Arrow Sees the Biggest Drop in Share Price in More than a Year

Submitted by Jim Thesiger on 2 February, 2010 - 05:07

Arrow Energy (AOE), one of the leading Australian coal seam gas explorer and producers, has seen the biggest drop in its share price in more than a year following an announcement made by the company that it was conducting an investigation regarding raising funds to develop the Fisherman's Landing liquefied natural gas project at Gladstone that worth more than $2 billion. The slump has created confusions among some market analysts due to the fact that Arrow Energy had around $300 million worth of cash at the end of June and earlier it flagged an increase of debt and equity. Nick Davies, the departing chief executive of the company who is expected to be replaced by Arrow Australia chief Shaun Scott in April has stated on Monday that, in order to get to first production, Arrow would need to raise funds. The Arrow shares dropped drastically based on the report yesterday and was closed for the day down 9.7 percent or 38 cents.

In its annual meeting during the last year, Arrow declared that it would raise fund for the Fisherman's Landing liquefied natural gas project through the mixture of equity and debt. The chief executive could not be reached after the fall of Arrow shares yesterday. The company won the full ownership of the LNG plant at Gladstone along with the gas fields that the company owned already during January through a restructure of the project, which means the company will be required to pay as much as 75 percent of the cost of the LNG plant and related infrastructure and another $1.5 billion which according to the company is required to develop the gas fields and for piping the gas to Gladstone.

In yesterday’s announcement, Arrow stated that Mr. Davies will step down in April from the post of chief executive and will replace John Reynolds, the departing chairman of the company on September. However, the appointment of Mr. Davies as the chairman five months after stepping down from the post of chief executive has raised questions among some corporate governance advisers as he might not be considered as independent chairmen. It is to be mentioned that, according to the corporate governance principles of the Australian Stock Exchange, the chairman of a company should be independent.