Cottee departure sends Nexus into nosedive

THE man brought in to turn around Nexus Energy, former Queensland Gas managing director Richard Cottee, yesterday quit the company, prompting a collapse in its share price.

By InvestSMART · 23 Sep 2011

By InvestSMART ·
23 Sep 2011

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THE man brought in to turn around Nexus Energy, former Queensland Gas managing director Richard Cottee, yesterday quit the company, prompting a collapse in its share price.

Nexus said Mr Cottee "has ceased employment effective immediately".

Mr Cottee's appointment in early 2010 was widely seen as the trigger to unlock the value of its troubled Crux liquids project in Western Australia, with brokers immediately slapping "buy" recommendations on its shares, while tipping their price would surge to around 50? from its then level of around 30?.

Yesterday's news resulted in the shares slumping. They closed down 13c to 12c as investors headed for the exits.

Nexus's share price peaked in early 2008 at around $1.70 amid optimism over the prospects for the Crux asset. Development costs for Crux had been put at more than $US700 million, forcing the company to seek partners.

It was also planning to sell down its interest in the Longtom gasfield to raise further funds as well, with a $122 million fund-raising earlier this year shunned by smaller shareholders, forcing underwriters to pick up a significant shortfall.

The company's share price collapsed from more than $1.20 to only around 40c in early 2009, when Mitsui & Co walked away from a deal to buy into the Crux project. It had been negotiating to take a 25 per cent stake for $US255 million.

"The company cited 'personal reasons' for Cottee's move," one analyst said. "But it seems like a deal was on the table which the board didn't agree with. A lot of institutional and retail investor interest in Nexus was due to Cottee, and his departure will see the selling continue."

Brokers speculated the collapse of the Nexus share price could prompt Shell to move, since it needs more gas for its Prelude development nearby.

Mr Cottee had a three-year contract, with three months' notice required to terminate. If made redundant, he would be entitled to six months' fixed remuneration. In the year to June, his remuneration package totalled $1.39 million, including $382,500 in share-based payments.

Queried after yesterday's share price collapse, Nexus said it did not believe the sell-off had anything to do with the company's prospects, saying negotiations to commercialise the Crux field and another asset, Echuca Shoals, are continuing.

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Frequently Asked Questions about this Article…

Why did Nexus Energy's share price collapse after Richard Cottee quit?

Nexus shares slumped after Richard Cottee, the executive hired to turn the company around, 'ceased employment effective immediately.' Investors sold down aggressively and the stock closed down 13 cents to 12 cents. Nexus said it did not believe the sell-off reflected the company's prospects and that negotiations to commercialise its assets were continuing.

Who is Richard Cottee and why was his resignation important for investors in Nexus Energy?

Richard Cottee is the former Queensland Gas managing director who was appointed to Nexus in early 2010 to help unlock value in the troubled Crux liquids project. Brokers and many investors had attributed renewed interest in Nexus to his appointment, so his sudden departure removed a key reason for investor confidence.

What is the Crux liquids project and how does it affect Nexus Energy's outlook?

Crux is a troubled liquids project in Western Australia that has been seen as central to Nexus's value. Development costs had been estimated at more than US$700 million, which forced the company to seek partners and funding to progress the project.

How has Nexus tried to raise funds and what happened with the $122 million fundraising?

Nexus planned to raise funds by selling down its interest in the Longtom gasfield and via a $122 million fundraising earlier in the year. Smaller shareholders largely shunned that raising, forcing underwriters to cover a significant shortfall.

What has been Nexus Energy's historical share price performance?

Nexus shares peaked in early 2008 at around $1.70 amid optimism over Crux. The price later collapsed — from more than $1.20 to around 40 cents in early 2009 — after Mitsui & Co walked away from a deal to buy into the Crux project.

What happened with the Mitsui & Co deal for the Crux project?

Mitsui & Co had been negotiating to take a 25% stake in the Crux project for about US$255 million but walked away from the deal. Their withdrawal was a major factor in the sharp fall in Nexus's share price in early 2009.

Is there any chance a company like Shell might step in after Nexus's share price fall?

Brokers speculated that Shell could move because it needs more gas for its nearby Prelude development. The article presents this as broker speculation rather than a confirmed negotiation or agreement.

What were the terms of Richard Cottee's contract and his reported remuneration at Nexus?

Cottee had a three-year contract that required three months' notice to terminate. If made redundant he would be entitled to six months' fixed pay. In the year to June his remuneration package totalled $1.39 million, which included $382,500 in share-based payments.