Algeria's oil minister on Saturday warned dissident shareholders of Canadian gas exploration company, First Calgary Petroleums Ltd. (FCP.T), against booting out the current management, saying it could cause disruptions to the development of the company's prime Algerian asset.
Chakib Khelil, in an interview with Dow Jones Newswires, said the development of First Calgary's MLE block was at an advanced stage and any changes should not be made until after it comes onstream, which the company estimates will be in about mid-2010.
"We don't favor changing horses in the middle of the stream," Khelil said. "It's definitely going to be delaying the project," especially if it's a completely new management.
"It means that you need to have similar objectives with the new management. They have to know us, how we work, our procedures, especially if they are new ones completely. It's a lot of uncertainties you're bringing in the picture," he said. "Let's wait until we put the project onstream and it's going reasonably well."
Khelil refused to specify what kind of delays could be expected if the management led by CEO Richard Anderson is replaced, but said adapting to a new team "is going to take at least six months or a year."
Dissident shareholders led by Waterford Finance & Investment Ltd., which owns 9.4% of First Calgary, made a motion last month demanding the removal of Anderson and another executive, blaming them for mismanaging the company, whose share price has fallen from around $20 at its peak four years ago to less than $3 in recent days amid disappointment as the MLE project failed to begin producing and delivering revenues as quickly as first expected and its initially heady resource estimates were gradually revised down.
Algeria's decision to remove Spain's Repsol YPF (REP.MC) and Gas Natural (GAS.MC) from an LNG project after significant delays and cost overruns also made some investors wary that a similar fate could await First Calgary.
Khelil, however, said that was never a possibility and indicated much of the delays could be attributed to technical challenges because of the area's geology.
The contract with First Calgary was for an exploration contract and different from the development contract awarded through bidding to Repsol and Gas Natural, Khelil said.
"We cannot cut off the contract," with First Calgary, he said.
"It is a project that has taken a long time and was very difficult and was very complicated ... But it has big prospects. For us, it's very important," he said.
Asked if he believed the project would continue on track if the management were retained, he said, "I think at least it's going to continue on the same basis ... they are knowledgeable about the project."
First Calgary has a 75% stake, while Algeria's state oil company Sonatrach holds the remaining 25% in the MLE project.
A Canadian court last week ordered the delay of a shareholder meeting that was set to determine the company's management by 10 days to April 18 in order to give investors more time to consider the matter after the company received a letter from Khelil expressing concern about the efforts to remove Anderson and possible delays.