Management Stock Purchases

[2126]

Since many on this board are finding dire implications regarding IOC management not buying shares personally, I asked IOC Legal Counsel Sheree Ford if there were, as I suspected, legal restrictions on IOC management personally purchasing shares. She passed my inquiry on to Michael Lynn, IOC Investor Relations, and here is his response:

"Our insider trading policy is on our website under "insider trading policy" at:

http://www.interoil.com/iocfiles/documents/corporateinformation/corporategovernance/

As set out on page 7 under "Additional Black-Out Periods "  the Company has imposed a blackout applying to all Covered Persons while any appraisal or exploration drilling program is being conducted by the Company. During such a blackout period except in limited circumstances described in the policy a Covered Person is prohibited from undertaking any sale, purchase or other transactions of any kind in Company securities.

At page 7, it states: 'In addition, the Company has imposed a blackout applying to all Covered Persons while any appraisal or exploration drilling program is being conducted by the Company. During such a blackout period a Covered Person is prohibited from undertaking any sale, purchase or other transactions of any kind in Company securities (other than those in which the Company is the buyer or seller for its own account or transactions made pursuant to an approved, Rule 10b5-1 Trading Plan as described above). The Compensation Committee may grant an exception to this prohibition on a case-by-case basis in the circumstances described under “Hardship and Special Circumstances Cases” above.'

As the Company is currently undertaking drilling activity the black out applies."

This policy was formally put into place on October 15, 2014. However, i'm also certain that a similar policy was in place previous to that date. No conspiracy, no ulterior motives. Simply a corporate stock purchase restriction relating to non-public material insider information. Time to move on.

[Palm]

"However, i'm also certain that a similar policy was in place previous to that date."

That would be incorrect. This new paragraph was added last October; there was nothing in the prior policy regarding purchases during "any appraisal or exploration drilling program".

Adding a clause like this is frankly absurd for a company that had just prior sold the refinery and retail gas stations and became a 100% appraisal and exploration drilling company. It is still a requirement that Covered Persons "maintain a significant equity interest in The Company", per the following paragraph. It would be interesting to hear from legal how, outside of options granted, a Covered Person ever will get to and/or maintain a "significant equity interest" with this absurd rule. Prior management was able to do so without problem, since it still had to be approved. Puzzling as to the reason for the change.

"The Company believes that, in order to align the interests of Company management with shareholders, directors, executive officers, vice presidents and managers (“Covered Persons&rdquo should maintain a significant equity interest in the Company. In light of this position, and because trading in the Company’s securities by Covered Persons may send inappropriate or potentially misleading signals to the market, it is the Company’s policy that any increase or decrease in a Covered Person’s position in the Company’s securities, other than increases that occur as a result of a grant of Company securities pursuant to Company stock incentive plans, must receive prior approval by the Compensation Committee."

Here's a much better example of a policy for a company covered by US and Australian exchange rules:

"In addition, Samson will institute Blackout Periods as appropriate prior to or upon the occurrence of significant corporate acquisitions, divestitures, contract negotiations, asset impairments, or similar transactions or events that will generally result in a material change in Samson’s business. Samson will evaluate potentially significant corporate events as they develop and will notify Restricted Persons when a Blackout Period commences and is terminated. Samson may impose a Blackout Period during the entire period of drilling of oil or gas wells in which Samson has a significant interest or may, depending on the circumstances, lift the Blackout Period for those times during the drilling that Restricted Persons do not, in Samson’s judgment, possess any Non-Public Material Information."

[2126]

The specific blackout rule paragraph was added in October 2014, but there was already a corporate insider trading policy that non-public material information included "exploration drilling progress" information. Thus, under the prior policy, essentially the same rule pertained previously. The blackout rule simply delineated that the policy would pertain to both appraisal and exploration wells.

[CAC]

'2126'

Since many on this board are finding dire implications regarding IOC management not buying shares personally, I asked IOC Legal Counsel Sheree Ford if there were, as I suspected, legal restrictions on IOC management personally purchasing shares. She passed my inquiry on to Michael Lynn, IOC Investor Relations, and here is his response:

"Our insider trading policy is on our website under "insider trading policy" at:

http://www.interoil.com/iocfiles/documents/corporateinformation/corporategovernance/

As set out on page 7 under "Additional Black-Out Periods "  the Company has imposed a blackout applying to all Covered Persons while any appraisal or exploration drilling program is being conducted by the Company. During such a blackout period except in limited circumstances described in the policy a Covered Person is prohibited from undertaking any sale, purchase or other transactions of any kind in Company securities.

At page 7, it states: 'In addition, the Company has imposed a blackout applying to all Covered Persons while any appraisal or exploration drilling program is being conducted by the Company. During such a blackout period a Covered Person is prohibited from undertaking any sale, purchase or other transactions of any kind in Company securities (other than those in which the Company is the buyer or seller for its own account or transactions made pursuant to an approved, Rule 10b5-1 Trading Plan as described above). The Compensation Committee may grant an exception to this prohibition on a case-by-case basis in the circumstances described under “Hardship and Special Circumstances Cases” above.'

As the Company is currently undertaking drilling activity the black out applies."

This policy was formally put into place on October 15, 2014. However, i'm also certain that a similar policy was in place previous to that date. No conspiracy, no ulterior motives. Simply a corporate stock purchase restriction relating to non-public material insider information. Time to move on.

**********

Thanks 2126. 

I asked that same question a few months ago and received a similar response.  I viewed it as a "true but not necessarily complete" answer to the real question (which is "could they EVER have bought".  My follow up question was..."Has there been any time period, at all, during the last few years that this black-out was not in effect?"  I got no response to that question.

Based on the language in this recent reply, I would want to ask a similar follow up question now as well.  Something along the lines of "Your response indicates that a blackout prevents purchases 'except in limited circumstances'.  Has there ever been a time within the last few years that those 'limited circumstances' existed?"

It may just be semantics, but if they are trying to say..."there was never a time withing the last 3 years that any insider was legally allowed to buy"...I'd prefer that they say it that way to eliminate unanswered questions. 

[jft310]

I have posted this info in the past several times in general terms direct from Michael Lynn. It's a curious policy . The question is why ?Based on 4 million acres of explorable area for Interoil we have years of appraisal drilling ahead , multiple deals to develop our assets ahead .
Will this policy change ?be lifted after the Total payment ???if no changes it will be years before management has a window . That just doesn't make sense . What other reasons could their be ???
Management does give us size estimates outside Antelope . When asked about Antelope Hession would not give a number recently for Antelope . The slides show estimates for future drilling targets but not for Antelope . They do say at least as much enough gas for a 2 train plant . The mid case estimates have moved from the mid case to the high case . Just general terms not specific except to report older GLJ and GCA numbers . It's curious .

[Thylacine-2]

Hession's reluctance to give a number recently for Antelope is understandable in light of the upcoming certification and his desire not to appear promotional. The certification number may turn out to be substantially lower than IOC's in-house number.

[jft310]

Thy- I agree Hession and crew may have a number but what matters is what the two unnamed reservoir engineers come up with . It will not be a GLJ number . Could be a GCA or Netherland Sewell number . We don't know . How do these pieces fit together is the question as regards management buying stock ??if at all ??

[Palm]

The specific blackout rule paragraph was added in October 2014, but there was already a corporate insider trading policy that non-public material information included "exploration drilling progress" information. Thus, under the prior policy, essentially the same rule pertained previously. The blackout rule simply delineated that the policy would pertain to both appraisal and exploration wells.

Big difference.  What you pull out of the prior policy as partial info is from items given as "Examples of some types of Company information that can be material."  All manner of things regarding operations, etc. are/were listed as POSSIBLE examples of Material Information, which was defined as "if it could affect the market price of a security, or if a reasonable investor would attach importance to the information in deciding whether to buy, sell or hold a security."  Since something of this nature is required to be publicly disclosed immediately it would be very obvious and a Covered Person would/should be denied permission to trade in company securities while knowing such info before it is disclosed.  Spudding, drilling, testing, etc. should not prevent a Covered Person from trading when no material event is known of.  Here's the language from that prior policy falling under the Material Information Defined:

"Events or business operations which are likely to affect future revenues or earnings (for example, mergers and acquisitions, the acquisition or divestiture of significant assets, subsidiaries or business units, exploration drilling progress, discoveries of oil and gas, and the execution, or loss, of important contracts with partners or other parties)."

IMHO the prior policy made much more sense and allowed prior Covered Persons to accumulate significant positions in Company securities.  The new policy states that execs are expected to hold significant positions and cannot trade RSUs etc. until they have 2.5 times their annual salary base.  That will take a while at the current rate and pps and is not $$$ spent in the open market.

Policies can be considered bad, and IMO this is a bad policy change from what they had before, and for what reason?

[jft310]

The question is why the change ?? There was a reason for the change what was it ???What prompted this update .??things happen for a reason .

[Palm]

Yep and my guess is it could have been the Laurie Brown deal. He was a consultant and suddenly there was an insider transaction filed on SEDI. Then it was announced that he had been hired. Remember kicking that around here when it happened as being "interesting". Knee jerk? Who knows, but if it was for something like that, they'll never admit it. "Just felt it was a good policy change." or something like that would be the answer.