Premier Oil appointment raises concerns over conflict of interest
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.