Historic Failings of Existing Board

In 2021, the co-CEOs were remunerated to a combined value of £716k. This equated to £358k per CEO, comprising their base salary of £231k each, a bonus of £50k each, share based payments worth £66k each in addition to pension contributions of £11k each. We believe the combined cost of £716k for the CEO function is staggering given the share price dropped significantly from 0.64p to 0.17p (a decline of over 70%) in the calendar year of 2021;

Reabold’s annual report for the year ended 31 December 2021 stated: “During the reporting period, the Board undertook a performance evaluation of the Executive Directors. The salaries were benchmarked to market and the committee considered the delivery of our strategic goals“. With the rapidly declining share price and loss for the year of £2.675m, it is anyone’s guess as to how the committee made this assessment;

Based on a 2021 KPMG Exec Remuneration Report analysing the pay of CEOs of AIM listed companies, the median basic salary for a CEO of an AIM listed company with a sub £50m market cap was £213,068. When Reabold’s performance is considered in conjunction with their Board’s attempt to justify having two CEOs, the Requisitioning Shareholders believe the existing remuneration packages are excessive;

Both co-CEOs have minimal skin in the game with their combined holdings equating to less than 1% of total shares. This has created a clear lack of alignment in the incentivisation of the current directors and shareholders;

The conditional sale of Corallian Energy was completed at a significantly lower value than expected and guided by the current board of directors. It was previously stated that Corallian Energy’s updated 2C economic valuation of Victory, based on a historical average gas price valuation of 50p/therm, had increased from £146m to £193m. However the sale price was just £32m;

Despite Reabold owning 49.99% of Victory, Reabold stated in the H1-2022 results that it will only receive net proceeds of c.£12.7m. There is a clear lack of visibility here relating to the headline deal value and the net proceeds (c.£3.3m); it is not evident how much of this is related to Reabold’s portion of transaction related fees and how much relates to excessive fees and options payable to the board of directors;

During the Corallian Energy sale process, it was announced Reabold had entered a period of exclusivity on 4 May 2022 when gas prices were at 156.17 p/t. On 31 August 2022, the exclusivity period with Shell ended and gas prices were near record highs of 627.43 p/t, 3x higher over less than a four-month period. It is the Requisitioning Shareholders’ opinion that Corallian should, at this point, have re-opened the process to other bidders to achieve a higher sale price, as the underlying market dynamics had changed and we deem the sale price that was agreed was sub-optimal. The directors of Reabold, as the major shareholder, should have made this clear to the Corallian board during the sale process but were clearly not inclined to do so, much to the detriment of Reabold;

The lacklustre results of UK onshore licence PEDL 183 (the West Newton asset). Reabold’s previous approach to drilling resulted in the following issues: “Completion fluids were injected into the formation at a rate constrained by the pumps on site at 5.7 barrels per
minute (8,208 barrels per day). However, the Kirkham Abbey reservoir appears to be sensitive to the drilling and completion fluids. We see clear signs of reservoir damage in near wellbore areas”. Reabold went on to conclude that “The B-1Z well will therefore be
suspended” (RNS 31 Aug 2021)

The current board displayed poor deal execution skills in their offer for Deltic Energy Plc in 2020.

• Deltic’s largest shareholder stated that Reabold’s offer “lacks any compelling strategic rationale, commercial logic or sufficient operational synergies”.
• Furthermore, Deltic’s board stated that the offer placed “no value at all on its significant non cash assets, not least its share of two potential high impact exploration wells with their partner Shell”.

It is our opinion that the current board failed to capitalise on the downtrend in oil prices from 2018 to 2020 where they could have acquired producing assets to secure the future of the business. Portillion suggested that Reabold should unlock more value by bringing in other producing assets but the board been slow to execute