Gulf Keystone gives in to investors on board shake-up

Two biggest shareholders to appoint four new directors

The management of Gulf Keystone has capitulated in its fight with its two largest shareholders only days ahead of a showdown at the Kurdistan-focused oil explorer’s annual general meeting.

Simon Murray, who took over as chairman earlier this month, said over the weekend that the board would no longer oppose four nominees as non-executive directors put forward by M&G and Capital Research Global Investors, which between them own more than 10 per cent of the company.

The agreement represents an embarrassing U-turn for the Aim-listed company. Just over a week ago it rejected the slate of four candidates as lacking “senior level of public company experience”.

“I am pleased that unity of purpose has been restored amongst the company and its largest shareholders,” Mr Murray said.

As part of the deal, the two incumbent board members, who were up for re-election at the annual meeting in Bermuda on July 25, will step down.

Ali Al-Qabandi, one of the co-founders and business development director, and Mehdi Varzi, who until recently chaired the group’s remuneration committee, have withdrawn “their consent to be considered for re-election”, Gulf Keystone said in a statement.

M&G and Capital had said they would vote against the re-election of the two directors.

Mr Varzi was the focus of shareholder ire because of concerns over executive pay and bonuses granted to Todd Kozel, chief executive, and other senior management.

Mr Kozel, who had also held the role of chairman until Mr Murray replaced him, received a pay and bonus package of more than £10m for 2012, making him one of the UK’s best-paid chief executives – despite a falling share price.

Last month Capital broke three decades of silence to declare that Gulf Keystone’s board – which includes the august Lord Guthrie, former head of the British army – needed “adult supervision”.

Mr Murray, the former French Foreign legionnaire who chaired Glencore in the run-up to its merger with Xstrata, also took over as head of the remuneration committee. Mr Varzi earned more than $1m in cash and shares in each of the past two years.

The move represents a victory for the shareholders who had fought an increasingly acrimonious battle after criticising the company’s governance and remuneration policies.

The shareholders’ nominees include former independent director Jeremy Asher, who was voted off the board in 2010 after clashing with Mr Kozel over remuneration.

The investors were worried the company’s strategic options were limited by concerns over its governance.

Gulf Keystone is the operator of the Shaikan field in the Kurdistan region of Iraq, which is due to move into commercial production at a rate of 150,000 barrels per day by 2016.

Next month, the High Court in London is due to rule on a compensation claim of $1.6bn made against Gulf Keystone by Excalibur Ventures, its former partner in Kurdistan.

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