The Board recognises the value and importance of high standards of corporate governance and has chosen to adopt and apply the Quoted Companies Alliance Corporate Governance Code (the ‘QCA Code’) published in April 2018. See QCA Code below for explanation as to how the Company addresses the key governance principles defined in the QCA Code.
As Chairman, I oversee the adoption, delivery and communication of the Company’s corporate governance model. I am also the Company’s leading ambassador, which includes presenting the Company’s aims and policies to investors and other outside parties. I promote active communication with shareholders and other stakeholders, including speaking regularly with major investors and other stakeholders. I chair the AGM and as chairman of the Board, I chair Board meetings, ensuring that the Board regularly reviews the Company’s strategy. I also oversee the composition and structure of the Board which involves regularly reviewing the overall size of the Board, the balance between executive and non-executive, age, experience, skills and personalities of the directors.
The Company holds regular Board meetings and the Board is responsible for formulating, reviewing and approving the Company’s strategy, budgets and corporate activity. The Board currently comprises five Directors, of whom two are executive and three are non-executive. Two of the three non-executive directors are considered to be independent.
The Board has established an audit committee, remuneration committee and AIM compliance committee with formally delegated duties and responsibilities, as described below.
The audit committee is responsible for monitoring the integrity of the Company’s financial statements, reviewing significant financial reporting issues, reviewing the effectiveness of the Company’s internal control and risk management systems, monitoring the effectiveness of the internal audit function and overseeing the relationship with the external auditors (including advising on their appointment, agreeing the scope of the audit and reviewing the audit findings).
The audit committee comprises Mark Lappin and Peter Cowley and is chaired by Peter Cowley. The audit committee aims to meet at least three times a year at appropriate times in the reporting and audit cycle and otherwise as required. The audit committee also meets regularly with the Company’s external auditors. See this link for the audit committee’s terms of reference.
The remuneration committee is responsible for determining and agreeing with the Board the framework for the remuneration of the Chairman and the executive Directors and, within the terms of the agreed framework, determining the total individual remuneration packages of such persons including, where appropriate, bonuses, incentive payments and share options or other share awards. The remuneration of non-executive Directors is a matter for the chairman and the executive members of the Board. No Director is involved in any decision as to his or her own remuneration.
The remuneration committee comprises Peter Cowley and Mark Lappin and is chaired by Peter Cowley. The remuneration committee meets at least twice a year and otherwise as required. See this link for the remuneration committee’s terms of reference.
AIM compliance committee
The AIM compliance committee is responsible for ensuring that the Company complies with its obligations under the AIM Rules for Companies (“AIM Rules”) and the Market Abuse Regulation (Regulation EU 596/2014) (“MAR”) and, in particular makes timely and accurate disclosure of all information that is required to be disclosed to meet its disclosure obligations arising from the admission of its shares to trading on AIM and, under MAR.
The AIM compliance committee comprises JG Cluff, Graham Swindells and Andrew Nunn. The AIM compliance committee meets as and when required, in order to undertake its responsibilities. See this link for the AIM compliance committee’s terms of reference.
Share dealing code
The Company has adopted a share dealing code for Directors, persons discharging managerial responsibilities and applicable employees of the Company for the purpose of ensuring compliance by such persons with the provisions of the AIM Rules relating to dealings in the Company’s securities (including, in particular, Rule 21 of the AIM Rules and MAR). The Directors consider that this share dealing code is appropriate for a company whose shares are admitted to trading on AIM.
The Company takes proper steps to ensure compliance by the Directors and applicable employees with the terms of the share dealing code and the relevant provisions of the AIM Rules (including Rule 21) and MAR.
JG Cluff, Chairman
27 September 2018
Quoted Company Alliance (QCA) Code
The QCA Code was developed by the QCA in consultation with a number of significant institutional small company investors, as an alternative corporate governance code applicable to AIM companies. The QCA code identifies ten principles, the application of each which must be supported by certain related disclosures.
The Principles of the QCA Code
|QCA Code Principle||What we do and why|
|1. Establish a strategy and business model which promote long-term value for shareholders
The Board must be able to express a shared view of the Company’s purpose, business model and strategy.
It should go beyond the simple description of products and corporate structures and set out how the Company intends to deliver shareholder value in the medium to long-term.
It should demonstrate that the delivery of long-term growth is underpinned by a clear set of values aimed at protecting the Company from unnecessary risk and securing its long-term future.
|The Company’s Investing Policy is set out on the Company’s website and on page 9 of the Report and Accounts for the year ended 31 December 2017. The Company will reiterate its strategy and business model in its next Annual Report and Accounts. *|
|2. Seek to understand and meet shareholder needs and expectations
Directors must develop a good understanding of the needs and expectations of all elements of the Company’s shareholder base.
The Board must manage shareholders’ expectations and should seek to understand the motivations behind shareholder voting decisions.
|The Company encourages two-way communication with both existing and potential investors and responds quickly to queries received. The Chairman and the executive directors speak regularly with the Company’s major shareholders. The executive team also engages with shareholders through regular investor presentations and events. In this way the Company ensures that the views of its shareholders are understood and communicated fully to the Board
The Board recognises the AGM as an important opportunity to meet private shareholders. The Directors are also available to listen to the views of shareholders formally during the AGM and informally immediately following the AGM. Where voting decisions are not in line with the Company’s expectations the Board will engage with those shareholders to understand and address any issues as appropriate.
The Company has appointed external PR consultants to undertake its Investor Relations who, together with the Chief Executive Officer and Chief Operating Officer, are the relevant contacts – see Contact Us page of the website for details.
The Directors believe that these methods of shareholder engagement are sufficient to support the Company’s aims in meeting their needs and expectations.
|3. Take into account wider stakeholder and social responsibilities and their implications for long-term success
Long-term success relies upon good relations with a range of different stakeholder groups both internal (workforce) and external (suppliers, customers, regulators and others). The Board needs to identify the Company’s stakeholders and understand their needs, interests and expectations.
Where matters that relate to the Company’s impact on society, the communities within which it operates, or the environment have the potential to affect the Company’s ability to deliver shareholder value over the medium to long-term, then those matters must be integrated into the Company’s strategy and business model.
Feedback is an essential part of all control mechanisms. Systems need to be in place to solicit, consider and act on feedback from all stakeholder groups.
|The Company is committed to sustainability in all aspects of our business – for the environment, suppliers and the communities we operate in. On the basis of the Directors’ experience and their knowledge from the operation of the Company, the identity of the Company’s wider key stakeholders have been identified by the Directors as being those applicable to a company with an Investing Policy focused on UK oil and gas exploration and, accordingly, the Board has considered the implications of these for the Company’s business model.
The Board believes that the following are the key resources and relationships upon which the business relies:
UK Oil and Gas Authority (OGA)
The Company maintains regular dialogue and a good relationship with our regulator, the OGA. Alignment of expectations and our reputation with the OGA is essential to our continuing to develop and to undertake exploration of our natural resource assets.
The Company has appointed external consultants to perform environmental sensitivity assessments on our licence blocks and to review and ensure our health and safety systems and procedures are up to date.
We work in partnership with our main suppliers particularly those engaged in the key process of seismic data acquisition and analysis. This approach fosters improved quality and performance. We treat all suppliers with respect and pay them promptly.
We cultivate an open culture such that employees feel able to contribute wherever they may add value, are mutually supportive, and may freely air any concerns.
The executive directors maintain regular dialogue with these stakeholders in order to obtain feedback and take any appropriate action.
|4. Embed effective risk management, considering both opportunities and threats, throughout the organisation
The Board needs to ensure that the Company’s risk management framework identifies and addresses all relevant risks in order to execute and deliver strategy; companies need to consider their extended business, including the Company’s supply chain, from key suppliers to end-customer.
Setting strategy includes determining the extent of exposure to the identified risks that the Company is able to bear and willing to take (risk tolerance and risk appetite).
|The Business Risk section on page 8 of our Report and Accounts for the year ended 31 December 2017 sets out the principal risks to the business and how these are mitigated. *
The Board is responsible for reviewing and evaluating risk and meet monthly to review ongoing performance, discuss budgets and forecasts and new developments.
MAINTAIN A DYNAMIC MANAGEMENT FRAMEWORK
|QCA Code Principle||What we do and why|
| 5. Maintain the Board as a well-functioning, balanced team led by the chair
The Board members have a collective responsibility and legal obligation to promote the interests of the Company and, are collectively responsible for defining corporate governance arrangements. Ultimate responsibility for the quality of, and approach to, corporate governance lies with the chair of the Board.
The Board (and any committees) should be provided with high quality information in a timely manner to facilitate proper assessment of the matters requiring a decision or insight.
The Board should have an appropriate balance between executive and non-executive directors and should have at least two independent non-executive directors. Independence is a Board judgement.
The Board should be supported by committees (e.g. audit, remuneration, nomination) that have the necessary skills and knowledge to discharge their duties and responsibilities effectively.
Directors must commit the time necessary to fulfil their roles.
The Company is controlled by the Board of Directors. JG Cluff, the non-executive Chairman, is responsible for the running of the Board and Graham Swindells, the Chief Executive Officer, and Andrew Nunn, the Chief Operating Officer, have executive responsibility for running the Company and implementing its strategy.
All Directors receive regular and timely information on the Company’s operational and financial performance. Relevant information is circulated to the Directors in advance of meetings. All Directors have direct access to the advice and services of the Company Secretary and are able to take independent professional advice in the furtherance of their duties, if necessary, at the Company’s expense.
The Board comprises two executive directors and three non-executive directors. The Board considers that all non-executive directors bring an independent judgement to bear notwithstanding the varying lengths of service.
The Board is supported by the Audit, Remuneration and AIM Compliance Committee. The Committee Terms of Reference are available on the Company’s website and can be accessed from the Corporate Governance page. *
| 6. Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities
The Board must have an appropriate balance of sector, financial and public markets skills and experience, as well as an appropriate balance of personal qualities and capabilities. The Board should understand and challenge its own diversity, including gender balance, as part of its composition.
The Board should not be dominated by one person or a group of people. Strong personal bonds can be important but can also divide a board.
As companies evolve, the mix of skills and experience required on the Board will change, and Board composition will need to evolve to reflect this change.
|The Directors are all identified together with a summary of their current and past experience on page 10 of the Report & Accounts for the year ended 31 December 2017. In the next Report & Accounts the Company will further demonstrate, inter alia, how the Board as a whole contains the necessary mix of experience, skills, personal qualities and capabilities. *
In February 2018, the Company split the role of the former Executive Chairman between the positions of Chairman and the current Chief Executive Officer, improving the balance of responsibilities within the Board.
The Chairman of the Board monitors the suitability of the Board’s composition on a continuing basis and will make recommendations to the Board as and when appropriate. Where new Board appointments are considered, the search for candidates is conducted, and appointments are made, on merit, against objective criteria.
|7. Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement
The Board should regularly review the effectiveness of its performance as a unit, as well as that of its committees and the individual directors.
The Board performance review may be carried out internally or, ideally, externally facilitated from time to time. The review should identify development or mentoring needs of individual directors or the wider senior management team.
It is healthy for membership of the Board to be periodically refreshed. Succession planning is a vital task for boards. No member of the Board should become indispensable.
|The Board evaluates its performance as a whole informally, on an ongoing basis. This falls under the overall responsibility of the Chairman, taking into account the Financial Reporting Council’s Guidance on Board Effectiveness. *
The chair of each Board committee is responsible for evaluating the performance of their respective committee in relation to the terms of reference of each of those committees, undertaken informally on an ongoing basis.
In addition, the individual performance and effectiveness of all Directors is considered prior to the proposal for each director’s re- election to ensure that their performance is and continues to be effective, that where appropriate they maintain their independence and that they are demonstrating continued commitment to the role, taking into account, inter alia, individual contributions towards implementing the Company‘s business strategy, the clarity of leadership, and the quality of information, presentations and support provided to the Board.
The evaluation procedures have been maintained and applied consistently over the years, reflecting the business activities of the Company. As a consequence of the process, there have been changes to Board composition that have resulted in a balanced and fit for purpose Board, comprising 2 executives and 3 non-executives.
The Chairman of the Board and the Board consider succession planning for Board and other senior management appointments as part of the evaluation process.
As a result of this evaluation, in February 2018, the role of the former Executive Chairman was split between the positions of Chairman and Chief Executive Officer.
New directors resign and stand for re-election at the Company’s first AGM following their appointment. Existing directors are required to resign and, if appropriate, stand for re-election every 3 years.
|8. Promote a corporate culture that is based on ethical values and behaviours
The Board should embody and promote a corporate culture that is based on sound ethical values and behaviours and use it as an asset and a source of competitive advantage.
The policy set by the Board should be visible in the actions and decisions of the chief executive and the rest of the management team. Corporate values should guide the objectives and strategy of the Company.
The culture should be visible in every aspect of the business, including recruitment, nominations, training and engagement. The performance and reward system should endorse the desired ethical behaviours across all levels of the Company.
The corporate culture should be recognisable throughout the disclosures in the annual report, website and any other statements issued by the Company.
|The Board seeks to maintain the highest standards of integrity and probity in the conduct of the Company’s activities. These values are enshrined in the written policies and working practices adopted by all employees. An open culture is encouraged within the Company, with regular communications to staff regarding progress and staff feedback regularly sought.
The Company is committed to providing a safe environment for its staff and all other parties for which the Company has a legal or moral responsibility in this area. External consultants retained by the Company have reviewed our health and safety systems and procedures, and we have implemented their recommendations. *
| 9. Maintain governance structures and processes that are fit for purpose and support good decision- making by the Board
The Company should maintain governance structures and processes in line with its corporate culture and appropriate to its:
The governance structures should evolve over time in parallel with its objectives, strategy and business model to reflect the development of the Company.
|The Company’s Corporate Governance Statement was included on page 13 of the Report & Accounts for the year ended 31 December 2017; this has since been updated in order to reflect the QCA code. The updated Corporate Governance Statement may be viewed on the website, Corporate Governance page.
The Corporate Governance Statement details the Company’s governance structures including information about the Audit Committee, Remuneration Committee, AIM Compliance Committee and Share Dealing Policy, including summaries of the committees’ terms of reference.
The Chairman and the Board, with the help of guidance from the Company’s advisers, assess annually the appropriateness of the Company’s governance structures as the Company continues to develop. This ensures their continuing adequacy and relevance. The Chairman, Chief Executive Officer and Chief Executive Officer are jointly responsible for engagement with shareholders and other stakeholders. The Chief Executive Officer has overall responsibility for formulating, planning and implementing the Company’s strategy and the Chief Operating Officer has responsibility for all technical operational matters.
The Board is in constant communication and meets regularly. The following formal matters are reserved for approval by the Board:
At present the Board is satisfied with the Company’s corporate governance and as such there are no specific plans for changes to the Company’s corporate governance arrangements in the short-term. However, the Company is committed to the evolution of its corporate governance in line with best practice, to the extent the Directors judge it appropriate considering the Company’s size, stage of development and resources.
|QCA Code Principle||What we do and why|
| 10. Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders.
A healthy dialogue should exist between the Board and all of its stakeholders, including shareholders, to enable all interested parties to come to informed decisions about the Company.
In particular, appropriate communication and reporting structure should exist between the Board and all constituent parts of its shareholder base. This will assist:
It should be clear where these communication practices are described (annual report or website).
|The Company encourages two-way communication with its investors and other stakeholders and responds quickly to all queries received. The Chairman and executive directors speak regularly with the Group’s major shareholders and ensure that their views are communicated fully to the Board.*
The Board recognises the AGM as an important opportunity to meet shareholders. The Directors are available to listen to the views of shareholders formally during the AGM and also informally, immediately following the AGM. The Company communicates how it is governed and is performing through its regulatory announcements, its Annual Report and via its website, which is regularly updated.
The Report & Accounts and Notices of General Meetings of the Company for the last five years may be viewed on the website page – Reports Shareholder Company Documents.
The results of voting on all resolutions in future general meetings will be posted to the Company’s website and announced via RNS, including any actions to be taken as a result of resolutions for which votes against have been received from at least 20% of individual shareholders
* It was not practicable for the Company to include the Annual Report & Accounts disclosures required by the 2018 QCA Code in the Company’s Annual Report & Accounts for the financial year ended 31 December 2017, given that the 2018 QCA code was published on 25 April 2018, when the Company was in the process of finalising its audit and Annual Report & Accounts. The Company intends to include the Annual Report & Accounts disclosures required by the 2018 QCA Corporate Governance Code in the Company’s Annual Report & Accounts for the financial year ended 31 December 2018.