Obsidian, activist spar over director choices
CALGARY Obsidian Energy Ltd. and activist investor FrontFour Capital traded barbs Wednesday over the appointment of new directors, which the company says would give the Connecticut-based hedge fund control over its board.
FrontFour had launched the fight for boardroom influence a day earlier, nominating four directors to the company’s nine-person board, but company executives fired back saying the dispute was a distraction from reviving its fortune.
A key point of contention is Gordon Ritchie, a retired Calgary-based investment banker, who Obsidian says was appointed at FrontFour’s suggestion in December — a claim the hedge fund denies.
“We are disappointed that after several months of attempting to work constructively with FrontFour, including the addition of Gordon Ritchie to the board at their suggestion, FrontFour has chosen to put its interests ahead of other shareholders at a critical time in the company’s history by starting a costly, time consuming and distracting proxy fight,” Obsidian chairman Jay Thornton said in a release.
Obsidian says the four directors plus Ritchie would give FrontFour a majority vote on its board.
FrontFour did suggest Ritchie as a director but Obsidian was already considering him for a board seat, said Stephen Loukas, FrontFour’s portfolio manager who is nominated by his firm as a board member. FrontFour owns 6.2 per cent of Obsidian’s stock.
“The company’s attempt to direct your attention to Mr. Ritchie and a narrative of control is hollow,” Loukas said in an email. “Mr. Ritchie then, of his own volition, joined the Obsidian board as an independent director in December 2017, explicitly on the basis that he was not a nominee of FrontFour.”
For his part, Ritchie sided with Obsidian and endorsed its current strategy and management team. “This is a challenging investment environment for all Canadian (energy companies), but I am confident when I say Obsidian Energy is on the right track,” Ritchie said in a statement.
Obsidian stock rose nearly 14.5 per cent on Wednesday to close at $1.34 on the Toronto Stock Exchange.
The composition of Obsidian’s board has been changing since former chairman and Calgary oilpatch veteran Rick George died of leukemia last August.
George was chairman through a tough period as Obsidian disclosed that a previous management team was mis-categorizing expenses, leading to a shareprice collapse even before oil prices began to slide in late 2014. It changed its name from Penn West Petroleum to Obsidian to distance itself from the scandal, which it settled in an $8.5-million deal with the U.S. Securities and Exchange Commission.
In a twist, George is the father of FrontFour portfolio manager Zachary George, who co-wrote a letter to investors Monday criticizing Obsidian ’s strategy.