Another bad week for investors

Last week was a really bad week for investors on Wall Street.

This is because for the first time in a long while, the Dow Jones Industrial Average index (DJIA) fell for five straight trading days.

In the process, it suffered a total loss of 451.22 points, or 3.52 percent, on a weekly basis.

Likewise, our market suffered badly last week.

At the end of trading last Friday, the Philippine Stock Exchange index (PSEi) fell by 278.52 points to 4,879.42, down 5.40 percent on a weekly basis.

Fortunately, we have a selection of local issues that are not so badly affected by developments abroad that they continue to hold good promise of productivity and profitability on the basis of the local economy’s fundamentals.

This is one reason why our local market was up 152.79 points last Thursday.

Some bargain hunting occurred: The market opened at 4,864.23, rose to a high of 5,029.78 and closed slightly lower at 5,017.02, with 4,864.23 as the day’s trading session low, on a volume of 3.47 billion shares and value turnover of P7.11 billion.

Some analysts stress that only a plausible solution to Greece’s credit problem and program of payment to its creditors will take away the anxiety in the market.

Other market watchers hope that the crisis will be resolved by the formation of a new government following the scheduled national elections in Greece on June 17.

Until then, analysts said “the markets will again be rattled by Europe.”

Shades of the same color

As investors go through another trying time this week, one investor who claims to have a “reform agenda to protect investors’ interests and rebuild shareholders’ confidence” at Nido Petroleum Ltd. (listed on the Australian Securities Exchange, with the trading symbol of “NDO”) will face the challenge of landing a board seat during the scheduled stockholders’ meeting (they call it Annual General Meeting, or AGM) of the company at 3:00 p.m. (Perth time) on May 25, to be held at the Royal Freshwater Bay Yacht Club, Keane’s Point, Hobb’s Place, Peppermint Grove, Western Australia.

My article last May 1, entitled “There is no worse lie than a truth misunderstood,” also elicited reactions from readers far away from the Philippines. One is from Michael Pope of Australia, the man who is seeking a board seat at NDO. He was happy with the warning to the investing public against “over-enthusiastic estimates put forward by some players in the Philippines oil and gas sector, particularly reserves at the Reed Bank (or Recto Bank, as we call it).”

I asked Old Leggs, my friend and oil consultant, what exactly is Pope’s related interest in NDO. He said that this is about the disappointing turnout in NDO’s drillings. In particular, NDO drilled at Gindara 1 at Service Contract (SC) 54B last year.

After highlighting the ‘Oh-so-good’ prognosis that even convinced Shell Philippines Exploration BV to farm-in for a 45 percent participating interest, the well turned out to be a “dry hole” and became an embarrassment to the company’s credibility.

Pope is strongly opposed to these types of posturing and “subsequent failure to achieve results.”

Common investors like him suffer the consequences of these “overly optimistic acts.”

As of last Friday, NDO’s market price had gone down to as low as AUD$0.041 per share.

With his invitation “to cover the outcome” of the supposed stockholders’ meeting of Nido Petroleum, I found one interesting item in the AGM. This is the bid for reelection of one Filipino national and director of the company, Eduardo Manalac, along with Michael Ollis and the candidacy of Michael Pope.”

I was also amused by the notice sent to stockholders.

It said: “The Chairman intends to vote undirected proxies in favor of Dr. Michael Ollis and the re-election of Mr. Eduardo Manalac and against the election of Mr. Michael Pope.”

Obviously, Pope does not enjoy the goodwill, much less the sympathy, of management.

Thus, while Filipino expatriate Manalac is extolled as a great contribution to the company along with Ollis, Pope is not, on account of the following requirements: “senior executive and leadership experience in the energy sector, non-executive director experience in the energy sector, demonstrated strategic planning and risk management skills, broad operational and/or business experience, capital market and Asian energy networks, and a strategic, ‘big picture’ view rather than a narrow specialist view. Moreover, given the criticality of working effectively in a group setting and engaging constructively in high-quality interaction with other Board members and the executive team, it is essential that Board candidates have the ability to develop and maintain mutual respect and the tact and skill to constructively determine outcomes.”

Curiously, the task of determining if a candidate possesses “most, if not all” of the above qualifications, is vested in the Remuneration and Nomination Committee and an independent consultant hired by the company.

The company describes Pope as “a drilling engineer with approximately 11 years of industry experience.” Pope says that he is “employed as Senior Drilling Engineer with Inpex Browse in relation to the Ichthys Development since November 2007.” Prior to this, he was a Drilling Engineer/Drill Site Manager with Chevron International E&P, Operations Engineer at Atwood Oceanics Australia, Sales Manager at Itochu Tubulars Oceania, and as Formation Evaluation Measurement While Drilling Engineer with Sperry-Sun Drilling Services and Clough Engineering—Offshore Division.

Bottom-line spin

NDO (as summarized in the material provided to the investors), “is an experienced exploration and production company of offshore Philippines, whose assets are located in the dominant offshore producing basin in the Philippines,” with a “large contiguous acreage position” of over “5.9 million acres under control (over 3.46 million net acres) in five Service Contracts (SC) areas.”

The company’s plans for the next two years are: to “increase the production rate of the Galoc oil field and West Linapacan; drill two wells in 2012 involving the Lawaan prospect at SC54A (42.4 percent); the Aboabo Well at SC63 (50 percent); and three wells in 2013 involving three prospects in SC63, the Pawikan prospect in SC54B (60 percent), and the Balyena prospect SC58 (50 percent).”

Interestingly, Pope was elected by the majority of the stockholders who voted in 2011. Despite that, the board disallowed his election on grounds that he was “not suitable for election to the Board of the company.”

This year might be more auspicious for him. Said power of the board has been removed as a result of the changes made to reform the Corporations Act. But then, he may again have another bad week.

From what I understand, the single biggest stockholder of Nido Petroleum is a Filipino national. Unfortunately for Pope, management was able to get his proxy in return for a promise to give it another two years to perform.

(The writer is a licensed stockbroker of Eagle Equities, Inc. You may reach the Market Rider at [email protected], [email protected] or at www.kapitaltek.com.)