produce the volume to meet China’s demand, after disappointing results from its Lydia gas well proved commercially unviable.
Representing Icon’s second largest shareholder underneath CEO Ray James (pictured), JP Morgan Nominees Australia Limited, John Clark was particularly vocal in his criticism of the board.
“Icon Energy was listed in 1997 at 20 cents a share, last year investors came in at 30 cents a share and it’s now trading at 18 cents. So over that period of time shareholders have lost a lot of money,” says Clark.
“I compare that to Molopo which has since 1997 gone up 500 per cent, Blue Energy 50 per cent, Bow 800 per cent (and) Eastern Gas 400 per cent. So the bare comparisons are actually very disappointing.
“The ASX 300, which this company unfortunately dropped out of the other day was up 100 per cent and yet Icon was down at least 10 per cent. So this company has not performed well for its shareholders.”
Referring to the April Shenzhen SinoGas announcement, Clark told Gold Coast Business News the board ‘overpromised and under-delivered’.
In the announcement, Icon stated it would achieve ‘first gas’ by 2014, despite CEO Ray James saying the date ‘was always unrealistic’ when grilled on the issue.
“The MOU (memorandum of understanding) we signed with Shenzhen SinoGas was a non-binding MOU and the desired date by the Chinese group was 2014. Because that was in the document we had to announce that, but I emphasise that it is not binding, neither is it realistic,” says James.
“(With) the negotiations we’ve conducted with them throughout this process, many of the points of negotiation are commercially in confidence and cannot be disclosed at this time.
“The question about timing and how we would develop this project; this is not a short-term project, this is a project that would take five or six years at a minimum and in terms of getting the (gas) reserves together by this date, it’s a process that would take at least three years.
“In doing that, we would be moving from a step where we have identified prospective resources, moved those into the contingent resource category and then further into the reserve category.
“We’ve made that very plain with our discussions and presentations with shareholders that this is the process.”
James says many aspects of the agreement must pass through the Chinese Government and ‘are out of our control’. He gave no assurance that the deal wouldn’t be postponed beyond the December date, but emphasised the board is ‘working vigorously and very hard towards that’.
Icon chairman Stephen Barry was also forced to defend James’ remuneration package which, at more than $640,000 per year, is far higher than the average executive salary of a second-tier CSG explorer.
A resolution was however passed to double non-executive director’s fees from $250,000 to $500,000, despite shareholders blocking the same move at the last AGM.
Barry says the increased funding would go towards adding additional non-executive directors if and when the company needed to bolster its expertise.
With increased media attention into the environmental impacts of CSG mining on agricultural land, James’ addressed shareholders about Icon’s community initiatives.
“There is a very strong movement around the Dalby area in the Darling Downs to stop CSG operations. I can only comment by saying that much of the information that’s been published is seriously, factually wrong and there needs to be a process of education to carry these projects forward,” says James.
“People don’t like change (and) they don’t like people coming on to their properties. If you have farmed all your life and you’ve sewn your crop, you’ve harvested your crop and then all of a sudden you’ve got a drilling rig in the middle of a paddock – that’s very confronting.
“But what is Icon doing about all this in the areas where we operate? We have from day one engaged all of our landowners on a personal basis. We’ve kept them informed; explained the operation to them and by in large we’ve had people that are quite happy and we’re working well with them.”
Icon Energy has also made presentations to local councils about its activities and recently sponsored the distribution of a new board game to all school children in its operating area.
James’ says the latter was simply a ‘PR opportunity’, but an important step in engaging with the local communities.
All company resolutions were passed at Icon’s annual general meeting.
With the Chinese deal, directors remuneration and overall company performance taking the shareholders attention, little was said about Icon’s recent State Government grant for the promising ATP 855P tenement in Western Queensland.
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