Boo hoo. how many times does Metgasco need to hear no to believe it? > Monday 07 July 2014 > Letter to Shareholders > Dear Shareholder, > All Metgasco directors share the ongoing frustration of shareholders at the NSW Governments 14 May decision to suspend without notice Metgascos approval to drill the Rosella gas exploration well. This suspension was on the grounds, which we consider to be spurious, that we had failed to undertake effective consultation and that our consultation contained an alleged mischaracterisation of the planned Rosella well. > > This decision by the NSW Government has already caused a financial loss in the order of $3 million to the company, in addition to causing an approximate 40% reduction in share price. > > You may recall that Metgasco made a submission on 15 May to the NSW Office of Coal Seam Gas (OCSG) requesting a review of this decision. On 22 May Metgasco also wrote to the Premier requesting a review of this decision by an independent third party, arguing that it was difficult for the OCSG to objectively review its own decision. This request to the Premier was refused on 26 May and the matter was sent back to the OCSG. On 6 June Metgasco provided the OCSG with additional detailed analysis to demonstrate that the suspension decision was flawed. > > On 26 June, the OCSG informed Metgasco that it had completed its review of the submission and confirmed its original decision to suspend the companys drilling operation. This most recent decision by the OCSG cites new and different reasons to the original 14 May letter. The prime reasons for the suspension decision appear to have little to do with Metgascos efforts to consult in good faith with the local community, but rather a concern about protests by activists who demonstrably have no interest in consultation. The new OCSG position has no reference to the alleged mischaracterisation of the Rosella well that was a key component of its 14 May letter. > > The material provided in the OCSGs response implies a seismic shift in the OCSGs interpretation of effective consultation, which Metgasco considers does not accord with the OCSGs own guidelines. We also do not consider the OCSGs position is reasonable or practical. > Over the past 10 years, Metgasco has drilled more than 50 conventional and unconventional wells in the Northern Rivers. The program of consultation for the single Rosella conventional gas exploration well was more comprehensive than previous consultation activities for similar activities. The OCSG was given a copy of the Rosella consultation plan as part of the drilling environmental application submitted in March 2013 and was approved by the OCSG in February 2014. The OCSG made no comment on the consultation plan, nor did it provide any feedback on consultation plans in general until its 14 May suspension decision. The OCSGs new interpretation is likely to have significant implications for resource and infrastructure projects across the state. This is at a time when there are gas shortages looming and substantial gas price increases to industries and consumers are expected. > > The Board believes that to protect shareholder interest it must pursue a judicial review of the suspension decision. The decision to take court action has not been taken lightly, but with significant shareholders funds invested in exploring in the Northern Rivers gas resources, Metgasco has no other choice. > > On Friday 4 July, Metgasco appeared in the NSW Supreme Court to continue to advance its judicial review of the decision made by the OCSG. > The Court has agreed to Metgascos request to expedite the hearing. Due to existing court commitments, the first available date for the hearing is likely to be no earlier than October. > > As previously advised, Metgasco is yet to be provided with any documentation from the NSW Government which explains how it determined that the suspension decision of May 14 was lawful and justified at that time, despite a Court approved Notice to Produce. The government seems to be arguing that there are no such documents other than the licence itself and a small handful of Metgascos own documents. If this is the case, we find it extraordinary that there was no internal government decision making discipline which documented the legal basis for making the decision and some background reasoning to show that the decision itself was sound. There should have been no doubt that the 14 May decision would have profound implications for Metgasco and the wider industry in NSW. > > Metgasco expects the Court to overturn the suspension decision. It is our intention to resume drilling of the Rosella conventional well as soon as practicable after this time. We will be seeking an assurance from the NSW Government that lawful activity in the Northern Rivers will be supported and protected. > > Metgasco continues to investigate all options, including whether it may have a claim for damages. Whether such a claim is available may not become clear until after the judicial review proceedings have been determined. > > Metgasco continues to have a focus on conserving cash, particularly given the legal and associated expenses which have unexpectedly arisen. Staff numbers have been further reduced and other costs rationalised. > > Metgasco has invested about $120 million exploring for natural gas in NSW and has identified the second largest gas resource in the state. We remain confident that gas development in our exploration licence areas can have an overwhelmingly positive impact on the Northern Rivers and NSW. However, given the delays and uncertainties in NSW, we will also be considering opportunities outside the Northern Rivers that complement our ability to recover value from the Northern Rivers resource. > > We will also continue to seek opportunities to work cooperatively with the Government to resolve the current dispute as quickly as possible. > The Board and management appreciate the numerous messages of support and encouragement from shareholders and from business and community leaders. Please be assured that the Board and management are focusing considerable effort and time to address these challenging issues and will continue to do so. > > Yours sincerely, > > Len Gill > Chairman > On behalf of the Board
Posted on: Mon, 07 Jul 2014 07:56:20 +0000
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