Corporate governance policy
PANORO ENERGY ASA – CORPORATE GOVERNANCE
Panoro Energy is a Norwegian public limited company (ASA), listed on the Oslo Stock Exchange and established under Norwegian law. This document has been generated to comply with the Norwegian Accounting Act, Section §3-3b, which states that the Company should issue an annual review of its Corporate Governance principles and practice, in a document included in or referred to in the Board of Directors Report.
Norwegian listed companies are obliged to follow the principles set forth in The Norwegian Code of Practice for Corporate Governance (“the Code”), issued by the Norwegian Corporate Governance Board (NCGB). Panoro Energy seeks to comply with all the requirements covered in the current edition of the Code latest adjusted on October 30, 2014. Thus, the edition published on October 30, 2014 will apply also to the financial year 2015. The Code can be found on www.ncgb.no.
The Oslo Stock Exchange requires listed companies to publish an annual statement of their policy on corporate governance in accordance with the Code in force at the time. An overview of continuing obligations for companies listed at the Oslo Stock Exchange is available at www.oslobors.no. The following statement on corporate governance is structured the same way as the Code, thus following the 15 chapters included in the Code.
1 IMPLEMENTATION AND REPORTING ON CORPORATE GOVERNANCE
Code of Practice:
The board of directors must ensure that the company implements sound corporate governance. The board of directors must provide a report on the company’s corporate governance in the directors’ report or in a document that is referred to in the directors’ report. The report on the company’s corporate governance must cover every section of the Code of Practice. If the company does not fully comply with this Code of Practice, the company must provide an explanation of the reason for the deviation and what alternative solution it has selected. The board of directors should define the company’s basic corporate values and formulate ethical guidelines and guidelines for corporate responsibility in accordance with these values.
Corporate Governance for Panoro Energy ASA – Board responsibility and working procedures
The main objective for Panoro Energy’s Corporate Governance is to develop a strong, sustainable and competitive company in the best interest of the shareholders, employees and society at large, within the laws and regulations of the respective country. The Board of Directors and management aim for a controlled and profitable development and long-term creation of growth through well-founded governance principles and risk management.
Panoro Energy acknowledges that successful value-added business is profoundly dependent upon transparency and internal and external confidence and trust. Panoro Energy believes that this is achieved by building a solid reputation based on our financial performance, our values and by fulfilling our promises. Thus, good corporate governance combined with Panoro Energy’s Code of Conduct is an important tool in helping the Board to ensure that we properly discharge our duty.
Panoro Energy’s core values are fundamental in all our efforts, and we always strive to be entrepreneurial, consistent, caring and open.
The Board will give high priority to finding the most appropriate working procedures to achieve, inter alia, the aims covered by these Corporate Governance guidelines and principles.
Financial and internal control, as well as short- and long-term strategic planning and business development, all according to the Panoro Energy business idea and vision and applicable laws and regulations, is our responsibility and the essence of our work.
The Board will strive to work as an active and dynamic forum, acting in the best interest of Panoro Energy and its beneficiaries. The Board is headed by the Chairman of the Board. The responsibility of the Chairman is to lead the work of the Board, and to ensure that this is in accordance with Norwegian law and the Corporate Governance directives.
Establishing good communication and reporting routines with the Chief Executive Officer (CEO) and management is the foundation of the Board’s work. The Chairman of the Board shall hence be in contact with the CEO to ensure that members of the Board are provided with information needed to follow and analyze the financial position and planning and the development of Panoro Energy.
The Board also acknowledges that our varied expertise, capacity, ethics and critical views are important factors in creating a good dynamic working environment in the Board meetings – and hence contributes to value added decisions and development for Panoro Energy.
Both as a forum and individuals, we must identify ourselves with the Panoro Energy culture and the Code of Conduct and encourage implementation and development of an ethical and responsible corporate environment. The Company has prepared a policy which describes the Company’s ethical and corporate social responsibility statement, hereunder the manner its activities affect people, society and the environment and how the Company envisages undertaking this responsibility.
To obtain the above we must be open minded, be aware of our responsibilities and evaluate our own Board work and contributions on a regular basis.
No deviations from the Code of Practice.
Code of Practice: The company’s business should be clearly defined in its articles of association. The company should have clear objectives and strategies for its business within the scope of the definition of its business in its articles of association. The annual report should include the business activities clause from the articles of association and describe the company’s objectives and principal strategies.
Panoro Energy ASA is an independent E&P company based in London and listed on the Oslo Stock Exchange with ticker PEN. The Company holds high quality exploration and development assets in West Africa, namely the Dussafu License offshore southern Gabon, and OML 113 offshore western Nigeria. Both assets have discoveries with approved Field Development Plans. In addition to discovered hydrocarbon resources and reserves, both assets also hold significant exploration potential.
The Company’s business is defined in the Articles of Association § 2, which states:
“The Company’s business shall consist of exploration, production, transportation and marketing of oil and natural gas and exploration and/or development of other energy forms, sale of energy as well as other related activities. The business might also involve participation in other similar activities through contribution of equity, loans and/or guarantees.”
Panoro Energy currently has one reportable segment, by geographic area being West Africa. The following summary describes the operations in these segments:
Exploration and production of oil and gas in West Africa
In West Africa the Company participates in two licenses in Nigeria and Gabon.
Our vision is to use our experience and competence in enhancing value in projects in West Africa to the benefit of the countries we operate in and the shareholders of the Company.
We have a dedicated, high-energy team that supports this.
No deviations from the Code of Practice.
3 EQUITY AND DIVIDEND
Code of Practice: The company should have an equity capital at a level appropriate to its objectives, strategy and risk profile. The board of directors should establish a clear and predictable dividend policy as the basis for the proposals on dividend payments that it makes to the general meeting. The dividend policy should be disclosed. Mandates granted to the board of directors to increase the company’s share capital should be restricted to defined purposes. If the general meeting is to consider mandates to the board of directors for the issue of shares for different purposes, each mandate should be considered separately by the meeting. Mandates granted to the board should be limited in time to no later than the dates of the next annual general meeting. This should also apply to mandates granted to the board for the company to purchase its own shares.
Panoro Energy’s Board of Directors will ensure that the Company at all times has an equity capital at a level appropriate to its objectives, strategy and risk profile. The oil and gas E&P business is highly capital dependent, requiring Panoro Energy to be sufficiently capitalized. The Board needs to be proactive in order for Panoro Energy to be prepared for changes in the market.
Mandate granted to the Board to increase the Company’s share capital is restricted to defined purposes.
Mandates granted to the Board for issue of shares for different purposes will each be considered separately by the General Meeting.
Mandates granted to the Board are limited in time to the following year’s Annual General Meeting (the “AGM”).
The Articles of Association do not authorize the Board of Directors to decide on share buy-backs or issuance of new equity.
Panoro Energy is in a phase where investments in the Company’s operations are required to enable future growth, and it is therefore not in a position to distribute dividends. Payment of dividends will be considered in the future based on the Company’s capital structure and dividend capacity as well as the availability of alternative investments.
No deviations from the Code of practice.
4 EQUAL TREATMENT OF SHAREHOLDERS AND TRANSACTIONS WITH CLOSE ASSOCIATES
Code of Practice: The company should only have one class of shares. Any decision to waive the pre-emption rights of existing shareholders to subscribe for shares in the event of an increase in share capital should be justified. Where the board of directors resolves to carry out an increase in share capital and waive the pre-emption rights of existing shareholders on the basis of a mandate granted to the board, the justification should be publicly disclosed in a stock exchange announcement issued in connection with the increase in share capital. Any transactions the company carries out in its own shares should be carried out either through the stock exchange or at prevailing stock exchange prices if carried out in any other way. If there is limited liquidity in the company’s shares, the company should consider other ways to ensure equal treatment of all shareholders. In the event of any not immaterial transactions between the company and shareholders, a shareholder’s parent company, members of the board of directors, executive personnel or close associates of any such parties, the board should arrange for a valuation to be obtained from an independent third party. This will not apply if the transaction requires the approval of the general meeting pursuant to the requirements of the Public Companies Act. Independent valuations should also be arranged in respect of transactions between companies in the same group where any of the companies involved have minority shareholders. The company should operate guidelines to ensure that members of the board of directors and executive personnel notify the board if they have any material direct or indirect interest in any transaction entered into by the company.
Panoro Energy has one class of shares representing one vote at the General Meeting. The Articles of Association contain no restrictions regarding the right to vote.
Any acquisition of own shares will be at market price, and the Company will not deviate from the principle of equal treatment of all shareholders. Any decision to deviate from the principle of equal treatment by waiving the pre-emption rights of existing shareholders to subscribe for shares in the event of an increase in share capital will be justified. Such deviation will be made only if in the common interest of the shareholders and the Company.
The Board has at the AGM in 2015 been granted a power of attorney by the General Meeting to acquire 10% the Company’s own shares and issue new shares of upto 10% of the share capital as of the date of the AGM. The power of attorney is valid for one year from the date of AGM. If the Board of Directors resolves to carry out an increase in share capital on the basis of a mandate granted to the Board, the justification for waiving the pre-emption rights of existing shareholders will be disclosed in the stock exchange announcement of the increase in share capital.
In the event that the Company carries out any transactions in its own shares, these will be carried out through a regulated marketplace at market price. If there is limited liquidity in the Company’s shares at the time of such transaction, the Company will consider other ways to ensure equal treatment of all shareholders.
All Board members, employees of the Company and close associates must clear transactions in the Company’s shares or other financial instruments related to the Company prior to any transaction. All transactions between the Company and shareholders, a shareholder’s parent company, members of the Board of Directors, executive personnel or close associates of any such parties, are governed by the Code of Practice and the rules of the Oslo Stock Exchange in addition to statutory law. Any transaction with close associates will be evaluated by an independent third party, unless the transaction requires the approval of the General Meeting pursuant to the requirements of the Norwegian Public Limited Liabilities Companies Act. Independent valuations will also be arranged in respect of transactions between companies in the same Group where any of the companies involved have minority shareholders. Any transactions with related parties, primary insiders or employees shall be made in accordance with Panoro Energy’s own instructions for Insider Trading.
The Company has guidelines to ensure that members of the Board and executive personnel notify the Board if they have any material direct or indirect interest in any transaction entered into by the Company.
No deviations from the Code of practice.
5 FREELY NEGOTIABLE SHARES
Code of Practice: The company’s shares must, in principle, be freely negotiable. Therefore, no form of restriction on negotiability should be included in a company’s articles of association
The Panoro Energy share is listed on the Oslo Stock Exchange. There are no restrictions on negotiability in Panoro Energy’s Articles of Association. Hence Panoro Energy’s shares are freely negotiable, and there are no restrictions on buying or selling the shares in Norway other than those required by statutory Norwegian law.
No deviations from the Code of Practice.
6 GENERAL MEETING
Code of Practice: The board of directors should take steps to ensure that as many shareholders as possible may exercise their rights by participating in general meetings of the company, and that general meetings are an effective forum for the views of shareholders and the board.
Such steps should include:
– making the notice calling the meeting and the support information on the resolutions to be considered at the general meeting, including the recommendations of the nomination committee, available on the company’s website no later than 21 days prior to the date of the general meeting
- ensuring that the resolutions and supporting information distributed are sufficiently detailed and comprehensive to allow shareholders to form a view on all matters to be considered at the meeting
setting any deadline for shareholders to give notice of their intention to attend the meeting as close to the date of the meeting as possible
- the board of directors and the person chairing the meeting making appropriate arrangements for the general meeting to vote separately on each candidate nominated for election to the company’’’s corporate bodies
- ensuring that the members of the board of directors and the nomination committee and the auditor are present at the general meeting
making arrangements to ensure an independent chairman for the general meeting
Shareholders who cannot attend the meeting in person should be given the opportunity to vote. The company should:
– provide information on the procedure for representation at the meeting through a proxy,
- nominate a person who will be available to vote on behalf of shareholders as their proxy
- to the extent possible prepare a form for the appointment of a proxy, which allows separate voting instructions to be given for each matter to be considered by the meeting and for each of the candidates nominated for election.
The AGM is the Company’s highest body. Panoro Energy’s Articles of Association and the Norwegian Public Limited Liabilities Companies Act stipulate the role and mandate of the AGM. The Articles of Association do not limit, expand or deviate from the rules concerning the General Meeting as set forth in Chapter 5 of the Norwegian Public Limited Liabilities Companies Act. Panoro Energy’s AGM will be held at the latest by the end of June each year.
The Board of Directors take the following necessary steps to ensure that as many shareholders as possible may exercise their rights by participating in General Meetings of the Company, and to ensure that General Meetings are an effective forum for the views of shareholders and the Board.
An invitation and agenda (including proxy) will be sent out 21 days prior to the meeting to all shareholders in the Company. The invitation will also be distributed as a stock exchange notification. The invitation and support information on the resolutions to be considered at the General Meeting will furthermore be posted on the Company’s website www.panoroenergy.com no later than 21 days prior to the date of the General Meeting.
The recommendation of the Nomination Committee will normally be available on the Company’s website at the same time as the notice. However, due to the process related to the composition of the Board may take more time than expected, a later publication of the recommendation may from time to time occur. Please note that statutory Norwegian company law has no specific requirements as to when such recommendation shall be made available to the shareholders.
Panoro Energy will ensure that the resolutions and supporting information distributed are sufficiently detailed and comprehensive to allow shareholders to form a view on all matters to be considered at the meeting.
According to Article 7 of the Company’s Articles of Association, registrations for the Company’s General Meetings must be received at least five calendar days before the meeting is held.
Arrangements for the General Meeting to vote separately on each matter and each candidate nominated for the Company’s corporate bodies will be made. However, in the event that there are neither objections to the proposed composition of the Board of Directors nor proposed additional candidates, then it may be proposed to the General Meeting to vote on the Board of Directors en bloc.
The Chairman of the Board and the CEO of the Company are normally present at the General Meetings. Other Board members and the Company’s auditor will aim to be present at the General Meetings. Members of the Nomination Committee are requested to be present at the AGM of the Company. An independent chairman for the General Meeting will, to the extent possible, be appointed. Normally the General Meetings will be chaired by the Company’s corporate lawyer.
Shareholders who are unable to attend in person will be given the opportunity to vote. The Company will nominate a person who will be available to vote on behalf of shareholders as their proxy. Information on the procedure for representation at the meeting through proxy will be set out in the notice for the General Meeting. A form for the appointment of a proxy, which allows separate voting instructions for each matter to be considered by the meeting and for each of the candidates nominated for elections will be prepared. Dividend, remuneration to the Board and the election of the auditor, will be decided at the AGM. After the meeting, the minutes are released on the Company’s website.
Separate directions for a calling notice for the AGM have been established.
No deviations from the Code of Practice.
7 NOMINATION COMMITTEE
Code of Practice: The company should have a nomination committee, and the general meeting should elect the chairperson and members of the nomination committee and should determine the committee’s remuneration. The nomination committee should be laid down in the company’s articles of association. The general meeting should stipulate guidelines for the duties of the nomination committee. The members of the nomination committee should be selected to take into account the interests of shareholders in general. The majority of the committee should be independent of the board of directors and the executive personnel. At least one member of the nomination committee should not be a member of the corporate assembly, committee of representatives or the board. No more than one member of the nomination committee should be a member of the board of directors, and any such member should not offer himself for re-election to the board. The nomination committee should not include the company’s chief executive or any other executive personnel. The nomination committee’s duties are to propose candidates for election to the corporate assembly and the board of directors and to propose the fees to be paid to members of these bodies. The nomination committee should justify its recommendations. The company should provide information on the membership of the committee and any deadlines for submitting proposals to the committee.
The Company has stated in Section 8 of its Articles of Association that it shall have a Nomination Committee consisting of 2 to 3 members to be elected by the AGM for a two year period.
The AGM elects the members and the Chairperson of the Nomination Committee and determines the committee’s remuneration. The Company will provide information on the membership of the Nomination Committee on its website. The Company will further give notice on its website, in good time, of any deadlines for submitting proposals for candidates for election to the Board of Directors and the Nomination Committee.
The Company aims at selecting the members of the Nomination Committee taking into account the interests of shareholders in general. The majority of the Nomination Committee shall as a rule be independent of the Board and the executive management. The Nomination Committee currently consists of three members, all of whom are independent of the Board and the executive management.
The Nomination Committee’s duties are to propose to the General Meeting shareholder elected candidates for election to the Board, and to propose remuneration to the Board. The Nomination Committee justifies its recommendations and the recommendations take into account the interests of shareholders in general and the Company’s requirements in respect of independence, expertise, capacity and diversity.
The AGM will stipulate guidelines for the duties of the Nomination Committee.
The members of the Nomination committee currently receive remuneration for their work according to the following rates per year:
Chair of the Nomination Committee: NOK 40,000
Member of the Nomination Committee: NOK 30,000
No deviations from the Code of Practice.
8 CORPORATE ASSEMBLY AND BOARD OF DIRECTORS – COMPOSITION AND INDEPENDENCE
Code of Practice: The composition of the corporate assembly should be determined with a view to ensuring that it represents a broad cross-section of the company’s shareholders. The composition of the board of directors should ensure that the board can attend to the common interests of all shareholders and meets the company’s need for expertise, capacity and diversity. Attention should be paid to ensuring that the board can function effectively as a collegiate body. The composition of the board of directors should ensure that it can operate independently of any special interests. The majority of the shareholder-elected members of the board should be independent of the company’s executive personnel and material business contacts. At least two of the members of the board elected by shareholders should be independent of the company’s main shareholder(s). The board of directors should not include executive personnel. If the board does include executive personnel, the company should provide an explanation for this and implement consequential adjustments to the organization of the work of the board, including the use of board committees to help ensure more independent preparation of matters for discussion by the board, cf. Section 9. The chairman of the board of Directors should be elected by the general meeting so long as the Public Companies Act does not require that the chairman must be appointed either by the corporate assembly or by the board of directors as a consequence of an agreement that the company shall not have a corporate assembly. The term of office for members of the board of directors should not be longer than two years at a time. The annual report should provide information to illustrate the expertise of the members of the board of directors, and information on their record of attendance at board meetings. In addition, the annual report should identify which members are considered to be independent. Members of the board of directors should be encouraged to own shares in the company.
The composition of the Board ensures that the Board can represent the common interests of all shareholders and meets the Company’s need for expertise, capacity and diversity. The current Board functions effectively as a collegiate body and consists of five Directors, representing a wide range of experience including shipping, offshore, energy, banking and investment. The composition of the Board ensures that it can operate independently of any special interests. The Board does not include executive personnel, and all members are independent of the main shareholders and material business contacts. Members of the Board are elected for a period of two years. Recruitment of members of the Board will be phased so that the entire Board is not replaced at the same time. The Chairman of the Board of Directors is elected by the General Meeting.
The Company has not experienced a need for a permanent deputy Chairman. If the Chairman cannot participate in the Board meetings, the Board will elect a deputy Chairman on an ad-hoc basis.
The Company’s website and annual report provides detailed information about the Board members expertise, independence and information on the Board members’ record of attendance at Board meetings.
The Board is aware of the need for diversification of its members in order to add value and to best serve the common interests of Panoro Energy and its shareholders (particularly with respect to expertise, experience, social skills, independence, flexibility and time capacity). The Board needs to be able to work as a forum in the best interest of Panoro Energy and its shareholders.
The Company has a policy whereby the members of the Board of Directors are encouraged to own shares in the Company, but to dissuade from a short-term approach which is not in the best interests of the Company and its shareholders over the longer term.
Between July 9, 2015 and March 31, 2016, due to the resignation of an elected board member Ms. Silje Augustson in July 2015, the Company’s board composition was not in compliance with the gender equality requirement of section 6-11a of the Norwegian Public Limited Liability Companies Act, whereby at least 40% of the board members in the Company should be either male or female. The Company’s shareholders elected Hilde Ådland in the extraordinary general meeting held March 2, 2016, accordingly the Company is compliant with the gender equality from April 1, 2016 when Hilde Ådland effectively became a director of Panoro.
9 THE WORK OF THE BOARD OF DIRECTORS
Code of Practice: The board of directors should produce an annual plan for its work, with particular emphasis on objectives, strategy and implementation. The board of directors should issue instructions for its own work as well as for the executive management with particular emphasis on clear internal allocation of responsibilities and duties. In order to ensure a more independent consideration of matters of a material character in which the chairman of the board is, or has been, personally involved, the board’s consideration of such matters should be chaired by some other member of the board. The Public Companies Act stipulates that large companies must have an audit committee. The entire board of directors should not act as the company’’s audit committee. Smaller companies should give consideration to establishing an audit committee. In addition to the legal requirements on the composition of the audit committee etc., the majority of the members of the committee should be independent. The board of directors should also consider appointing a remuneration committee in order to help ensure thorough and independent preparation of matters relating to compensation paid to the executive personnel. Membership of such a committee should be restricted to members of the board who are independent of the company’s executive personnel. The board of directors should provide details in the annual report of any board committees appointed. The board of directors should evaluate its performance and expertise annually.
The Board has the overall responsibility for the management and supervision of the activities in general. The Board decides the strategy of the Company and has the final say in new projects and/or investments. The Board’s instructions for its own work as well as for the executive management have particular emphasis on clear internal allocation of responsibilities and duties. The Chairman of the Board ensures that the Board’s duties are undertaken in efficient and correct manner. The CEO is responsible for the Company’s daily operations and ensuring that all necessary information is presented to the Board. The Board shall stay informed of the Company’s financial position and ensure adequate control of activities, accounts and asset management. The Board member’s experience and skills are crucial to the Company both from a financial as well as an operational perspective.
An annual schedule for the Board meetings is prepared and discussed together with a yearly plan for the work of the Board. The yearly plan aims at having particular emphasis on objectives, strategy and implementation of the work of the Board of Directors.
Should the Board need to address matters of a material character in which the Chairman is or has been personally involved, the matter will be chaired by another member of the Board to ensure a more independent consideration.
In addition to the Nomination Committee elected by the General Meeting, the Board will have an Audit Committee and a Remuneration Committee as sub-committees of the Board. The members will be independent of the executive management.
The current Audit Committee consists of four members, assisting the Board in administering and exercising its supervisory responsibility by preparing matters within selected areas. The Audit Committee meets when deemed necessary, at least in connection with audit planning and annual reporting. The Auditors are also present in the Audit Committee meetings in connection with quarterly and annual reporting.
The current Compensation Committee consists of four members ensuring thorough and independent preparation of matters relating to compensation paid to the Company’s executive personnel.
The annual report provides details of appointed Board committees.
The Board evaluates its performance and expertise annually.
No deviations from the Code of Practice except that currently the Audit Committee consists of the complete Board. The reason for this is the rather low number of directors in the Company, which has led the Board to conclude that it is currently more efficient for the Board function that all directors also are members of the Audit Committee. This practice will be further assessed in the future.
10 RISK MANAGEMENT AND INTERNAL CONTROL
Code of Practice: The board of directors must ensure that the company has sound internal control and systems for risk management that are appropriate in relation to the extent and nature of the company’s activities. Internal control and the systems should also encompass the company’s corporate values, ethical guidelines and guidelines for corporate social responsibility. The board of directors should carry out an annual review of the company’s most important areas of exposure to risk and its internal control arrangements.
Financial and internal control, as well as short- and long term strategic planning and business development, all according to the Panoro Energy’s business idea and vision and applicable laws and regulations, are the Board’s responsibility and the essence of our work. Hence we must focus on ensuring proper financial and internal control, including risk control systems. The Board approves the Company’s strategy and level of acceptable risk which is documented in the guiding tool “Risk Management”.
The Company’s primary products, crude oil and natural gas, are exposed to continuous price fluctuations. Furthermore, the development of oil and gas fields in which the Company is involved is associated with significant technical risk and in some cases political risk. Such operations might lead to cost overruns, and production disruptions, as well as delays compared with the plans laid out by the field operators. To mitigate such financial risks, the Company may enter into a variety of financial derivative transactions, in addition to appropriate insurance cover, where economically available.
The Audit Committee ensures quality of the financial reporting, and has the responsibility for assessing the ongoing financial and accountancy reporting to the Management and Board as well as external reporting. This takes place through reports and meetings with the management and the external auditor. Financial reports are prepared by the CFO and the Financial Controller, in compliance with prevailing accounting standards and regulations. The financial reports are subject to quality assurance also by the rest of the accounting and financial division with regards to consolidated figures as well as figures reported by subsidiaries.
Managers of the individual companies in the Group are responsible for risk management and internal controls within their areas, based on Group guidelines and policies and also subject to local legislation, rules, and regulations.
The Board carries out an annual review of the Company’s most important areas of exposure to risk and its internal control arrangements, hereunder the Company’s corporate values, ethical guidelines and guidelines for corporate social responsibility.
For further details on the use of financial instruments, refer to relevant note in the consolidated financial statements in the Annual Report and the Company’s guiding tool “Financial Risk Management” described in relevant note in the consolidated financial statements in the Annual Report.
No deviations from the Code of Practice.
11 REMUNERATION OF THE BOARD OF DIRECTORS
Code of Practice: The remuneration of the board of directors should reflect the board’s responsibility, expertise, time commitment and the complexity of the company’s activities. The remuneration of the board of directors should not be linked to the company’s performance. The company should not grant share options to members of its board. Members of the board of directors and/or companies with which they are associated should not take on specific assignments for the company in addition to their appointment as a member of the board. If they do nonetheless take on such assignments this should be disclosed to the full board. The remuneration for such additional duties should be approved by the Board. Any remuneration in addition to normal directors’ fees should be specifically identified in the annual report.
The remuneration to the Board will be decided at the AGM each year.
Panoro Energy is a diversified company, and the remuneration will reflect the Board’s responsibility, expertise, the complexity and scope of work as well as time commitment.
The remuneration to the Board is not linked to the Company’s performance, and share options will normally not be granted to Board members. Remuneration in addition to normal director’s fee will be specifically identified in the Annual Report.
The Board Members currently receive remuneration for their work according to the following rates per year:
Board chair: NOK 450,000
Board member: NOK 200,000
No deviations from the Code of Practice.
12 REMUNERATION OF THE EXECUTIVE PERSONNEL
Code of Practice: The board of directors is required by law to prepare guidelines for the remuneration of the executive personnel. These guidelines are communicated to the annual general meeting. The guidelines for the remuneration of the executive personnel should set out the main principles applied in determining the salary and other remuneration of the executive personnel. The guidelines should help to ensure convergence of the financial interests of the executive personnel and the shareholders.Performance-related remuneration of the executive personnel in the form of share options, bonus programs or the like should be linked to value creation for shareholders or the company’’s earnings performance over time. Such arrangements, including share option arrangements, should incentivize performance and be based on quantifiable factors over which the employee in question can have influence. Performance related remuneration should be subject to an absolute limit.
The Board has established the following guidelines for the remuneration of the executive personnel:
Remuneration of the Chief Executive Officer (CEO)
Panoro Energy has appointed a Remuneration Committee (RC) which meets regularly. The objective of the committee is to determine the compensation structure and remuneration level of the Company’s CEO. The RC will present its recommendations to the Board, whereby the Board will decide upon the remuneration of the CEO. Remuneration to the CEO shall be at market terms and decided by the Board and made official at the AGM.
Remuneration to other key executives (CFO, Technical Director)
Remuneration to other key executives shall be proposed by the CEO to the Remuneration Committee. The Remuneration Committee will prepare the matter for Board approval.
Wages to and other remuneration of other members of management
Wages to and other remuneration of other members of management shall be decided by the administration. The principles of remuneration shall be based on relevant directions approved by the Board. The administration shall inform the Board of the remuneration of other senior executives.
Criteria to be emphasized when determining the remuneration of the management
The remuneration shall, both with respect to the chosen kind of remuneration and the amount, encourage addition of values to the Company and contribute to the Company’s common interests – both for management as well as the owners. Any bonus shall be linked to the value added to the Company and the shareholders over a period of time. Circumstances that may have substantial effect on the results, but which the employees have limited influence on, shall not be considered as criteria for a bonus.
All employees are included in the Company’s discretionary bonus scheme. The scheme currently allows the opportunity to be awarded a discretionary year-end bonus payment of up to maximum 50 percent (50%) of base salary.
Information of remuneration of management in the Annual Report
Detailed information about options and remuneration for executive personnel and Board members is provided in the Annual Report. The guidelines are presented to the AGM as an attachment to the AGM notice.
No deviations from the Code of Practice.
13 INFORMATION AND COMMUNICATION
Code of Practice: The board of directors should establish guidelines for the company’s reporting of financial and other information based on openness and taking into account the requirement for equal treatment of all participants in the securities market. The company should publish an overview each year of the dates for major events such as its annual general meeting, publication of interim reports, public presentations, dividend payment date if appropriate etc. All information distributed to the company’s shareholders should be published on the company’s web site at the same time as it is sent to shareholders. The board of directors should establish guidelines for the company’s contact with shareholders other than through general meetings.
All external communication takes place in accordance with Company guidelines described below.
External communication to financial markets and shareholders:
Panoro Energy’s information policy is based on transparency and on providing the shareholders, investors and financial market with correct and timely information, in a way that safeguards the principle of equal treatment of all shareholders, and satisfies the regulations and practice applicable to listed companies. Panoro Energy’s key communication objectives are visibility, transparency and openness, and the Company will achieve these objectives through precise, relevant, timely and consistent information. Panoro Energy will co-ordinate its external and internal communication activities to ensure that the Company is presented in a clear and consistent manner, and that the Company’s brand and reputation is managed properly. All sensitive information will be controlled and disclosed in compliance with statutory laws and the relevant stock exchange rules and regulations.
Oslo Stock Exchange is used as an active discussion partner regarding information requirements in order to provide the market with the most appropriate information.
Compliance with the Corporate Governance recommendation
Panoro Energy normally makes four quarterly presentations a year to shareholders, potential investors and analysts in connection with quarterly earnings reports. The quarterly presentations are held through audio conference calls to facilitate participation by all interested shareholders, analysts, potential investors and members of the financial community. A question and answer session is held at the end of each presentation to allow management to answer the questions of attendees. A recording of the conference call presentation is retained on the Company’s website www.panoroenergy.com for a limited number of days.
The Company also makes investor presentations at conferences in and out of Norway. The information packages presented at such meetings are published simultaneously on the Company’s web site.
Panoro Energy’s website, www.panoroenergy.com, contains comprehensive information regarding the Company, its activity and contact information, and is updated on a regular basis. In addition, all presentation materials are available on the website.
Panoro Energy distributes all sensitive press releases, as well as all reports, through Cision, Oslo Stock Exchange and on its website.
Panoro Energy publishes an annual financial calendar which can be consulted on the Oslo Stock Exchange website, through news agencies and on the Company’s website.
The Chief Financial Officer will be responsible for all co-ordination and control of external communication (including, but not limited to media relations), reputation management, co-ordination of employee and customer communication and for Panoro Energy’s internet.
The responsibility of the communications department does not extend to decisions regarding the disclosure of inside information, where the responsibility lies jointly with the CEO and the CFO. All releases to the market are approved by the Board of Directors.
Decentralized communication responsibilities
All Panoro Energy’s business units shall, within the limits necessitated by the above mentioned organization, pro-actively undertake employee and customer communication as well as market communication related to promoting their respective businesses.
Panoro Energy’s office in London, UK, has an appointed person responsible for co-ordination of the communication with the CFO and the CEO. Provided that the communication – in form and content – complies with the Company’s policies and guidelines, the Company’s offices may undertake employee, customer and market communication to promote their respective businesses. However, all communication will have to be approved by the CEO/CFO.
The offices’ responsibility does not extend to the disclosure of inside information, where the responsibility lies with the CEO, CFO and Investor Relations. All business areas must immediately inform group management of any matter that has arisen or which is likely to arise – for example legal disputes, large scale redundancies, serious accidents, project failures, etc. – which could be regarded as inside information, or which could result in media interest or generally affect Panoro Energy’s reputation.
Panoro Energy employees which have not been authorized to do so are requested not to discuss the Company in any detail with people outside of the Company, such as journalists, financial analysts/ brokers, shareholders or potential investors. All inquiries should be referred to the CFO, CEO or Investor Relations.
Each Panoro Energy employee should immediately inform his superior and/or the CFO/CEO of any issue which has arisen or is likely to arise, which could result in media interest and affect the Company’s reputation. The CEO/CFO on their prerogative, report matters to the Board of Directors.
No employee is allowed to reveal inside information, in which case a breach of confidentiality is subject to prosecution as well as disciplinary action. In the case of insider information, all employees are required to inform also the CEO or the CFO if such information has arisen or are likely to arise. The exception is work with inside information which has been assigned to the employee by his superior or the CEO or the CFO (e.g., preparations of interim or annual financial reports and presentations), unless the employee has not been notified that this is inside information.
Please refer to procedure in chapter 4 of the Inside instructions for definitions and guidelines for handling of inside information.
Communication with the press:
The Chairman, CEO, CFO and Investor Relations of Panoro Energy are the only people who are authorized to speak to, or be in contact with the Press – unless otherwise described or approved by the Chairman, CEO and/or CFO.
No deviations from the Code of Practice.
Code of Practice: The board of directors should establish guiding principles for how it will act in the event of a take-over bid. In a bid situation, the company’s board of directors and management have an independent responsibility to help ensure that shareholders are treated equally, and that the company’s business activities are not disrupted unnecessarily. The board has a particular responsibility to ensure that shareholders are given sufficient information and time to form a view of the offer. The board of directors should not hinder or obstruct take-over bids for the company’s activities or shares. Any agreement with the bidder that acts to limit the company’s ability to arrange other bids for the company’s shares should only be entered into where it is self-evident that such an agreement is in the common interest of the company and its shareholders. This provision shall also apply to any agreement on the payment of financial compensation to the bidder if the bid does not proceed. Any financial compensation should be limited to the costs the bidder has incurred in making the bid. Agreements entered into between the company and the bidder that are material to the market’s evaluation of the bid should be publicly disclosed no later than at the same time as the announcement that the bid will be made is published. In the event of a take-over bid for the company’s shares, the company’s board of directors should not exercise mandates or pass any resolutions with the intention of obstructing the take-over bid unless this is approved by the general meeting following announcement of the bid. If an offer is made for a company’s shares, the company’s board of directors should issue a statement making a recommendation as to whether shareholders should or should not accept the offer. The board’s statement on the bid should make it clear whether the views expressed are unanimous, and if this is not the case it should explain the basis on which specific members of the board have excluded themselves from the board’s statement. The Board should arrange a valuation from an independent expert. The valuation should include an explanation, and should be made public no later than at the time of the public disclosure of the board’s statement. Any transaction that is in effect a disposal of the company’s activities should be decided by a general meeting, except in cases where such decisions are required by law to be decided by the corporate assembly.
Panoro Energy has established guiding principles for how the Board of Directors will act in the event of a take-over bid.
As of today the Board does not hold any authorizations as set forth in Section 6-17 of the Securities Trading Act, to effectuate defense measures if a takeover bid is launched on Panoro Energy.
The Board may be authorized by the General Meeting to acquire its own shares, but will not be able to utilize this in order to obstruct a takeover bid, unless approved by the General Meeting following the announcement of a takeover bid.
The Board of Directors will generally not hinder or obstruct take-over bids for the Company’s activities or shares.
As a rule the Company will not enter into agreements that act to limit the Company’s ability to arrange other bids for the Company’s shares unless it is clear that such an agreement is in the common interest of the Company and its shareholders. As a starting point the same applies to any agreement on the payment of financial compensation to the bidder if the bid does not proceed. Any financial compensation will as a rule be limited to the costs the bidder has incurred in making the bid. The Company will generally seek to disclose agreements entered into with the bidder that are material to the market’s evaluation of the bid no later than at the same time as the announcement that the bid will be made is published.
In the event of a take-over bid for the Company’s shares, the Board of Directors will not exercise mandates or pass any resolutions with the intention of obstructing the take-over bid unless this is approved by the General Meeting following announcement of the bid.
If an offer is made for the Company’s shares, the Board will issue a statement evaluating the offer and making a recommendation as to whether shareholders should or should not accept the offer. The Board will also arrange a valuation with an explanation from an independent expert. The valuation will be made public no later than at the time of the public disclosure of the Board’s statement. Any transactions that are in effect a disposal of the Company’s activities will be decided by a General Meeting.
No deviations from the Code of Practice.
Code of Practice: The auditor should submit the main features of the plan for the audit of the company to the audit committee annually. The auditor should participate in meetings of the board of directors that deal with the annual accounts. At these meetings the auditor should review any material changes in the company’s accounting principles, comment on any material estimated accounting figures and report all material matters on which there has been disagreement between the auditor and the executive management of the company. The auditor should at least once a year present to the audit committee a review of the company’s internal control procedures, including identified weaknesses and proposals for improvement. The board of directors should hold a meeting with the auditor at least once a year at which neither the chief executive nor any other member of the executive management is present. The board of directors should establish guidelines in respect of the use of the auditor by the company’s executive management for services other than the audit. The board ofdirectors must report the remuneration paid to the auditor at the annual general meeting, including details of the fee paid for audit work and any fees paid for other specific assignments.
The Auditor will be appointed at the General Meeting every year. Ernst & Young has previously been appointed.
The Board has appointed an Audit Committee (the “AC”) as a sub-committee of the Board, which will meet with the auditor regularly. The objective of the committee is to focus on internal control, independence of the auditor, risk management and the Company’s financial standing, including the quarterly and annual financial statements. The AC will present its findings to the Board on a continuous basis. In this respect, the Board will be able to receive information on a more continuous basis and improve its internal control routines.
The auditors will send a complete Management Letter/Report to the Board – which is a summary report with comments from the auditors including suggestions of any improvements if needed. This is an important tool for the Board in order to get a better overview and fulfil the control duties. The auditor participates in meetings of the Board of Directors that deal with the annual accounts, where the auditor reviews any material changes in the Company’s accounting principles, comments on any material estimated accounting figures and reports all material matters on which there has been disagreement between the auditor and the executive management of the Company.
In view of the auditor’s independence of the Company’s executive management, the auditor is also present in at least one Board meeting each year at which neither the CEO nor other members of the executive management are present.
In addition, the Board should receive an annual written confirmation from the auditor stating that the auditor continues to satisfy the requirements for independence. The auditor should provide the Board with a summary of all services that have been undertaken for the Company, in addition to the audit work.
Panoro Energy places importance on independence and has established guidelines in respect of retaining the Company’s external auditor by the Company’s executive management for services other than the audit.
The Board reports the remuneration paid to the auditor at the AGM, including details of the fee paid for audit work and any fees paid for other specific assignments.
No deviations from the Code of Practice.
REPORTING OF PAYMENTS TO GOVERNMENT
This report is prepared in accordance with the Norwegian Accounting Act § 3-3d), which is a new requirement applicable from the fiscal year 2014. It states that the companies engaged in the activities within the extractive industries shall annually prepare and publish a report containing information about their payments to governments at country and project level. The Ministry of Finance has issued a regulation (F20.12.2013 nr 1682 – “the regulation”) stipulating that the reporting obligation only apply to reporting entities above a certain size and to payments above certain threshold amounts. In addition, the regulation stipulates that the report shall include other information than payments to governments, and provides more detailed rules with regard to definitions, publication and group reporting.
This report contains information for the activity in the whole fiscal year 2014 for Panoro Energy ASA.
The management of Panoro has applied judgement in interpretation of the wording in the regulation with regard to the specific type of payments to be included in this report, and on what level it should be reported. When payments are required to be reported on a project-by-project basis, it is reported on a field-by-field basis. Per management’s interpretation of the regulation, reporting requirements only stipulate disclosure of gross amounts on operated licences as all payments within the license performed by Non-operators, normally will be cash calls transferred to the operator and will as such not be payments to government.
Although Panoro Energy, through its subsidiaries, has ownership interest in two licences in West Africa, namely Dussafu license offshore Gabon and OML-113 offshore Nigeria; both of the licenses are non-operated and as such only cash calls are disbursed to operating partners and therefore none of the payments during 2014 can be construed as payments to governments under the regulation. Furthermore, the Company or its subsidiaries have not made any direct payments in relating to the non-operated assets to the respective governments of Gabon and Nigeria.
Updated March 2016