STATEMENT ON CORPORATE GOVERNANCE
IN PANORO ENERGY ASA
Panoro Energy ASA (“Panoro”, “Panoro Energy” or “the Company”, and with its subsidiaries; the “Group”) aspires to ensure confidence in the Company and the greatest possible value creation over time through efficient decision making, clear division of roles between shareholders, management and the Board of Directors (“the Board”) as well as adequate communication.
Panoro Energy seeks to comply with all the requirements covered in The Norwegian Code of Practice for Corporate Governance (the “Code”). The latest version of the Code of 17 October 2018 is available on the website of the Norwegian Corporate Governance Board, www.nues.no . The Code is based on the “comply or explain” principle, in that companies should explain alternative approaches to any specific recommendation. The Company also seeks to comply with the Oslo Børs Code of Practice for Investor Relation (IR) of 1 July 2019.
1: Implementation and reporting on corporate governance
The main objective for Panoro’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 (the Board) and management aim for a controlled and profitable development and long-term creation of growth through well-founded governance principles and risk management.
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.
The Code comprises 15 points. Panoro’s Corporate Governance report follows:
Panoro Energy ASA is an independent exploration and production (E&P) company headquartered in London and listed on the Oslo Stock Exchange with ticker PEN. The Company holds production, development, and exploration assets in North and West Africa.
The North African portfolio comprises a participating interest in five producing oil field concessions, the Sfax Offshore Exploration Permit (SOEP), and the Ras El Besh concession, all in the region of the city of Sfax, Tunisia. The operations in West Africa include the Dussafu License offshore southern Gabon and OML 113 offshore western Nigeria, which is classified as held for sale.
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 two reportable segments with exploration and production of oil and gas, by geographic locations being West Africa and North Africa. In West Africa, the Company participates in a number of licenses in and Gabon and Nigeria whereas the North African business is concentrated in Tunisia.
Our vision is to use our experience and competence in enhancing value in projects in Africa to the benefit of the countries we operate in and the shareholders of the Company.
3: Equity and dividends
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.
Mandates granted to the Board to increase the Company’s share capital or to purchase own shares will normally be restricted to defined purposes, and are normally limited in time to the following year’s Annual General Meeting. Any acquisition of our shares will be carried out through a regulated marketplace at market price, and the Company will not deviate from the principle of equal treatment of all shareholders. 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.
Mandates granted to the Board for issue of shares for different purposes will each be considered separately by the General Meeting. 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 and disclosed in the stock exchange announcement of the increase in share capital. Such deviation will be made only in the common interest of the shareholders of the Company.
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.
4: Equal treatment of shareholders and transactions with close associates
Panoro Energy has one class of shares representing one vote at the Annual General Meeting. The Articles of Association contains no restriction regarding the right to vote.
All Board members, employees of the Company and close associates must internally clear potential 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, shareholder’s parent company, members of the Board of Directors, executive personnel or close associates of any such parties, are governed by the Code 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 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.
5: Shares and negotiability
Shares of Panoro Energy are listed on the Oslo Stock Exchange. There are no restrictions on ownership, trading or voting of shares in Panoro Energy’s Articles of Association.
6: General meetings
Panoro Energy’s Annual General Meeting is to be held by the end of June each year. The Board will take 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 no later than 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 normally be posted on the Company’s website 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.
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.
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 person to chair the General Meeting will, to the extent possible, be appointed. Normally the General Meetings will be chaired by the Company’s external corporate lawyer.
Shareholders who are unable to attend in person will be given the opportunity to vote by proxy. 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, among the matters that will be decided at the AGM. After the meeting, the minutes are released on the Company’s website.
7: Nomination committee
The Company shall have a Nomination Committee consisting of 2 to 3 members to be elected by the Annual General Meeting for a two year period. The Annual General Meeting elects the members and the Chairperson of the Nomination Committee and determines the committee’s remuneration. The Company will provide information on the member 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, whereof all members 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, gender, capacity and diversity.
The Nomination Committee is described in the Company’s Articles of Association and the General Meeting may stipulate guidelines for the duties of the Nomination Committee.
8: Board of directors – composition and independence
The composition of the Board ensures that the Board represents the common interests of all shareholders and meets the Company’s need for expertise, capacity and diversity. The members of the Board represent 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. Members of the Board are elected for a period of two years. Recruitment of members of the Board may be phased so that the entire Board is not replaced at the same time. The General Meeting elects the Chairman and any Deputy Chairman. The Company’s website and annual report provides detailed information about the Board members expertise and independence. The Company has a policy whereby the members of the Board 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.
9: The work of the board of directors
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 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. The Board evaluates its performance and expertise annually. The CEO is responsible for the Company’s daily operations and ensures that all necessary information is presented to the Board.
An annual schedule for the Board meetings is prepared and discussed together with a yearly plan for the work of the Board.
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. 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 the Deputy Chairman of the Board to ensure a more independent consideration.
In addition to the Nomination Committee elected by the General Meeting, the Board has an Audit Committee and a Remuneration Committee as sub-committees of the Board. The members are independent of the executive management.
Currently the Audit Committee and the Remuneration Committee both consist 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 committees. This practice will be further assessed in the future.
10: Risk management and internal control
Financial and internal control, as well as short- and long-term strategic planning and business development, all according to Panoro Energy’s business idea and vision and applicable laws and regulations, are the Board’s responsibilities and the essence of its work. This emphasizes the focus on ensuring proper financial and internal control, including risk control systems.
The Board approves the Company’s strategy and level of acceptable risk, as documented in the guiding tool “Risk Management” described in the relevant note in the consolidated financial statements in the Annual Report.
The Board carries out an annual review of the Company’s most important areas of exposure to risk and its internal control arrangements.
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.
11: Remuneration of the board of directors
The remuneration to the Board will be decided by the Annual General Meeting 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.
Members of the Board normally do not take on specific assignments for the Company in addition to their appointment as a member of the Board.
12: Remuneration of the executive personnel
The Board has established guidelines for the remuneration of the executive personnel. The guidelines set out the main principles applied in determining the salary and other remuneration of the executive personnel. The guidelines ensure convergence of the financial interests of the executive personnel and the shareholders.
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. Remuneration to the CEO shall be at market terms and decided by the Board and made official at the AGM every year. Remuneration to other key executives shall be proposed by the CEO to the RC.
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.
Detailed information about options and remuneration for executive personnel and Board members is provided in the Annual Report pursuant to and in accordance with section 6-16a of the Norwegian Public Limited Companies Act. The guidelines are normally presented to the Annual General Meeting also as a separate attachment to the Annual General Meeting notice.
13: Information and communications
The Company has established guidelines for the Company’s reporting of financial and other information.
The Company publishes an annual financial calendar including the dates the Company plans to publish the quarterly results and the date for the Annual General Meeting. The calendar can be found on the Company’s website, and will also be distributed as a stock exchange notification and updated on Oslo Stock Exchange’s website. The calendar is published at the end of a fiscal year, according to the continuing obligations for companies listed on the Oslo Stock Exchange. The calendar is also included in the Company’s quarterly financial reports.
All shareholders information is published simultaneously on the Company’s web site and to appropriate financial news media.
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 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.
The Chairman, CEO and CFO 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.
Panoro Energy has established the following guiding principles for how the Board 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 defence 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 with the purpose 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.
The auditor will be appointed by the General Meeting.
The Board has appointed an Audit Committee 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.
The auditors will send a complete Management Letter/Report to the Board – which is a summary report of risks faced by the business. The auditor participates in meetings of the Board 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.
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 Annual General Meeting, including details of the fee paid for audit work and any fees paid for other specific assignments.
16: Reporting of payments to Governments
This report is prepared in accordance with the Norwegian Accounting Act § 3-3d and Securities Trading Act § 5-5a. 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 applicable to definitions, publication and group reporting.
This report contains information for the activity in the financial year 2019 for Panoro Energy ASA (hereafter referred to as the “Company” or “Panoro” throughout this section).
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 governments. Panoro’s activities within the extractive industries as an Operator are located in Tunisia.
Reporting of payments
The regulation’s Section 2 no. 5 defines the different types of payments subject to reporting. In the following sections, only those applicable to the Company will be described.
Tunisia – Operated
Panoro Group acquired interest in the Sfax Offshore Exploration Permit (SOEP) in Tunisia during 2018 and assumed Operatorship. No payments were made to the government of Tunisia in respect of these assets and no area fees was paid for these assets during the year ended 31 December 2019 (2018: from acquisition date of 30 July 2018 to 31 December 2018: Nil).
Tunisia – Non-operated
Panoro Group acquired an interest in five oil producing concessions in Tunisia on 21 December 2018. The operations on these concessions are managed by Thyna Petroleum Services S.A. (TPS), which is a joint operating company. During the year ended 31 December 2019, the Group made direct payments to the Government in the form of taxes through its jointly controlled company, Panoro TPS Production GmbH amounting to USD 7.4 million (representing Panoro’s share at 60%). Of this amount, USD 5.3 million related to taxes on income from prior year and USD 2.1 million for taxes on income of current year. Further, as at 31 December 2019, the Group had corporation tax liability of USD 5 million which is due for payment in 2020.
For the period ended 31 December 2018, no taxes or other fees were paid to the government of Tunisia by the Group from acquisition date of 21 December 2018. As at 31 December 2018, the Group had current corporation tax liability of USD 5.8 million payable to the government of Tunisia which was paid in 2019
West Africa (Nigeria and Gabon) – Non-operated
Although Panoro Energy, through its subsidiaries, has extractive activities and 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 2019 and 2018 can be construed as payments direct to governments under the regulation. As such, no payment will be disclosed in these cases, unless the operator is a state-owned entity and it is possible to distinguish the payment. In Gabon, the Group is party to a Production Sharing Contract (PSC) under which tax is paid in kind by virtue of the contractual Profit Oil allocation for the State’s participation in the license. In 2019, an estimate of the value of the State Profit Oil portion was USD 3.8 million (2018: USD 0.9 million).
30 April 2020