Investors Revolt Against Gulf Keystone Boss

Investors in Gulf Keystone Petroleum, the London-listed oil explorer, are plotting a revolt at this week's annual meeting which will rank among the biggest City rebellions so far this year.

Sky News has learnt that some of the company's biggest shareholders, including those which led a campaign to overhaul its board last year, have lodged votes opposing the re-election of Todd Kozel, its founder.

Mr Kozel is standing for re-election as an executive director, with a search under way for his successor as chief executive.

Simon Murray, Gulf Keystone's chairman, wrote to shareholders last month to urge them to support Mr Kozel's re-election, and warned that the company's operations in Kurdistan could be jeopardised if he is removed altogether.

But insiders said that shareholders would deliver a bloody nose to the board in Paris on Thursday, with a possibility that both Mr Kozel and Mark Hanson, a non-executive director, could be ousted.

It will be the latest in a series of major shareholder revolts which have hit major companies such as Barclays (LSE: BARC.L - news) , Burberry, Experian (Other OTC: EXPGF - news) and Pearson (Xetra: 858266 - news) this year.

A source said leading investors had been told that Mr Hanson would not stand for re-election but that the company had reneged on that promise.

The investors understood to be opposing the re-election of those directors include Capital Research Group and M&G Investments, as well as a number of various Malaysian interests, they added.

Collectively, those shareholders hold more than 20% of Gulf Keystone's stock, with a large number of small investors also unhappy about the company's poor financial performance and lavish pay deals for My Kozel and other executives.

A source said that the votes were "on a knife-edge" and that it would not be clear until Thursday whether the company would be defeated on any of its AGM resolutions.

A big revolt would embarrass Mr Murray.

Although he is not standing for re-election, his recent letter to shareholders put his personal credibility at stake.

"Based on its recent communications with the (Kurdistan) MNR (Minister of Natural Resources), our key stakeholder, and the valuable contribution that Todd can continue to make, the Board views it as essential that Todd remains on the Board as an executive director upon his retirement as CEO," he wrote.

"Given Todd is standing for re-election as a director at the AGM on 17 July, I felt that shareholders should be made aware of the position of the MNR and I would like to reiterate that the Board strongly urges shareholders to vote for Todd’s re-election."

Gulf Keystone's shares have been hit by their exposure to the turmoil in Iraq, as well as company-specific issues including a warning that payments for exports would be delayed.

Last month, the company announced that Ewen Ainsworth, its finance director, was stepping down, leaving the board with no permanent executive director.

Last year, the company reached an eleventh-hour agreement with M&G and Capital Research Group to appoint a group of independent directors in order to avert a widespread rebellion at its AGM.

Much of the tension over Mr Kozel stems from his pay packages in recent years, having been awarded £14.4m in 2011 and £8.8m in 2012 despite ongoing losses.

The shares have fallen from a peak of 465p in 2012 to around 91p, with a 12 month fall of 44%. It has a market value of just under £800m.

A Gulf Keystone spokesman declined to comment.