The Board recognises its responsibility for the proper management of the Company and is committed to maintaining a high standard of corporate governance. The Directors recognize the importance of sound corporate governance commensurate with the size and nature of the Company and the interests of its Shareholders.
The Corporate Governance Code does not apply to companies quoted on AIM and there is no formal alternative for AIM companies. The Quoted Companies Alliance has published a set of corporate governance guidelines for AIM companies, which include a code of best practice comprising principles intended as a minimum standard, and recommendations for reporting corporate governance matters. The Directors have adopted the QCA Corporate Governance Guidelines for Smaller Quoted Companies and the compliance with the principles is set out in the table below.
The Board currently comprises two executive Directors (being the Chief Executive Officer and the Chief Financial Officer) and three non-executive Directors (including the Chairperson). Ms. Linda Beal, Mr. Richard Ames and Mr. Neill Carson (these being the three non-executive Directors) are, in the opinion of the Board, independent in character and judgment.
The Board’s decision making process is not dominated by any one individual or group of individuals. None of the Directors have any potential conflicts of interest between their duties to the Company and their private interests and/or duties owed to third parties.
The composition of the Board will be reviewed regularly and strengthened as appropriate in response to the Company’s changing requirements. Appropriate training and an induction programme will be undertaken in respect of all Directors on appointment and subsequently as necessary, taking into account existing qualifications and experience. The Board intends to have monthly Board meetings, including physical meetings at least four times a year, which also shall include an annual strategy day. At these meetings, the Board will review the Company’s long-term strategic direction and financial plans. All necessary information will be supplied to the Directors on a timely basis to enable them to discharge their duties effectively. Certain matters are reserved for consideration by the Board whilst other matters are delegated to Board committees.
The Board is responsible for leading and controlling the Company and, in particular, for formulating, reviewing and approving the Company’s strategy and budget.
The Board has established the following committees:
The role of the audit committee is to assist the Board in discharging its responsibilities with regard to monitoring the integrity of the Company’s financial reporting, to review the Company’s internal control and risk management systems, to monitor the effectiveness of the Company’s external and internal audit function and to oversee the relationship with the Company’s external auditors.
The audit committee focuses particularly on compliance with legal requirements, accounting standards and the AIM Rules and ensures that an effective system of internal financial control is maintained.
The audit committee is chaired by Mrs. Beal and the other member is Mr. Ames. The audit committee will meet at least three times a year with further meetings as required. The Chief Executive Officer, the Chief Financial Officer, other Directors and representatives from the finance function may also attend and speak at meetings of the audit committee. No members of the audit committee have links with the Company’s external auditors.
The Corporate Governance Committee (“CG Committee”)
The primary purposes of the corporate governance committee are to develop and recommend to the Board guidelines, policies and procedures relating to corporate governance; identify individuals qualified to become Board members; recommend to the Board director nominees for election to the Board; recommend to the Board committee composition and appointments; evaluate the performance and effectiveness of the Board and committees of the Board; and, review and make recommendations to the Board on non-employee director compensation.
The CG committee will meet at least twice a year or as otherwise required. The CG committee is chaired by Mrs. Beal and the other member is Mr. Carson. The Chief Executive Officer, the Chief Financial Officer and other Directors may also attend and speak at meetings of the CG committee.
The reserves committee assists the Board in monitoring and reviewing the appointment of an independent engineering firm retained by the Company to report on the quantity and the value of the Company’s oil and gas reserves. The reserves committee reviews the procedures by which the Company provides information to the independent engineering firm to be used as the basis of evaluation and audit, ensuring disclosure complies with applicable laws and regulations, and is also responsible for matters relating to the preparation and public disclosure of estimates of the Company’s reserves. In addition, the reserves committee monitors the Company’s joint venture partners to ensure policies and procedures are in place to minimize environmental, occupational health and safety and other risks such that damage to or deterioration of asset value is mitigated.
The reserves committee will meet at least twice a year. The reserves committee is chaired by Mr. Carson and the other member is Mr. Ames. The Chief Executive Officer, the Chief Financial Officer and other Directors may also attend and speak at meetings of the reserves committee.
The role of the remuneration committee is to determine and agree with the Board the broad policy for executive and senior employee remuneration, as well as for setting the specific remuneration packages (including pension rights and any compensation payments of all executive Directors and the Chairman) and recommending and monitoring the remuneration of the senior employees.
In accordance with the remuneration committee’s terms of reference, no Director shall participate in discussions relating to or vote on his own terms and conditions of remuneration. Non-executive Directors’ fees will be determined by the Board and the Chairman’s fees will be determined by the Board.
The remuneration committee will meet at least twice a year and as otherwise required. The remuneration committee is chaired by Mr. Ames and the other member is Mrs. Beal. The Chief Executive Officer, the Chief Financial Officer and other Directors may also attend and speak at meetings of the remuneration committee.
Share Dealing Code
The Directors intend to comply, and to procure compliance, with Rule 21 of the AIM Rules relating to dealings in the Company’s securities by the Directors and other applicable employees. The Company has adopted a share dealing code for Directors’ and applicable employees’ dealings appropriate for a company whose shares are admitted to trading on AIM and will take all reasonable steps to ensure compliance by the Directors and any relevant employees.
Terms of reference
|1. Establish a strategy and business model which prompt long-term value for shareholders||The board must be able to express a shared view of the company’s purpose, business model and strategy. It should go beyond the simple description of assets and corporate structures and set out how the company intends to deliver shareholder value in the medium to long-term.
It should demonstrate that the delivery of long-term growth is underpinned by a clear set of values aimed at protecting the company from unnecessary risk and securing its long-term future.
|The strategy and business operations of the Company are set out in the Strategic Report on pages 10 – 15 of the Company’s 2019 Annual Report.
The Company’s strategy and business model and amendments thereto, are developed by the Chief Executive Officer and his senior management team and approved by the Board. The management team, led by the Chief Executive Officer, is responsible for implementing the strategy and managing the business at an operational level.
The Company’s overall strategic objective is to develop high quality oil & gas assets where cycle, situation or geography offer disproportionate opportunity.
The Board has concluded that the highest near to medium-term value can be delivered to its shareholders through the strategy of acquiring developed producing assets in the Western Canadian Sedimentary Basin which provide upside drilling opportunities that can be drilled and brought into production if and when commodity prices recover, while farming down i3’s UK North Sea licences for further appraisal drilling and development. This will enable the Company to become a dividend payer that has multiple options for future capital allocation.
The Company’s strategy is to focus on the development of discoveries located close to existing infrastructure and the exploitation of producing fields, whilst maintaining limited exploration exposure.
The Company operates in an inherently high risk and heavily regulated sector and this is reflected in the principal risks and uncertainties set out on pages 12, 13, 25 and 26 of the Company’s 2019 Annual Report.
In executing the Company’s strategy and operational plans, management will typically confront a range of day-to-day challenges associated with these key risks and uncertainties and will seek to deploy the identified mitigation steps to manage these risks as they manifest themselves.
|2. Seek to understand and meet shareholder needs and expectations||Directors must develop a good understanding of the needs and expectations of all elements of the company’s shareholder base.
The board must manage shareholders’ expectations and should seek to understand the motivations behind shareholder voting decision
|The Company seeks to maintain a regular dialogue with both existing and potential new shareholders in order to communicate the Company’s strategy and progress and to understand the needs and expectations of shareholders.
Beyond the Annual General Meeting, the Chief Executive Officer, Chief Financial Officer and, where appropriate, other members of the senior management team meet regularly with investors and analysts to provide them with updates on the Company’s business and to obtain feedback regarding the market’s expectations of the Company.
The Company’s investor relations activities encompass dialogue with both institutional and private investors. The Company also presents at private investor events, providing an opportunity for those investors to meet with representatives from the Company in a more informal setting.
|3. Take into account wider stakeholder and social responsibilities and their implications for long-term success||Long-term success relies upon good relations with a range of different stakeholder groups both internal (workforce) and external (suppliers, customers, regulators and others). The board needs to identify the company’s stakeholders and understand their needs, interests and expectations.
Where matters that relate to the company’s impact on society, the communities within which it operates, or the environment have the potential to affect the company’s ability to deliver shareholder value over the medium to long-term, then those matters must be integrated into the company’s strategy and business model. Feedback is an essential part of all control mechanisms. Systems need to be in place to solicit, consider and act on feedback from all stakeholder groups.
|The Company is aware of its corporate social responsibilities and the need to maintain effective working relationships across a range of stakeholder groups. These include the Company’s employees, suppliers, and regulatory authorities.
The Company’s operations and working methodologies take account of the need to balance the needs of all of these stakeholder groups while maintaining focus on the Board’s primary responsibility to promote the success of the Company for the benefit of its members as a whole.
The Company endeavours to take account of feedback received from stakeholders, making amendments to working arrangements and operational plans where appropriate and where such amendments are consistent with the Company’s longer-term strategy.
The Company takes due account of any impact that its activities may have on the environment and seeks to minimise this impact wherever possible. Through the various procedures and systems it operates, the Company ensures full compliance with health and safety and environmental legislation relevant to its activities.
|4. Embed effective risk management, considering both opportunities and threats, throughout the organisation||The board needs to ensure that the company’s risk management framework identifies and addresses all relevant risks in order to execute and deliver strategy; companies need to consider their extended business, including the company’s supply chain, from key suppliers to end-customer.
Setting strategy includes determining the extent of exposure to the identified risks that the company is able to bear and willing to take (risk tolerance and risk appetite).
|The Board is responsible for the systems of risk management and internal control and for reviewing their effectiveness. The internal controls are designed to manage rather than eliminate risk and provide reasonable but not absolute assurance against material misstatement or loss. Through the activities of the Audit Committee, the effectiveness of these internal controls is reviewed annually.
A summary of the principal risks and uncertainties facing the Company, as well as mitigating actions, are set out on pages 6 and 7 of the Company’s 2017 Annual Report.
A comprehensive budgeting process is completed once a year and is reviewed and approved by the Board. The Company’s results, compared with the budget, are reported to the Board on a bi-monthly basis.
The Company maintains appropriate insurance cover in respect of actions taken against the Directors because of their roles, as well as against material loss or claims against the Company. The insured values and type of cover are comprehensively reviewed on a periodic basis.
The senior management team meets weekly to consider new risks and opportunities presented to the Company, making recommendations to the Board and/or Audit Committee as appropriate.
|5. Maintain the board as a well-functioning, balanced team led by the chair||The board members have a collective responsibility and legal obligation to promote the interests of the company and are collectively responsible for defining corporate governance arrangements. Ultimate responsibility for the quality of, and approach to, corporate governance lies with the chair of the board. The board (and any committees) should be provided with high quality information in a timely manner to facilitate proper assessment of the matters requiring a decision or insight.
The board should have an appropriate balance between executive and non-executive directors and should have at least two independent non-executive directors. Independence is a board judgement. The board should be supported by committees (e.g. audit, remuneration, nomination) that have the necessary skills and knowledge to discharge their duties and responsibilities effectively. Directors must commit the time necessary to fulfil their roles.
|i3 Energy plc’s Board currently comprises 3 Non-executive Directors and 2 Executive Directors.
All of the Directors were subject to election by shareholders at the first Annual General Meeting after their appointment to the Board and will continue to seek re-election every year.
Directors’ biographies are set out here:
The Board is responsible to the shareholders for the proper management of the Company and meets at minimum of 6 times per year to set the overall direction and strategy of the Company and to review operational and financial performance and to advise on management appointments. All key operational and investment decisions are subject to Board approval.
During the year all Board members attended every meeting and all committee members attended each of the appropriate committee meetings.
The Board considers itself to be sufficiently independent. The QCA Code suggests that a board should have at least two independent Non-executive Directors. All of the Non-executive Directors who currently sit on the Board of the Company are regarded as independent under the QCA Code’s guidance for determining such independence.
Non-executive Directors receive their fees in the form of a basic cash fee. The Non-executive Directors also participate in the Company’s Share Option Scheme. To avoid any incentive effect that may influence the Non-executive Directors’ independence, these share options vest over five years on a performance basis.
The option grants concerned are not deemed to be significant, either for any individual Non-executive Director or in aggregate. The current remuneration structure for the Board’s Non-executive Directors is deemed to be proportionate and was subject to a shareholder consultation process prior to its implementation.
|6. Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities||The board must have an appropriate balance of sector, financial and public markets skills and experience, as well as an appropriate balance of personal qualities and capabilities. The board should understand and challenge its own diversity, including gender balance, as part of its composition.
The board should not be dominated by one person or a group of people. Strong personal bonds can be important but can also divide a board. As companies evolve, the mix of skills and experience required on the board will change, and board composition will need to evolve to reflect this change.
|The Board considers that all of the Non-executive Directors are of sufficient competence and calibre to add strength and objectivity to its activities and bring considerable experience in the development, operation and finance of oil and gas assets.
The Directors’ biographies are set out here:
The Board regularly reviews the composition of the Board to ensure that it has the necessary breadth and depth of skills to support the ongoing development of the Company.
The Chairman, in conjunction with the Company Secretary, ensures that the Directors’ knowledge is kept up to date on key issues and developments pertaining to the Group, its operational environment and to the Directors’ responsibilities as members of the Board.
During the course of the year, Directors received updates from the Company Secretary and various external advisers on a number of corporate governance matters.
Directors’ service contracts or appointment letters make provision for a Director to seek personal advice in furtherance of his or her duties and responsibilities, normally via the Company Secretary.
|7. Evaluate board performance based on clear and relevant objectives, seeking continuous improvement||The board should regularly review the effectiveness of its performance as a unit, as well as that of its committees and the individual directors. The board performance review may be carried out internally or, ideally, externally facilitated from time to time.
The review should identify development or mentoring needs of individual directors or the wider senior management team. It is healthy for membership of the board to be periodically refreshed. Succession planning is a vital task for boards. No member of the board should become indispensable.
|The Board has a process for evaluation of its own performance, that of its committees and individual Directors, including the Chairman.
This process is conducted biennially and will take place in August 2018. The Board may use the services of an independent third party organisation to manage the evaluation process, analyse the results and report back to the Board for subsequent follow-up.
Evaluation criteria will include Controls and Procedures, Strategic Aims, Entrepreneurial Leadership and Communications and Relationships.
The Board may utilise the results of the evaluation process when considering the adequacy of the composition of the Board and for succession planning.
|8. Promote a corporate culture that is based on ethical values and behaviours||The board should embody and promote a corporate culture that is based on sound ethical values and behaviours and use it as an asset and a source of competitive advantage.
The policy set by the board should be visible in the actions and decisions of the chief executive and the rest of the management team. Corporate values should guide the objectives and strategy of the company.
The culture should be visible in every aspect of the business, including recruitment, nominations, training and engagement. The performance and reward system should endorse the desired ethical behaviours across all levels of the company. The corporate culture should be recognisable throughout the disclosures in the annual report, website and any other statements issued by the company.
|The Board seeks to maintain the highest standards of integrity and probity in the conduct of the Company’s operations.
These values are enshrined in the written policies and working practices adopted by all employees in the Company. An open culture is encouraged within the Company, with regular communications to staff regarding progress and staff feedback regularly sought.
The Executive Committee regularly monitors the Company’s cultural environment and seeks to address any concerns than may arise, escalating these to Board level as necessary.
The Company is committed to providing a safe environment for its staff and all other parties for which the Company has a legal or moral responsibility in this area.
The Company has a Health, Safety and Environmental Manager who monitors, reviews and make decisions concerning health and safety matters. The Company’s health and safety policies and procedures are enshrined in the Company’s documented quality systems, which encompass all aspects of the Company’s day-to-day operations.
|9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the board||The company should maintain governance structures and processes in line with its corporate culture and appropriate to its:
The governance structures should evolve over time in parallel with its objectives, strategy and business model to reflect the development of the company.
|The Board has overall responsibility for promoting the success of the Company.
The Executive Directors have day-to-day responsibility for the operational management of the Company’s activities. The Non-executive Directors are responsible for bringing independent and objective judgment to Board decisions.
There is a clear separation of the roles of Chief Executive Officer and Non-executive Chairman. The Chairman is responsible for overseeing the running of the Board, ensuring that no individual or group dominates the Board’s decision-making and ensuring the Non-executive Directors are properly briefed on matters.
The Chairman has overall responsibility for corporate governance matters in the Company and chairs the Nominations and Corporate Governance Committee.
The Chief Executive Officer has the responsibility for implementing the strategy of the Board and managing the day-to-day business activities of the Company. The Company Secretary is responsible for ensuring that Board procedures are followed and applicable rules and regulations are complied with.
The Board has established an Audit Committee, Corporate Governance Committee, Reserves Committee and Remuneration Committee with formally delegated duties and responsibilities.
Ms. Linda Beal chairs the Audit Committee and the Corporate Governance Committee. Mr. Neill Carson chairs the Reserves Committee and Mr. Richard Ames chairs the Remuneration Committee.
The Audit Committee meets at a minimum of twice a year and has responsibility for, amongst other things, planning and reviewing the annual report and accounts and interim statements involving, where appropriate, the external auditors. The Committee also approves external auditors’ fees and ensures the auditors’ independence as well as focusing on compliance with legal requirements and accounting standards. It is also responsible for ensuring that an effective system of internal control is maintained. The ultimate responsibility for reviewing and approving the annual financial statements and interim statements remains with the Board.
The Corporate Governance Committee, which meets as required, but at least once a year, has responsibility for reviewing the size and composition of the Board, the appointment of replacement or additional Directors, the monitoring of compliance with applicable laws, regulations and corporate governance guidance and making appropriate recommendations to the Board.
The Reserves Committee, which meets as required, but a least twice a year, has the responsibility of assisting the Board in monitoring and reviewing the appointment of an independent engineering firm retained by the Company to report on the quantity and the value of the Company’s oil and gas reserves and resources.
The reserves committee reviews the procedures by which the Company provides information to the independent engineering firm to be used as the basis of evaluation and audit, ensuring disclosure complies with applicable laws and regulations, and is also responsible for matters relating to the preparation and public disclosure of estimates to the Company’s reserves and resources. In addition, the reserves committee would monitor any of the Company’s future joint venture partners to ensure policies and procedures are in place to minimise environmental, occupational health and safety and other risks such that damage to or deterioration of asset value is mitigated.
The Remuneration Committee, which meets as required, but at least once a year, has responsibility for making recommendations to the Board on the compensation of senior executives and determining, within agreed terms of reference, the specific remuneration packages for each of the Executive Directors. It also supervises the Company’s share incentive schemes and sets performance conditions for share options granted under the schemes.
The Corporate Governance Report which discusses the above committees and details their responsibilities is set out on pages 33 – 35 of the Company’s 2019 Annual Report.
The Directors believe that the above disclosures constitute sufficient disclosure to meet the QCA Code’s requirement and consequently, a separate Committee Reports are not presented in the Company’s Annual Report.
The terms of reference of the above Committees are set out in the Company’s Corporate Governance Memorandum, which is regularly updated and can be found above.
The Corporate Governance Memorandum also contains a schedule of matters specifically reserved for Board decision or approval and sets out the Company’s share dealing code and its public interest disclosure (“whistle-blowing”) policy and procedures.
|10. Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant shareholders||A healthy dialogue should exist between the board and all of its stakeholders, including shareholders, to enable all interested parties to come to informed decisions about the company. In particular, appropriate communication and reporting structures should exist between the board and all constituent parts of its shareholder base. This will assist:
It should be clear where these communication practices are described (annual report or website).
|The Company places a high priority on regular communications with its various stakeholder groups and aims to ensure that all communications concerning the Company’s activities are clear, fair and accurate. The Company’s website is regularly up-dated and users can register to be alerted when announcements or details of presentations and events are posted onto the website.
The Company’s financial reports can be found here.
Notices of General Meetings of the Company can be found here.
The results of voting on all resolutions in future general meetings will be posted to the Company’s website, including any actions to be taken as a result of resolutions for which votes against have been received from at least 20 per cent of independent shareholders.