NEW YORK, June 27, 2014 /PRNewswire/ -- Lone Star Value
Investors, LP ("Lone Star Value", "we", or "us") is a significant
shareholder of Antares Energy Limited (ASX: AZZ) (AZZEF) ("Antares"
or the "Company") and is seeking to enhance the Board of Antares
(the "Board") through the election of five new independent
directors and the removal of two employee directors at a General
Meeting of Antares. Today, Lone Star Value issued a personal
letter from its founder, Jeffrey E.
Eberwein, to the shareholders of Antares.
Dear Fellow Shareholders:
I wanted to take this opportunity to tell you about myself, our
firm, why we decided to invest in Antares, and why we believe it is
so urgent to change Antares' Board at this time. Although I
founded Lone Star Value last year and Antares is our first
investment in Australia, I have
invested in Australia throughout
my career and plan to do so for a long time to come. I am
originally from Dallas, Texas and
have worked with, or invested in, energy companies for 23
years. As a senior portfolio manager at Viking Global and
Soros Fund Management, I invested significant amounts of capital
globally with a particular emphasis on resource companies.
Lone Star Value plans to be a long term investor in Australia and in Antares. In short,
we're here to stay.
We first began buying Antares stock because we saw a huge gap
between the value of its assets and the price at which its shares
were trading. We believe this gap is mainly due to Mr.
Cruickshank running the Company as his personal fiefdom at
shareholders' expense. After analysing the Company and
speaking with many frustrated shareholders, we committed to a
significant investment and hands-on involvement by enhancing
Antares' Board. We believe we can begin to close Antares'
value gap through our proposed enhancements. Our goal is
to maximise Antares' stock price over the long term – we are not
here to make a quick buck and leave the Company in a worse
position.
Mr. Cruickshank recently stated that he "listens to shareholders
and his mobile phone number is at the bottom of ASX
announcements". We believe being pro-shareholder is about
much more than giving out a mobile number. Being
pro-shareholder is about managing the Company for the benefit of
its shareholders and always placing their interests first -
this is what it means to be a fiduciary. If Mr. Cruickshank
truly places shareholder value and rights first and foremost, why
did he unilaterally cancel the US$300
million asset sale after Antares' shareholders
overwhelmingly approved it at January's extraordinary general
meeting? Mr. Cruickshank claims he subsequently (and rather
abruptly) gathered new positive information on these assets leading
him to cancel the sale, right after the vote was conducted.
Shouldn't shareholders have been given the full information Mr.
Cruickshank claims led him to cancel the sale? Our experts
have examined all public disclosure made by Antares during this
period and believe there is no new material news. Shouldn't
shareholders have been allowed to vote on whether or not the sale
should go through in light of any material changes rather than Mr.
Cruickshank deciding this for us? Also, and most importantly,
it appears Mr. Cruickshank's ultimate plan was to keep the cash at
Antares so he could reinvest it - he NEVER had a plan to sell the
Company outright or to sell the assets and return any cash to
shareholders. We believe this is why Antares' stock price
only rose to a high of $0.58 per
share after the asset sale announcement in June 2013 versus the $1+ value per share implied
by the theoretical US$300 million
proceeds. In our view, a truly shareholder-oriented CEO would
have completed the sale for US$300
million, paid off the Company's debts, and then returned the
balance in cash ($1+ per share in this case) to the
shareholders. We believe that we, as shareholders, are
capable of deciding what is in our own best interest when material
transactions are involved. We find it VERY telling that Mr.
Cruickshank never offered to let shareholders decide if they wanted
the cash returned to them at the January shareholder meeting.
We have come to the conclusion that the right way to think about
Antares -- as it is currently structured -- is that it isn't really
a proper oil and gas company – rather, it is Mr. Cruickshank's
fully-controlled, personal private equity fund. He buys and
sells assets, but shareholders never see any cash. Mr.
Cruickshank claims Lone Star Value is seeking control without
paying a takeover premium. On the contrary, we are merely
trying to restore Antares' Board to its proper balance – a Board
that works for the shareholders and with actual shareholder
representation rather than composed of management and working for
management. Why should Mr. Cruickshank have, what appears to
be, 100% personal control of Antares with his 4% ownership?
Lone Star Value is seeking to enhance Antares' Board NOT for the
purpose of personal control but rather solely for the purpose of
maximising value for ALL shareholders. We are confident that
Antares will never achieve its full potential and our shares will
never reach their full value under the current structure of near
full personal control by Mr. Cruickshank.
Antares' Board needs to be enhanced to serve two goals:
1) to create a new Board which truly represents ALL shareholders
and places their interests first and foremost; and
2) to add the talent required to help Antares realise its full
potential, most likely by forming drilling joint ventures and
eventually selling all or parts of the Company.
We strongly believe Antares' current Board is incapable of
achieving either of these goals, which is why we reluctantly came
to the conclusion that the only way these goals would ever be
realised is through significant Board changes.
As to our candidates, except for me, they are all completely
independent from Lone Star Value and have no other agenda but to
serve as shareholder representatives on the Board.
Aaron Kennon is the only candidate I
have known for a long time. He is standing for election
because his firm has been a long-suffering Antares shareholder and
he and his team have a long relationship with Antares and Mr.
Cruickshank. The other three candidates, Mr. Sharwood, Mr.
Fairhurst, and Mr. Hyman, are all recent acquaintances of Lone Star
Value and were chosen for their talent and the experience they will
bring to Antares Board for your benefit. None of these four
candidates have any business relationship with Lone Star Value and
NO commitment to vote in lock-step with me. These candidates
were referred to us and came highly recommended by people we
greatly respect in the oil and gas industry. If elected, this
new Board at Antares will represent a major upgrade in terms of the
talent, connections, and judgment required to take Antares to the
next level. In short, Mr. Cruickshank deserves credit for
taking Antares from a penny stock company to its present size, but
he desperately needs help, whether he wants it or not, for Antares
to reach the next level – and we're here to help.
Mr. Cruickshank answers many important questions with his retort
"look at what the stock price has done since I became CEO in 2008",
but this is the wrong time period. We do give Mr.
Cruickshank credit for growing value from 2008 to 2011, but since
that time, Antares has gone off the rails and Mr. Cruickshank's
true goals and motivations have become apparent. From 2008 to
2011, Antares was not focused on the Permian Basin. In 2011,
Antares took proceeds from the sale of its Eagle Ford assets in
South Texas and bought assets in
the Permian Basin of West Texas. Unfortunately, oil and
gas production volumes from the assets Mr. Cruickshank acquired
have declined over the last three years while overall Permian Basin
output has doubled. Sadly, Antares stock has massively
underperformed its Permian Basin peer group since it became a
Permian Basin pure play in 2011. Something isn't right when
production declines and a company massively underperforms its peer
group. We believe Mr. Cruickshank needs help. Why is
Mr. Cruickshank fighting our help through Board enhancements so
vehemently? Could it be to protect his position and his
lifestyle? On the Company's money, Cruickshank chose
to live in an expensive neighbourhood in Dallas. His home in
Dallas has a market value of
approximately $3 million and has
almost 7,000 square feet – hardly necessary for someone who said he
"answered the call to serve" and begrudgingly moved his family
overseas for the sake of Antares, as Mr. Cruickshank's latest
letter proclaims. Why is this expense necessary for
shareholders to bear? Most other Permian Basin operators are
headquartered in the much less fancy city of Midland, Texas, which is much closer to
Antares' assets. We believe Mr. Cruickshank is fighting Board
enhancement due to the perceived threat to his lavish lifestyle at
shareholders' expense.
Operating and drilling decisions are of tantamount importance to
an oil and gas company like Antares. Antares' Southern Star
field needs to be developed with horizontal wells, not vertical
wells. Horizontal wells are very expensive and very
complicated and Antares SHOULD NOT drill these wells on its
own without a true technical team. Our plan is to find an
industry partner to fund and drill these horizontal wells.
After the potential of Antares' assets has been proven through
horizontal drilling, then its assets can be sold for maximum
value. Over the long term, the natural and more appropriate
owner for Antares' assets, once proven, would be a larger company
with lower cost of capital and greater operating and manufacturing
expertise. Who do you think is more likely to eventually
maximize shareholder value and sell the Company to a strategic
buyer – a large shareholder serving on the Board or a CEO who wants
to preserve his lifestyle and position?
Antares' recent (June 2014)
announcement of a $19.5 million note
issuance is yet another sad example of Mr. Cruickshank needing help
in his capital markets activity. These notes have a high 10%
interest rate and dilute current shareholders' upside via their
conversion feature. Lone Star Value's candidates have the
contacts and expertise required to dramatically lower Antares' cost
of capital. Callon Petroleum, for example, recently signed a
bank deal with an interest rate of less than 4% after our
involvement and assistance to lower its cost of capital. We
hope to do the same for Antares. In addition, we commit
that, if elected, we will put up for a Board vote the use of the
$19.5 million in proceeds from the
recent note issuance to buy back Antares common shares to offset
the dilution incurred by the conversion feature of the new 10%
convertible notes.
Previously, we publicly urged the current Board of Antares not
to undertake any material transactions prior to the election of
directors at the General Meeting to ensure that material decisions
regarding the future of Antares are made by directors with a clear
mandate from shareholders. I believe the election of
directors at the 22 July General Meeting will have an enormous
impact on the future of Antares, and call upon James Cruickshank and the rest of the Board to
cease any material actions until the shareholders have spoken.
Two additional notes of mention as to why Antares needs a real
Board for proper oversight: First, we believe that Mr.
Cruickshank personally attempted to stifle the voice of Antares'
USA shareholders by telling them
not all shares could vote at the upcoming 22 July General Meeting
if they held AZZEF shares. One share, one vote is a long-held
shareholder right. It doesn't matter if these shares are held
by an Australian who purchased them on the Australian exchange or
by an American or Canadian who purchased them on a US
exchange. Shareholder voting rights are sacrosanct.
Either Mr. Cruickshank doesn't know this, which means he lacks
capital markets expertise, or he does know it and knowingly
attempted to confuse US shareholders into not voting.
Unfortunately, this is not the first time Mr. Cruickshank has
actively sought to tell US shareholders they were ineligible to
vote. Second, Mr. Cruickshank purchased for his personal
account 125,000 shares of Antares stock in June 2013 right before the announcement that
Antares was selling its assets for US$300
million[1], which caused a one-day 70% jump in the
stock. Think about this for one moment: our CEO used
company information in order to make personal
purchases from existing Antares shareholders who didn't have
the information he had. This behaviour is the very definition
of self-dealing. It shows either ignorance of the rules or an
intentional and flagrant violation of those rules – in either case,
this example once again shows Antares needs a competent Board which
is independent of management to ensure proper oversight of the
CEO.
18-6-13
|
CEO purchases 50,000
shares at $0.325
|
19- and
20-6-13
|
CEO purchases 50,000
shares at $0.325
|
24-6-13
|
CEO purchases 25,000
shares at $0.30
|
26-6-13
|
Asset sale
announcement, stock goes to $0.48
|
We urge all Antares shareholders to read carefully the materials
that Lone Star Value has mailed to them as those materials contain
important information. We call on all Antares shareholders to
vote on the blue and white proxy card to improve the Board of
Antares.
For further information please visit our website,
www.antaresvalue.com.au, or call our shareholder information line,
1300 889 468 (from within Australia) or +61 2 8022 7902 (from outside
Australia).
Sincerely Yours,
Jeffrey E.
Eberwein
Founder and CEO
Lone Star Value Management, LLC
Proxy voting enquiries please contact:
Australia:
Murray Williams
GPS
+61 2 8022 7911
MWilliams@gpsproxy.com.au
USA:
John Grau
InvestorCom
203-972-9300
x11
jgrau@investor-com.com
Media enquiries please contact:
John Hurst
Cannings Corporate Communications
+61 418 708 663
[1] Source: Change of Director's Interest ASX filings from
19/6/2013, 24/6/2013 and
25/6/2013.
SOURCE Lone Star Value Investors, LP