Oilex Ltd Corporate Governance Statement (5750Q)

TIDMOEX

RNS Number : 5750Q

Oilex Ltd

13 September 2017

OILEX LTD (ABN 50 078 652 632)

Corporate Governance Statement

Approach to Corporate Governance

Oilex Ltd ABN 50 078 652 632 (Company) has established a corporate governance framework, the key features of which are set out in this statement. In establishing its corporate governance framework, the Company has referred to the recommendations set out in the ASX Corporate Governance Council's Corporate Governance Principles and Recommendations 3(rd) edition (Principles & Recommendations). The Company has followed each recommendation where the Board has considered the recommendation to be an appropriate benchmark for its corporate governance practices. Where the Company's corporate governance practices follow a recommendation, the Board has made appropriate statements reporting on the adoption of the recommendation. In compliance with the "if not, why not" reporting regime where, after due consideration, the Company's corporate governance practices do not follow a recommendation, the Board has explained its reasons for not following the recommendation and disclosed what, if any, alternative practices the Company has adopted instead of those in the recommendation.

The following governance-related documents can be found on the Company's website at www.oilex.com.au, under the section marked "Corporate Governance":

Charters

Board

Audit and Risk Committee

Nomination and Remuneration Committee

Policies and Procedures

Process for Performance Evaluations

Policy and Procedure for the Selection and (Re)Appointment of Directors

Induction Program

Procedure for the Selection, Appointment and Rotation of External Auditor

Code of Conduct (summary)

Diversity Policy (summary)

Policy on Continuous Disclosure (summary)

Compliance Procedures (summary)

Risk Management Policy

Shareholder Communication and Investor Relations Policy

Securities Trading Policy

Whistleblower Policy

Anti-bribery and Corruption Policy

The Company reports below on whether it has followed each of the recommendations during the year ended 30 June 2017 (Reporting Period). The information in this statement is current at 11 September 2017. This statement was approved by a resolution of the Board on 11 September 2017.

Principle 1 - Lay Solid Foundations for Management and Oversight

Recommendation 1.1

The Company has established the respective roles and responsibilities of its Board and management, and those matters expressly reserved to the Board and those delegated to management and has documented this in its Board Charter, which is disclosed on the Company's website.

Recommendation 1.2

The Company undertakes appropriate checks before appointing a person, or putting forward to shareholders a candidate for election as a director and provides shareholders with all material information in its possession relevant to a decision on whether or not to elect or re-elect a director.

Appropriate checks were undertaken before Paul Haywood was appointed to the Board as a non-executive director on 29 May 2017. The Company provided shareholders with all material information in relation to the election of Bradley Lingo as a director at its 2016 Annual General Meeting.

Recommendation 1.3

The Company has, and had during the Reporting Period, a written agreement with each non-executive director and each senior executive setting out the terms of their appointment.

Recommendation 1.4

The Company Secretary is accountable directly to the Board, through the Chairman, on all matters to do with the proper functioning of the Board as outlined in the Company's Board Charter. The Company's Secretary's role is also outlined in the employment agreement between the Company Secretary and the Company.

Recommendation 1.5

The Company has a Diversity Policy, which includes requirements for the Board to set measurable objectives for achieving gender diversity and to assess annually both the objectives and the Company's progress in achieving them. A summary of the Company's Diversity Policy is disclosed on the Company's website.

The following measurable objectives for achieving gender diversity have been set by the Board:

 
 Measurable objective           Progress made towards achieving 
                                 measurable objectives during 
                                 the Reporting Period 
-----------------------------  --------------------------------- 
 Increase the overall           The Company has reduced employee 
  percentage of females          numbers during the reporting 
  employed by the Company        period as part of its cost 
  to 20%.                        reduction strategy. After 
                                 the reduction 19% of the 
                                 Company's employees as at 
                                 30 June 2017 were female, 
                                 an increase of 3% over June 
                                 2016. 
-----------------------------  --------------------------------- 
 At least one female            In its search for an additional 
  candidate to be considered     non-executive director, the 
  when the Board is next         Company requested that female 
  appointing a director.         candidates were presented 
                                 and one female candidate 
                                 was interviewed. 
-----------------------------  --------------------------------- 
 When recruiting senior         The Company did not recruit 
  and technical roles,           for any senior or technical 
  at least one female            roles in the Reporting Period. 
  candidate to be considered. 
-----------------------------  --------------------------------- 
 

The respective proportions of men and women on the Board, in senior executive positions and across the whole organisation are set out in the following table. Senior executive for these purposes means those employees that report directly to the Managing Director:

 
                                                           Proportion of women 
--------------------------------------------------------  ----------------------------- 
 Whole organisation                                        Six out of thirty one (19%) 
--------------------------------------------------------  ----------------------------- 
                                                           Three out of nineteen (16%) 
        *    Administration and operations support 
--------------------------------------------------------  ----------------------------- 
                                                           Zero out of three (0%) 
        *    Professional specialty - technical 
--------------------------------------------------------  ----------------------------- 
                                                           Three out of seven (43%) 
        *    Professional specialty - finance/commercial 
--------------------------------------------------------  ----------------------------- 
                                                           Six out of twenty nine (21%) 
        *    Total employees 
--------------------------------------------------------  ----------------------------- 
                                                           Zero out of two (0%) 
        *    Senior executive positions 
--------------------------------------------------------  ----------------------------- 
 Board                                                     Zero out of four (0%) 
--------------------------------------------------------  ----------------------------- 
 

Recommendation 1.6

Evaluations of the Board and individual directors for the reporting period ended 30 June 2016 were undertaken during the Reporting Period (in July 2016) in accordance with the process set out in the Company's Process for Performance Evaluations except that the Chair used the services of an independent third-party facilitator to evaluation the performance and competencies of the Board and the Chair. Each Board member completed a Board skills questionnaire, the responses to each of the questionnaires were summarised and collated by the facilitator. The facilitator also conducted individual director interviews, with specific attention on the areas of governance and leadership. The facilitator reported back to the Board on 24 August 2016, and the Board reviewed and discussed the responses, recommendations and addressed issues as required.

In July, August and September 2017, evaluations of the Board and individual directors (including the Chairman and Managing Director, but excluding non-executive director Paul Haywood) were undertaken in relation to the Reporting Period, and were conducted in accordance with the process disclosed in the Company's Process for Performance Evaluations. The evaluations for the Reporting Period were not undertaken during the Reporting Period due the Chairman's travel commitments. Mr Haywood's performance was deferred until the next round of evaluations, given his recent appointment to the Board.

Recommendation 1.7

The Managing Director is responsible for evaluating the performance of senior executives in accordance with the process disclosed in the Company's Process for Performance Evaluations. During the Reporting Period, the Managing Director undertook an evaluation of senior executives. The evaluations were carried out in accordance with the process disclosed in the Company's Process for Performance Evaluations.

Principle 2 - Structure the Board to Add Value

Recommendation 2.1

The Board has not established a separate Nomination Committee. Given the size and composition of the Board, the Board considers that there are no efficiencies to be gained by having a separate Nomination Committee, and accordingly the role is performed by the Board. The Board had adopted a Nomination and Remuneration Committee Charter, which describes the role, composition, functions and responsibilities of the committee. The Nomination and Remuneration Committee Charter is disclosed on the Company's website.

Items that are usually required to be discussed by a Nomination and Remuneration Committee are marked as separate agenda items at Board meetings when required, and when the Board convenes as a Nomination and Remuneration Committee, it carries out those functions which are delegated to it in the Nomination and Remuneration Committee Charter. These functions include addressing Board succession issues, and ensuring that the Board has the appropriate balance of skills, knowledge, experience, independence and diversity to enable it to discharge its duties and responsibilities effectively. The functions also include fulfilling the Board's corporate governance responsibilities with respect to remuneration by reviewing the Company's remuneration policy, senior executives' remuneration and incentives, the remuneration framework for directors and remuneration related reporting requirements. The Board deals with any conflicts of interest that occur when it performs the functions of a Nomination and Remuneration Committee by ensuring that any director with a conflicting interest is not party to the relevant discussions.

Recommendation 2.2

During the Reporting Period, the Board, with the assistance of the independent third-party facilitator, evaluated the Board's skills and diversity to identify the priority skill set it is wishes to see represented in its membership. The following skills were identified, which reflect the Company's focus on its assets located around the Indian Ocean rim, with a particular focus on applying tight oil/tight gas technologies from North America into the Cambay Field in Gujarat, India:

   --     International oil and gas industry experience. 
   --     Capital markets experience. 
   --     Corporate and commercial skills. 
   --     Legal. 
   --     Strategic Human Resources. 
   --     Strategic Information Technology. 
   --     Strategic Marketing. 

Whilst the Board possesses some of these skills, the Board is looking to appoint an additional non-executive director and who may potentially chair the Board. This person will have significant public company experience in the junior oil and gas resources sector, be independent and possess the strategic skills the Board is seeking.

Recommendation 2.3

The Board considers the independence of directors having regard to the relationships listed in Box 2.3 of the Principles & Recommendations. The Board considers the independence of each of its non-executive directors at least annually.

The following table sets out the directors during the Reporting Period, and their independence status:

 
 Director       Independent (Yes/No)            Date of appointment/length 
                 If no, reason.                  of service 
-------------  ------------------------------  --------------------------- 
 Max Cozijn     No, due to his length           3 June 1997 
                 of service as a director        Company listed 
                 of the Company, and             on ASX October 
                 additional director             2003 
                 fees that he has received 
                 for services performed 
                 outside the scope of 
                 his ordinary duties 
                 as a non-executive director. 
                 However, the Board considers 
                 that Mr Cozijn acts 
                 Independently in the 
                 discharge of his duties 
                 as a non-executive director. 
-------------  ------------------------------  --------------------------- 
 Jonathan       No, Managing Director.          29 November 2015 
  Salomon                                        (appointed Managing 
                                                 Director on 18 
                                                 March 2016) 
-------------  ------------------------------  --------------------------- 
 Bradley        Yes                             11 February 2016 
  Lingo 
-------------  ------------------------------  --------------------------- 
 Paul Haywood   Yes                             29 May 2017 
-------------  ------------------------------  --------------------------- 
 

Recommendation 2.4

The Board does not have a majority of directors who are independent, but does have equal numbers of independent and non-independent directors. The Board considers that its current composition is an appropriate mix of skills and experience relevant to the Company's business. The Board did appoint Paul Haywood on 29 May 2017, who is an independent non-executive director. In addition, the Company is seeking to appoint an additional non-executive independent director to potentially chair the Board.

Recommendation 2.5

For the period 1 July 2016 to 23 February 2017, the Chairman of the Board was Max Cozijn, who is not an independent director for the reasons outlined above in relation to Recommendation 2.3. The Board considered that Max Cozijn was the most appropriate person to chair the Board, notwithstanding that he is not an independent director, due to his extensive industry and Australian public company director experience.

However, the position of chairman was reviewed by the Board, and in particular the importance of having an independent director as its chair, and on 23 February 2017 the Board appointed Bradley Lingo as its Chairman. The Company has initiated a formal search process to identify a potential new Chair.

Both Mr Cozijn and Bradley Lingo are not also the Company's Managing Director.

Recommendation 2.6

The Company has an induction program that it uses when new directors join the Board and when new senior executives are appointed. The goal of the program is to assist new directors to participate fully and actively in Board decision-making at the earliest opportunity and to assist senior executives to participate fully and actively in management decision-making at the earliest opportunity. The Company's Induction Program is disclosed on the Company's website.

The Board, performing the functions of the Nomination and Remuneration Committee, regularly reviews whether the directors as a group have the skills, knowledge and familiarity with the Company and its operating environment required to fulfil their role on the Board effectively. Where any gaps are identified, the Board considers what training or development should be undertaken to fill those gaps. In particular, the Board ensures that any director who does not have specialist accounting skills or knowledge has a sufficient understanding of accounting matters to fulfil his or her responsibilities in relation to the Company's financial statements. Directors also receive education on relevant developments in accounting standards.

Principle 3 - Act Ethically and responsibly

Recommendation 3.1

The Company has established a Code of Conduct for its directors, senior executives and employees, a summary of which is disclosed on the Company's website. The Company has also established a Whistleblower Policy (disclosed on the Company's website) to encourage the reporting of violations (or suspected violations) of the Code of Conduct and provide effective protection from victimisation or dismissal to those reporting by implementing systems for confidentiality and report handling.

The Company has also established an Anti-bribery and Corruption Policy, which sets out the Company's policy and approach to bribery and corruption. This policy is also disclosed on the Company's website.

Principle 4 - Safeguard Integrity in Corporate Reporting

Recommendation 4.1

The Board has not established a separate Audit Committee, having resolved that it would perform the function of an Audit and Risk Committee. The Board has adopted an Audit and Risk Committee Charter, which describes the role, composition, functions and responsibilities of the Board in its capacity as the committee, and which is disclosed on the Company's website. Items that are usually required to be discussed by an Audit and Risk Committee are marked as separate agenda items at Board meetings when required, and when the Board convenes as the Audit and Risk Committee, it carries out those functions which are delegated to it in the Audit and Risk Committee Charter. These functions include reviewing the adequacy of the Company's corporate reporting processes, and reviewing whether the Company's financial statements reflect the understanding of the Board members, and otherwise provide a true and fair view of, the financial position and performance of the Company. The functions also include reviewing the adequacy of the Company's processes for managing risk. The Board deals with any conflicts of interest that occur when it perms the functions of an Audit and Risk Committee by ensuring that any director with a conflicting interest is not party to the relevant discussions.

Details of the relevant qualifications and experience of the members of the Board are set out in the Directors' Report on pages 14 to 15 of the Company's Financial Report for year ended 30 June 2017.

The Company has also established a Procedure for the Selection, Appointment and Rotation of its External Auditor. The Board is responsible for the initial appointment of the external auditor and the appointment of a new external auditor when any vacancy arises. Candidates for the position of external auditor must demonstrate complete independence from the Company through the engagement period. The Board may otherwise select an external auditor based on criteria relevant to the Company's business and circumstances. The performance of the external auditor is reviewed on an annual basis by the Board.

Recommendation 4.2

Before the Board approved the Company financial statements for the half year ended 31 December 2016, for each of the quarters ending 30 September 2016, 31 December 2016, 31 March 2017 and 30 June 2017 and for the full-year ended 30 June 2017 it received from the Managing Director and the Chief Financial Officer a declaration that, in their opinion, the financial records of the Company for the relevant financial period have been properly maintained and that the financial statements for the relevant financial period comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the Company and the consolidated entity and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively.

Recommendation 4.3

Under section 250RA of the Corporations Act, the Company's auditor is required to attend the Company's annual general meeting at which the audit report is considered, and must arrange to be represented by a person who is a suitably qualified member of the audit team that conducted the audit and is in a position to answer questions about the audit. Each year, the Company writes to the Company's auditor to inform them of the date of the Company's annual general meeting. In accordance with section 250S of the Corporations Act, at the Company's annual general meeting where the Company's auditor or their representative is at the meeting, the Chairman allows a reasonable opportunity for the members as a whole at the meeting to ask the auditor (or its representative) questions relevant to the conduct of the audit; the preparation and content of the auditor's report; the accounting policies adopted by the Company in relation to the preparation of the financial statements; and the independence of the auditor in relation to the conduct of the audit. The Chairman also allows a reasonable opportunity for the auditor (or their representative) to answer written questions submitted to the auditor under section 250PA of the Corporations Act.

Mr Graham Hogg, a representative of the Company's auditor KPMG, attended the Company's annual general meeting held on 23 November 2016.

Principle 5 - Make Timely and Balanced Disclosure

Recommendation 5.1

The Company has established written policies and procedures for complying with its continuous disclosure obligations under the ASX Listing Rules. A summary of the Company's Policy on Continuous Disclosure and Compliance Procedures are disclosed on the Company's website.

Principle 6 - Respect the Rights of Security Holders

Recommendation 6.1

The Company provides information about itself and its governance to investors via its website at www.oilex.com.au as set out in its Shareholder Communication and Investor Relations Policy, which is disclosed on the Company's website.

Recommendation 6.2

The Company has designed and implemented an investor relations program to facilitate effective two-way communication with investors. The program is set out in the Company's Shareholder Communication and Investor Relations Policy, which is disclosed on the Company's website.

Recommendation 6.3

During the Reporting Period, the Company had in place a Shareholder Communication and Investor Relations Policy which outlines the policies and processes that it has in place to facilitate and encourage participation at meetings of shareholders.

Recommendation 6.4

Shareholders are given the option to receive communications from, and send communications to, the Company and its share registry electronically. New shareholders are mailed a communication form providing a choice of communication, either electronic or hard copy. Existing shareholders can amend their form of communication at any time. Shareholders can also subscribe via the Company's website to receive the Company's announcements made to ASX by email.

Principle 7 - Recognise and Manage risk

Recommendation 7.1

The Board has not established a separate Risk Committee, having resolved that it would perform the function of an Audit and Risk Committee. Please refer to the disclosure under the heading "Recommendation 4.1" in relation to the Board performing the function of the Audit and Risk Committee.

Recommendation 7.2

During the Reporting Period, the Board reviewed the Company's risk management framework to satisfy itself that it continued to be sound, to determine whether there have been any changes in the material business risks the Company faces and to ensure that the Company is operating within the risk appetite set by the Board.

Recommendation 7.3

The Company does not have an internal audit function. To evaluate and continually improve the effectiveness of the Company's risk management and internal control processes, the Board relies on ongoing reporting and discussion of the management of material business risks as outlined in the Company's Risk Management Policy.

Recommendation 7.4

The Company has material exposure to the following economic, environmental and/or social sustainability risks:

 
 Risk                      How risk is managed/intended 
                            to be managed 
------------------------  ------------------------------------------ 
 Health and safety         Oilex is committed to protecting 
  management                the health and safety of everybody 
                            who plays a part in its operations 
                            or lives in the communities where 
                            the Company operates. Oilex has 
                            implemented a HSES framework 
                            that promotes responsibility 
                            and accountability within the 
                            Company for health and safety 
                            matters. 
------------------------  ------------------------------------------ 
 Environmental             Oilex has an active program of 
                            education, monitoring and reporting 
                            within the business to identify 
                            and mitigate environmental risks. 
------------------------  ------------------------------------------ 
 Future funding            Funding requirements are reviewed 
                            on a regular basis through internal 
                            cash flow models and scenario 
                            analysis. Alternative funding 
                            options are identified and reviewed 
                            on a regular basis. 
------------------------  ------------------------------------------ 
 Commodity Pricing         The Company's ability to secure 
                            funding is partially impact by 
                            prevailing commodity prices. 
                            The Company adjusts its work 
                            programmes and budgets to ensure 
                            it is aligned with its capacity 
                            to secure the necessary funding. 
------------------------  ------------------------------------------ 
 Joint Venture Alignment   The Company is in continuous 
                            discussions with its Joint Venture 
                            Partner working towards the approval 
                            and funding of the work programmes 
                            and budgets. As the operator 
                            of several PSCs, the Company 
                            is liable for expenditure commitments 
                            and accordingly, may be required 
                            to fund the unpaid cash calls 
                            by its joint venture partners. 
------------------------  ------------------------------------------ 
 Cambay Production         The Company intends to submit 
  Sharing Contract          in September 2017, an application 
  Extension                 to the Government of India (GOI), 
                            for an extension to the Cambay 
                            PSC for up to ten years. The 
                            extension is subject to approval 
                            by the GOI and accordingly cannot 
                            be assured. 
------------------------  ------------------------------------------ 
 Delays to schedule        Oilex regularly reviews and updates 
                            work programmes and plans to 
                            ensure critical path items are 
                            identified and appropriate contingencies 
                            are in place to manage schedule 
                            risk. 
------------------------  ------------------------------------------ 
 Regulatory framework      The Company continually liaises 
                            with governments, employs staff, 
                            consultants and specialists experienced 
                            in operating within the relevant 
                            regulatory and commercial environment 
                            for each jurisdiction. 
------------------------  ------------------------------------------ 
 Exploration risk           The Company utilises the services 
                             of suitably qualified personnel 
                             and consultants, appropriate 
                             systems and reviews all available 

                             material data prior to undertaking 
                             any substantial exploration activities. 
------------------------  ------------------------------------------ 
 

The Managing Director has responsibility for identifying, assessing, monitoring and managing risks. The Managing Director is also responsible for identifying any material changes to the Company's risk profile and ensuring, with approval of the Board, the risk profile of the Company is updated to reflect any material change.

The Managing Director is to report to the Board as to the effectiveness of the Company's management of its material business risks, at least annually. During the Reporting Period, the reports were provided quarterly.

Principle 8 - Remunerate Fairly and Responsibly

Recommendation 8.1

The Board has not established a separate Remuneration Committee, having resolved that it would perform the function of a Nomination and Remuneration Committee. Please refer to the disclosure under the heading "Recommendation 2.1" in relation to the Board performing the function of a Nomination and Remuneration committee.

Recommendation 8.2

Details of remuneration, including the Company's policy on remuneration and "clawback policy" regarding the deferral of performance-based remuneration and the reduction, cancellation or clawback of the performance-based remuneration in the event of serious misconduct or a material misstatement in the Company's financial statements, are contained in the "Remuneration Report" which forms of part of the Directors' Report and commences at page 21 of the Company's Financial Report for year ended 30 June 2017.

Recommendation 8.3

The Company does not currently have an equity based remuneration scheme in place.

This information is provided by RNS

The company news service from the London Stock Exchange

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September 13, 2017 02:00 ET (06:00 GMT)