Doc....I'm still a bit on the fence as to this upcoming vote on performance rights. Many, many reasons to be against it, but potentially one or two compelling reasons for it. Hence I'm likely to remain on the fence till the last minute required to vote.
Some of the reasons against:
- We are at about 75% off post IW1 SP highs, and the SP growth tranche is vague as to whether the performance target is 200% growth over three years or each year. Massive distinction for me and most likely a vote swayer. My inner 'negative nancy' is telling me that this is structured as a 200% growth in year 1 (which would still be short of post IW1 highs) and a SP maintenance incentive for years 2 and 3 after this. Which takes us to the year 2021.
- We are at pre-farmout and the 'free hit' to achieve the SP growth target if we get 1 or 2 farm-outs, make it essentially a performance incentive for actions which have already been set in motion. A more shareholder aligned approach could be (as an illustration) pre-farmout 500% year 1 target growth and post farmout perhaps the 200%??
- Given the perceived disappointments of the last 12 months or so (as evidenced by market sentiment), it is not a great look to be lining up an additional reward system before shareholders can see light at the end of the tunnel.
- The forward plan released days before the General Meeting notice announcement, released info that I believe most company watchers would have considered to be a delay: IW conventional (post 2018 farmout) not being drilled till 2020.
- My experience of performance incentives is that they are a combination of carrot and stick. However, this one appears to be all carrot and no stick. When i say 'stick' I don't mean the nuclear option as suggested by some...as that is less stick and more guillotine (implying final judgement). By stick I mean some penalty for failure and that this should be on a similar sliding scale to the reward side of the equation. Examples I am familiar with are based on an estimate of total fair compensation for doing your job....then (say) 50% of it being at risk if you don't perform/deliver to expectations; 100% given if you meet expectations; and (say) 300% of it being available if you exceed expectations. That is how management incentives are aligned to shareholder interests.
- And on a slightly petty personal point....I do believe that this is something that should be floated and discussed /explained to shareholders. I don't know whether this was done in London...I await the video of the Q&A session....but we 35%'ers in Oz do deserve the odd attempt to hear about our investment too. Not in Perth (unless that is where most Oz holders are based) but somewhere on the East Coast more readily accessible.
That said, there are a couple of reasons that support the Oct 15 motions (in my mind):
- If the SP growth tranche is actually 200% growth per year for each of the three years then we all win. Though note the points above as to timing (pre vs post farmout)
- If the second and third tranches deliver within 12 months (which will automatically achieve year 1 of the SP growth tranche), then it is definitely a worthy 'reward' for management. A reward which is difficult to give ex-post.
- The dilutionary impact of this (if rewards are vested) is negligible.
- If DW does not deliver he gets nothing.
So...am sitting on the fence ...waiting to see how things develop.
At the moment....in terms of the forward plan - the only thing that we know will happen is the Winx drill in mid Q1 2019. there is no money to do anything further. HRZ horizontal flow testing is contingent on an HRZ farm-out. So I don't see the point in anyone moaning about that. If the HRZ is successfully farmed out, that means experts with more insight than you, I or the expert friends we consult with, have determined it is worth investing in further. Good enough for me.
Till then (YG aside), the focus is on farming out IW conventional. I am hoping that the absence of any drilling plans on the forward plan is more a tactical approach from the BoD to alleviate any sense of 'desperation' or urgency that Tier 1 farminees may seek to exploit. I can only imagine that once a farmout is concluded, if the drilling permits are largely in place and ice/road equipment and drilling rigs are available, then they
could kick-on this winter. Especially with the leverage and resources of a Tier 1 partner. I hope. May put the performance rights palaver into perspective.
All IMO and GLTA.
Apologies for the excessive and lengthy opining.
(20min delay)
