Tony O’Reilly jnr facing threat from leader of shareholder group
But the boss of Providence Resources has maintained the level of backing he needed, writes Gavin McLoughlin
PROVIDENCE Resources chief executive Tony O’Reilly Jnr is faced with the prospect of unwelcome legal action as battle continues over the future of the company.
UK-based Richard Jennings, the leader of a small group of shareholders that has been seeking O’Reilly’s removal from the company, is behind the potential lawsuit.
Jennings — a director of equity research house Align Research — told the Sunday Independent that if O’Reilly is not removed by the board, he is prepared to take what is known as a derivative action.
This is where a shareholder brings a claim against the company for an alleged wrong not being pursued by directors.
The basis of Jennings’ complaint is the disclosure to shareholders regarding payments to drilling company Transocean after a court ruling on a legal dispute. The claim would be based on the use of the term “final payment” in a paragraph in Providence’s 2014 annual report which discusses payments to be made by Providence to Transocean.
“The ruling allowed the parties to agree the final account, with Providence making a final payment of circa $6m (net) in March 2015, against the original Transocean gross claim of $19m (net, plus interest)”.
Subsequently a successful appeal by Transocean meant Providence is due to pay up to a further $7m extra. Jennings believes the case has merit and should be heard by a judge.
Later in the annual report, Providence notes that Transocean did have the right to appeal the ruling but that the directors had considered that and were “satisfied on the basis of all information available to them that no provision is required to be recorded in the financial statements”.
A spokeswoman for Providence said the company declined to comment.
The potential lawsuit emerges as O’Reilly’s position at Providence has been coming under increased pressure from disgruntled shareholders.
However, he has retained the backing of a large majority of the company’s institutional shareholder base.
The group led by Jennings had not been ruling out seeking to requisition an egm asking shareholders to vote on O’Reilly’s position, but Providence’s corporate broker at Cenkos Securities in London said a motion for O’Reilly’s removal would be “roundly and soundly defeated”.
Providence is believed to be close to clinching a significant fundraising that would replenish its capital requirements. Jennings said that if a large fundraising was completed, “the story that the City has short memories has been proved to be not correct in this case, I believe the City has no memory whatsoever”. He added that O’Reilly was “probably the best salesman I’ve ever come across”.
Providence shares have collapsed in recent years. Having reached 707.5p in summer 2012, the shares were 13.75p as of their current suspension.
O’Reilly has deep, long-standing ties with Providence, whose roots lie in Atlantic Resources, founded by O’Reilly’s father Tony O’Reilly Snr.
In 1991 Atlantic was acquired by Conroy Petroleum and Natural Resources, which demerged certain assets into a new company named Providence in 1997.