Pre­mier Oil ap­point­ment raises con­cerns over con­flict of in­ter­est

The Sunday Telegraph - Money & Business - - Business - By Jil­lian Am­brose Sun­day Tele­graph The

NORTH SEA ex­plorer Pre­mier Oil is fac­ing calls to de­fend the ap­point­ment of its new chair­man, who is set to take a po­si­tion on the board of one of the basin’s largest oil­field ser­vice groups later this year.

The oil com­pany sparked con­cerns of “in­evitable con­flicts of in­ter­est” last week af­ter ap­point­ing Roy Franklin, a Scots North Sea veteran of al­most four decades, to lead the board from next month. Oil in­dus­try sources told

that Mr Franklin’s forth­com­ing role as deputy chair­man of Wood Group, which pro­vides engi­neer­ing ser­vices to a large num­ber of oil ex­plor­ers in the North Sea, has ran­kled ex­ec­u­tives from both sides of the in­dus­try. Oil pro­duc­ers are said to be wary of work­ing too closely with an oil­field ser­vices com­pany whose lead­er­ship in­cludes the chair­man of a ri­val, and oil­field ser­vice com­pa­nies are said to have sim­i­lar con­cerns about fu­ture deals with Pre­mier.

“For Pre­mier this ap­point­ment couldn’t be any bet­ter. There are few men who are as deeply em­bed­ded in the North Sea. He is ab­so­lutely steeped in the in­dus­try and is about as good as it gets if you’re on the hunt for a chair­man,” said one source.

Mr Franklin, a for­mer BP ex­ec­u­tive, cur­rently holds a non-ex­ec­u­tive seat on the board of Amec Fos­ter Wheeler, as well as a place on the ad­vi­sory board of Kero­gen Cap­i­tal, which has made ma­jor in­vest­ments in Pre­mier’s North Sea ri­vals this year.

He will as­cend to the role of deputy chair­man of Wood Group fol­low­ing the group’s £2.2bn swoop on Amec FW, which is ex­pected to close later this year. Sarah Wil­son, from ad­vi­sory ser­vice Man­i­fest, said there are no ma­jor cor­po­rate gover­nance rules against hold­ing dual board po­si­tions within an in­dus­try, but it will be up to the com­pa­nies in­volved to set out how the po­ten­tial con­flict is man­aged to soothe in­dus­try fears. She said: “Con­flicts of in­ter­est abound, but it’s about how you man­age this con­flict.”

Pre­mier Oil did not set out any cor­po­rate safe­guards fol­low­ing the ap­point­ment last week and de­clined to com­ment on its plans in the wake of in­dus­try con­cern.

The com­pany has re­cently emerged from a lengthy re­struc­tur­ing of its $2.8bn of debt in the wake of the oil price crash and, ac­cord­ing to city sources, the FTSE 250 oil pro­ducer is on the brink of an­nounc­ing a new fi­nanc­ing deal that could in­clude a part­ner­ship with an oil­field ser­vice com­pany. Pre­mier is ex­pected to hand over a stake in its Tor­mount gas field in the south­ern North Sea, and the Sea Lion project in the Falk­land Is­lands, in ex­change for the cap­i­tal needed to de­velop the fields while it pays off its heavy debts.

Pre­mier is said to have ap­proached in­fra­struc­ture funds, as well as oil­field ser­vices com­pa­nies, in a bid to se­cure the deal, but Wood Group is not be­lieved to be among those who would con­sider a joint ven­ture.

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