Poor Response From RPL to FrontFour's Allegations
In RPL's news release dated November 6, 2013, they state "Some of these false statements do not merit a response". This statement appears to be a bad attempt to avoid responding to the following allegations presented by FrontFour in its NR dated October 21, 2013, none of which were addressed by RPL in the Nov 6 news release:
1) The current board owns less than 0.04% (four hundredths of one percent) of the equity of Renegade.
2) The Company disclosed an approximate $63 million "miss" in leverage guidance in connection with the Transformational transaction; transaction fees accounted for approximately $30 million of the leverage "miss". Included in the audited transaction expenses are insider finder fees and in-the-money options issued to officers. Errors in the valuation of a Gross Overriding Royalty increased the dilution of the Transformational transaction.
3) Clark, Reid and Turnbull remain on the board despite the oversight of the destruction of hundreds of millions of dollars in equity value (MY COMMENTS: the names of these three gentlemen still appear on RPL's website as Directors, so they are still there along with the three new people, bringing the total number of Directors at RPL to nine - are nine directors really needed to run a microcap oil and gas company? What is the compensation being given to each of these people?
4) The board monetized "non-core" assets in West Central Saskatchewan for approximately $19 million that resulted in net locations to decrease from 298 in May 2013 to 81. This reflects a 72% decrease in net locations, reducing upside for shareholders without adequate consideration. Using management's guidance of NPV per net location, the average of the guidance type curves equates to $222 million in value sold for $19 million, plus the loss of 70 boe/d in production.
5) Director Jay Reid, who the Company characterizes as an independent director, is a Partner at the law firm of Burnet, Duckworth & Palmer LLP ("BD&P"). BD&P serves as outside counsel for Renegade and has received significant cash payments from Renegade, directly and indirectly benefitting Jay Reid and his partners at BD&P. This antiquated custom is widely viewed as the antithesis of "best practice" and speaks to the standards of corporate governance upheld by Renegade.
6) A stressed company exploring a sale requires a good "Plan B". Renegade has apparently never had one. The board had ample time to put forth a new Chairman and CEO prior to the AGM, but instead has continued with its reactionary approach to managing the business.
The concerns raised by FrontFour are valid and serious. Hopefully, they will be on the agenda at the January 28, 2014 meeting, with clear answers provided to shareholders.
It's also interesting to see that RPL's Board has decided to hire Kingsdale Shareholder Services to assist them in dealing with matters pertaining to this special meeting. Kingsdale's website states that they provide "...tailored strategic corporate communications, investor relations, transaction communications (including mergers & acquisitions and proxy fight communications) and crisis communications solutions...". It appears shareholders will be paying for this firm to engage in battle with FrontFour on behalf of the Board of Directo.....oh, sorry, on behalf of the company.