May 13, 2016 - 7:18 AM EDT
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Concerned InterOil Shareholders Nominate Five Highly-Qualified, Independent Directors for Election to the Board of InterOil Corporation

HOUSTON, TX, May 13, 2016 /PRNewswire/ - The founding shareholder, former chairman and Chief Executive Officer of InterOil Corporation ("InterOil" or the "Company") (NYSE: IOC), Phil Mulacek, and Petroleum Independent & Exploration, LLC ("PIE Corp.") (together, the "Concerned InterOil Shareholders"), announced today that they have delivered to the Board of Directors of InterOil (the "Board"), pursuant to InterOil's by-laws, notice of the nomination of five highly-qualified, independent directors (the "Shareholder Nominees") to be elected at the annual and special meeting of shareholders of InterOil, to be held on June 14, 2016 (the "AGM"). At the AGM, shareholders will also be asked to approve a number of corporate governance proposals (the "Proposed Resolutions"), which were included in the requisition of a special meeting of shareholders (the "Requisition") dated March 21, 2016 by the Concerned InterOil Shareholders and other shareholders of InterOil representing in total approximately 7.6% of the outstanding shares of the Company.

The incumbent Board has presided over a massive destruction of shareholder value. The Concerned InterOil Shareholders believe that the incumbent Board has failed to provide effective oversight of management and has adopted a flawed managerial and operational structure. The Concerned InterOil Shareholders further believe that these mistakes have significantly damaged the interests of InterOil's shareholders and jeopardized the future of the Company.

In March of this year, frustrated with the poor decision-making of the incumbent Board and management team, the Concerned InterOil Shareholders and certain other shareholders made the Requisition in order to introduce the Proposed Resolutions, which are a series of important corporate governance reforms designed to protect shareholders from destructive Board actions. The Board initially refused to even acknowledge and disclose the lawful Requisition, which forced the Concerned InterOil Shareholders to seek redress from the Supreme Court of Yukon, at their own expense, to compel the Board to act on the Requisition and bring the Proposed Resolutions to a vote at the AGM.

The Proposed Resolutions are reasonable proposals intended to make the Board accountable to shareholders, improve the composition of skills on the Board, align the Board's interests with shareholders and introduce basic corporate governance practices, including more complete disclosure. Unfortunately, the incumbent Board opposes every single one of the Proposed Resolutions and is now actively working against their adoption.

The Board's baffling opposition to measures intended to remedy the unaccountability, poor decision-making processes and destruction of shareholder value, have led the Concerned InterOil Shareholders to believe that even if the Proposed Resolutions are passed at the AGM, the incumbent Board will not make a good faith attempt to implement them. The Concerned InterOil Shareholders have concluded, after much deliberation and thought, that the only way to ensure that the Proposed Resolutions are implemented in a credible way would be to nominate the Shareholder Nominees for election to the Board at the AGM. The Concerned InterOil Shareholders may also nominate a sixth highly-qualified individual.

HISTORY OF VALUE DESTRUCTION BY THE INCUMBENT BOARD

Since Mr. Mulacek's retirement as CEO in April 2013, InterOil's share price has declined by about US$60 per share.  The Concerned InterOil Shareholders believe the incumbent Board is responsible for this substantial destruction of shareholder value. Among other things:

  • The incumbent Board has pursued value destructive transactions and done so without shareholder approval, including the sale of more than half of InterOil's gross interest in the Elk and Antelope gas fields to TOTAL, S.A. ("TOTAL") on terms that caused the share price to plummet over 50% in the following month and a half, wiping out US$2.5 billion in shareholder value.
  • The incumbent Board has proven that it lacks needed expertise and understanding of exploration and development operations in Papua New Guinea, which has led to cost overruns, repeated operational failures and high and increasing debt levels for the Company.
  • The incumbent Board is taking a destructive short-term view of InterOil's business, sacrificing long - term shareholder value by allowing management to dispose of assets at fire-sale prices and  destroy useful equipment, and to dismiss hundreds of recently hired and trained employees.
  • The incumbent Board has failed to disclose developments to shareholders that the Concerned InterOil Shareholders believe to be material, and has emphasized non-material announcements to provide the appearance of progress.
  • Compensation levels of the incumbent Board and management, including substantial "golden parachutes" for management in the event of a change in control of the Company, are far out of scale for a company like InterOil with no net revenue from upstream operations and no operatorship of PRL 15 (Elk and Antelope fields) or other material lease operations.
  • Current Board members' interests are not aligned with the interests of shareholders. Most of the InterOil shares owned by current directors were received as share grants from the Company without material purchases from their own funds.

 

THE CONCERNED INTEROIL SHAREHOLDERS PROPOSED RESOLUTIONS WOULD:

  • Compel the Board to seek shareholder approval of material transactions that involve more than 10% of the Company's total asset value. Shareholders must have some check on the Board to ensure that the incumbent Board's track record of entering into value destructive transactions without shareholder approval cannot continue.
  • Require at least one-third of the Board members to have direct operating experience in exploration and development in remote jungle areas. The Board must have the necessary expertise to be able to provide effective oversight of management to avoid a repeat of the poor managerial and operational decision-making that has plagued InterOil since Mr. Mulacek retired as CEO in 2013.
  • Require third party analysis to support discovery announcements and evaluate the commercial potential of the Company's assets. To promote transparency and accountability and avoid market distortions, the Board must provide accurate and independently verified reserves information to the public and shareholders, and the Board and management must be prevented from misstating the significance (or insignificance) of "discoveries" and other material developments.
  • Compel the Board to develop and vigorously enforce a disclosure policy that exceeds the regulatory minimum. Shareholders deserve a full and complete understanding of their investment based on a policy of full disclosure instead of minimum compliance with required standards.
  • Require a threshold price per share as a condition to any change of control payments to management; limit aggregate Board cash compensation to US$600,000; and restrict the sale of equity grants received by Board members for a year after their service ends. The Board must be aligned with shareholders and incentivized to act in the long - term best interests of the Company. The Concerned InterOil Shareholders also want to ensure that the Board and management seek the best price for InterOil in the event of a sale of the Company, and only benefit if shareholders also benefit.

 

THE CONCERNED INTEROIL SHAREHOLDERS' FIVE HIGHLY-QUALIFIED NOMINEES:

Phil Mulacek – Mr. Mulacek is the Chairman of Asian Oil & Gas Pte Ltd. and the founder and President of PIE Corp. based in Houston, Texas. Mr. Mulacek is the founder of, and served as the Chairman and Chief Executive Officer of InterOil from its inception on July 1st, 1997 until his resignation as Chairman on August 3rd, 2012. On April 30th, 2013, Mr. Mulacek retired as Chief Executive Officer of InterOil.

During his tenure at the Company, its market capitalization grew from approximately US$10 million (~ US$0.50/share) to over US$4.5 billion (~ US$92.00/share) at his departure.  The Company also constructed the first petroleum refinery in Papua New Guinea, a 36,000 bpd facility at Napa Napa, with a fully integrated downstream business that contributed to support the Company.

Mr. Mulacek led InterOil's discovery of the world-class Elk and Antelope gas fields in the Gulf Province of Papua New Guinea, with approximately 10 to 15 tcfe of certified hydrocarbon resource, and the nearby Triceratops gas field, with approximately 1 tcfe of certified hydrocarbon resource.  These fields have been among the largest onshore discoveries in Papua New Guinea and Asia in recent years. 

Since retiring from InterOil in 2013, Mr. Mulacek has remained actively involved in the upstream oil and gas industry in Papua New Guinea, the US and elsewhere globally through his affiliated companies with offices in Singapore and branch offices in the United States.  He resides in Singapore.

David Lasco – Mr. Lasco has 40 years of business and financial experience. Mr. Lasco is the founder and CEO of privately held Lasco Development, a construction and real estate company formed in 1996, including dozens of affiliates and subsidiaries that he has managed. His primary business experience is in the acquisition, developing, building and management of residential and commercial real estate projects ranging from single tenant build to suit projects to multi-million dollar housing developments and multi-unit million dollar apartment and commercial rental facilities.  Prior to founding Lasco Development, Mr. Lasco was an initial investor, officer and board member of a telemarketing company in the U.S. which, through his management skills, grew into a multi-location, multi-million dollar national telemarketing sales company with over 2000 employees during his tenure.

David Vance – Mr. Vance is a senior corporate and project finance attorney and CFA charter holder with more than 30 years of experience in Asia and the US in major project investment and development, including LNG projects and oil and gas matters in Papua New Guinea. He is currently Upstream Counsel for Asian Oil & Gas Pte Ltd. in Singapore and a Non-Executive Director and member of the audit committee of Kina Petroleum Ltd. (ASX:KPL).  Prior to joining Asian Oil & Gas, Mr. Vance was Senior Commercial Manager for InterOil and a partner in the Tokyo office of U.S. law firm Paul Hastings.

Henry Olen Overstreet - Mr. Overstreet has 47 years of experience in the oil and gas industry, and currently acts as an upstream oil and gas drilling contractor with operations in the United States and overseas.

George Cammon – Mr. Cammon is a 37-year veteran of the oil and gas industry, with experience in oil and gas exploration, appraisal and intervention. Mr. Cammon is currently the Drilling and Engineering Manager for PIE Operating.

If properly managed, the Concerned InterOil Shareholders believe that InterOil still has the potential to create billions of dollars in value for shareholders. The Shareholder Nominees are all highly-qualified and knowledgeable about InterOil's business, and would bring much-needed shareholder-focused representation into the boardroom, as well as capital allocation and operational expertise and deep industry specific experience. The Concerned InterOil Shareholders believe that all of these fundamental competencies are lacking and required on the Board.

Shareholders, the Concerned InterOil Shareholders intend to solicit BLUE forms of proxy in the coming days to enable you to vote for the Proposed Resolutions and our highly-qualified nominees. Do NOT vote on the Management proxy card. Discard any materials you receive from Management.

Advisors:

The Concerned InterOil Shareholders have retained Wildeboer Dellelce LLP and Taft Stettinius & Hollister LLP as its legal advisors, Evolution Proxy, Inc. as its proxy solicitor, and Bayfield Strategy as its strategic communications advisor in connection with this matter.

Cautionary Statement Regarding ForwardLooking Statements:

This press release contains forward‐looking statements. All statements contained in this filing that are not clearly historical in nature or that necessarily depend on future events are forward‐looking, and the words "anticipate," "believe," "expect," "estimate," "plan," and similar expressions are generally intended to identify forward‐looking statements. These statements are based on current expectations of the Concerned InterOil Shareholders and currently available information.  They are not guarantees of future performance, involve certain risks and uncertainties that are difficult to predict, and are based upon assumptions as to future events that may not prove to be accurate. The Concerned InterOil Shareholders do not assume any obligation to update any forward‐looking statements contained in this press release.

Information Contact:

For additional information on this press release and a copy of the Requisition (including the Proposed Resolutions), please contact the Concerned InterOil Shareholders at +1 (832) 510-7028, or by email at [email protected]

Media Contact:

Bayfield Strategy, Inc.
Riyaz Lalani
+1 (416) 907-9365
[email protected]

Information in Support of Public Broadcast Solicitation:

The Concerned InterOil Shareholders are relying on the exemption under section 9.2(4) of National Instrument 52‐102 ‐ Continuous Disclosure Obligations to make this public broadcast solicitation. The following information is provided in accordance with corporate and securities laws applicable to public broadcast solicitations.

This solicitation is being made by the Concerned InterOil Shareholders and not by or on behalf of the management of InterOil.

The address of InterOil is 163 Penang Road, Winsland House II, #06-02, Singapore, 238463.

The Concerned InterOil Shareholders have filed an amended and restated information circular dated May 12, 2016 (the "Concerned InterOil Shareholders Circular") concerning the Requisition, the Proposed Resolutions and the Shareholder Nominees. The Concerned InterOil Shareholders Circular is available on InterOil's company profile on SEDAR at .http://www.sedar.com and on the Concerned InterOil Shareholders' website at http://www.concernedinteroilshareholders.com. The Concerned InterOil Shareholders have also filed a statement of beneficial ownership on Form 13-D (the "Form 13-D"), as amended, with the U.S. Securities and Exchange Commission.  The Form 13-D also includes the Requisition as an Exhibit and is available at https://www.sec.gov/Archives/edgar/data/1221715/000114420416090986/v435587_sc13d.htm and on the Concerned InterOil Shareholders website at http://www.concernedinteroilshareholders.com.

The Concerned InterOil Shareholders intend to solicit proxies in support of the Proposed Resolutions, the Shareholder Nominees and against resolutions being put forward by InterOil at the AGM. The Concerned InterOil Shareholders may solicit proxies by mail, telephone, facsimile, email or other electronic means as well as by newspaper or other media advertising and in person by directors, officers and employees of the Concerned InterOil Shareholders who will not be specifically remunerated therefor. In addition, the Concerned InterOil Shareholders may solicit proxies in reliance upon the public broadcast exemption to the solicitation requirements under applicable Canadian corporate and securities laws, conveyed by way of public broadcast, including press release, speech or publication, and by any other manner permitted under applicable Canadian laws. The Concerned InterOil Shareholders may engage the services of one or more agents and authorize other persons to assist them in soliciting proxies on behalf of the Concerned InterOil Shareholders.

The Concerned InterOil Shareholders have hired Evolution Proxy, Inc. to act as proxy agent for the Concerned InterOil Shareholders with respect to a formal solicitation of proxies. Services provided by Evolution Proxy, Inc. are based on a fee of $150,000, and subject to certain restrictions, an additional fee of $6.00 for each telephone call to or from InterOil shareholders. All costs incurred for the solicitation will be borne by the Concerned InterOil Shareholders.

A registered holder of common shares of InterOil that gives a proxy may revoke it: (a) by completing and signing a valid proxy bearing a later date and returning it in accordance with the instructions contained in the form of proxy to be provided by the Concerned InterOil Shareholders, or as otherwise provided in the proxy circular, once made available to shareholders; (b) by depositing an instrument in writing executed by the shareholder or by the shareholder's attorney authorized in writing, as the case may be: (i) at the registered office of InterOil at any time up to and including the last business day preceding the day of the AGM or the day of any adjournment or postponement of the AGM, or (ii) with the chairman of the AGM prior to its commencement on the day of the AGM or any adjournment or postponement of the AGM; or (c) in any other manner permitted by law.

A non‐registered holder of common shares of InterOil will be entitled to revoke a form of proxy or voting instruction form given to an intermediary at any time by written notice to the intermediary in accordance with the instructions given to the non‐registered holder by its intermediary. It should be noted that revocation of proxies or voting instructions by a non‐registered holder can take several days or even longer to complete and, accordingly, any such revocation should be completed well in advance of the deadline prescribed in the form of proxy or voting instruction form to ensure it is given effect in respect of the AGM.

Neither the Concerned InterOil Shareholders, nor any directors or officers, or any associates or affiliates of the foregoing or the Shareholder Nominees has: (i) any material interest, direct or indirect, in any transaction since the beginning of InterOil's most recently completed financial year or in any proposed transaction that has materially affected or would materially affect InterOil or any of its subsidiaries; or (ii) any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter currently known to be acted on at the AGM, other than the Proposed Resolutions and the election of the Shareholder Nominees.

However, certain of the Concerned InterOil Shareholders are the beneficial holders of minority indirect participation interests in certain of InterOil's petroleum prospecting licenses and petroleum retention licenses in Papua New Guinea under indirect participation agreements with InterOil.  The Concerned InterOil Shareholders believe that these indirect participation interests are not material to InterOil but are nevertheless fully aligned and not in conflict with the interests of InterOil's shareholders.

SOURCE Petroleum Independent & Exploration, LLC


Source: PR Newswire (May 13, 2016 - 7:18 AM EDT)

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