Governance
Zephyr is committed to achieving the highest standards of corporate governance and follows the requirements of the QCA Corporate Governance Code (the “Code”) published by the Quoted Companies Alliance in April 2018, a full version of which is available at http;//www.theqca.com.
All members of the Board believe strongly in the value and importance of good corporate governance and in our accountability to all of Zephyr stakeholders, including Shareholders, staff, clients, suppliers and the Governments and regulators of the countries in which we operate.
The corporate governance framework which the Group operates, including Board leadership and effectiveness, Board remuneration, and internal control is based upon practices which the Board believes are proportional to the size, risks, complexity and operations of the business and is reflective of the Group’s values.
The Board continually assesses its corporate governance processes to ensure that Zephyr continues to comply with best practice as outlined in the Code.
As Chairman of the Company, I have overall responsibility for corporate governance and promoting high standards throughout the Group. No key corporate governance matters have occurred during the year. The Code is constructed around ten broad principles and a set of disclosures. The Code states what it considers to be appropriate arrangements for growing companies and asks companies to provide an explanation about how they are meeting the principles through the prescribed disclosures. We have considered how we apply each principle to the extent that the Board judges these to be appropriate in the circumstances, and we provide an explanation of the approach taken in relation to each principle on our website and a summary is set out below.
RL Grant
Non-Executive Chairman
Establish a strategy and business model which promote long-term value for shareholders
The Board ensures that every action and investment decision is considered against the Company’s twin core values: to be responsible stewards of our investors’ capital, and to be responsible stewards of the environment in which we work.
This includes the following points of focus:
- to continue to protect the Group, safeguard its existing asset base and position it for attractive growth opportunities;
- to seek creative and beneficial funding opportunities in an effort to unlock value from our existing asset portfolio;
- to adopt a disciplined focus on growth via the acquisition of producing or near-term development opportunities in the Rocky Mountain region. We believe that attractive, value-additive acquisitions are available and may be acquired using non-traditional funding structures;
- to continue with a programme of tight financial controls and cash preservation which will enable the Group to continue trading effectively; and
- to continue to ensure management and the Board are aligned with shareholders through significant ownership of shares – the Board currently controls over 9.5 per cent of the Company’s issued share capital.
Further details may be found in the latest Annual Report which can be found on this website here: https://zephyrplc.com/investors/reports-presentations.
Seek to understand and meet shareholder needs and expectations
The Group remains committed to listening and communicating openly with its Shareholders to ensure that its strategy, business model and performance are clearly understood. Understanding what stakeholders think about the Group, and in turn, helping these audiences understand our business, is a key part of driving our business forward and we actively seek dialogue with all stakeholders. We do so via investor roadshows, presenting at investor conferences/webinars and our regular reporting and at the Group’s Annual General Meeting. The Group also makes regular operational announcements to keep Shareholders and the market updated on operational activity and progress. The Group also makes available corporate presentations on the ‘corporate documents’ page on the ‘investors’ area on the Group’s website. The CEO is responsible for shareholder liaison.
Take into account wider stakeholder and social responsibilities
Directors and employees adopt a broad view during decision making to take meaningful account on of the impact of the business on all key stakeholder groups. The Board recognises that Zephyr’s long-term success is reliant on good relationships with its key stakeholders.
Embed effective risk management, considering both opportunities and threats
The Board operates a comprehensive system of internal controls designed (to the extent considered appropriate) to safeguard the Group’s assets and protect the business from identified risks, including reputational risk.
As well as tight oversight exercised by the Executive Directors, and appropriately trained and qualified staff, the Board engages appropriate auditors and consultants to assist in identifying and managing risk.
For further details please see the Principal Risks section of the latest Annual Report, available on this website at: https://zephyrplc.com/investors/reports-presentations.
Maintaining the Board as a well-functioning, balanced team led by the Chair
The Board comprises the Non-Executive Chairman, two Executive Directors and two Non-Executive Directors (both of which are considered by the Company to be independent). One of the Non-Executive Directors, GB Stein acts as the Group’s Senior Independent Director.
The Board is constantly reviewing its make up to ensure that it has a sufficient blend between independence on the one hand, and knowledge of the Group on the other, to enable it to discharge its duties and responsibilities effectively.
All Directors are encouraged to use their independent judgement and to challenge all matters, whether strategic or operational. The Chairman holds regular update meetings with each Director to ensure they are performing as they are required. Board meetings take place, on average, every 4 to 6 weeks, normally held by telephone conference owing to the diverse geographic locations of the Board members.
Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities
The Board is satisfied that, between the Directors, it has an effective and appropriate balance of skills and experience, including in the areas of exploration, development and production of oil and gas assets. All Directors receive regular and timely information on the Group’s operational and financial performance. Relevant information is circulated to the Directors in advance of meetings. All Directors retire by rotation at regular intervals in accordance with the Group’s Articles of Association.
The Board makes decisions regarding the appointment and removal of Directors, and there is a formal, rigorous procedure for appointments. The Group’s Articles of Association require that one-third of the Directors must stand for re-election by Shareholders annually in rotation; that all Directors must stand for re-election at least once every three years; and that any new Directors appointed during the year must stand for election at the AGM immediately following their appointment.
All Directors are able to take independent professional advice in the furtherance of their duties, if necessary, at the Group’s expense. In addition, the Directors have direct access to the advice and services of the Company Secretary and Finance Director.
Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement
The Chairman continually assesses the contribution of each member of the Board to ensure that:
- Their contribution is relevant and effective
- That they have a commitment to progressing the Company’s objectives in order to increase shareholder value
- Where relevant, they have maintained their independence
Over the next few months, as a result of the Company’s recent restructuring and expansion, we intend to implement a programme to review the performance and structure of the team as a unit and to ensure that the members of the Board collectively function in an efficient and productive manner.
Promote a culture that is based on ethical values and behaviours
The Board aims to lead by example and do what is in the best interests of the Company.
The Board spends a significant amount of time formulating and agreeing on the core principles and values under which Zephyr will operate. In short, Zephyr’s team will always strive to be responsible stewards of its investors’ capital and responsible stewards of the environment in which we work. We believe that good environmental performance, together with good governance practices, will translate into good business performance and therefore are focused on delivering strong economic returns in the most environmentally responsible manner practical.
Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board
The Board meets regularly for both formal Board meetings and for informal discussions.
The Board sets direction for the Group through a schedule of matters reserved for its decision. The Board and its Committees receive appropriate and timely information prior to each meeting; a formal agenda is produced for each meeting, and Board and Committee papers are distributed several days before meetings take place. Any Director may challenge Group’s proposals and decisions are taken democratically after discussion. Any Director who feels that any concern remains unresolved after discussion may ask for that concern to be noted in the minutes of the meeting, which are then circulated to all Directors. Any specific actions arising from such meetings are agreed by the Board or relevant Committee and then followed up by the Group’s management.
The Executive Team consists of the Chief Executive Officer and the Financial Director with input from the other Directors. They are responsible for formulation of the proposed strategic focus for submission to the Board, the day-to-day management of the Group’s businesses and its overall trading, operational and financial performance in fulfilment of that strategy, as well as plans and budgets approved by the Board of Directors. It also manages and oversees key risks, management development and corporate responsibility programmes. The Chief Executive Officer reports to the plc Board on issues, progress and recommendations for change. The controls applied by the Executive Team to financial and non-financial matters are set out earlier in this document, and the effectiveness of these controls is regularly reported to the Audit Committee and the Board.
The Board is supported by the Audit and Remuneration Committees. Each Committee has access to such resources, information and advice as it deems necessary, at the cost of the Group, to enable the committee to discharge its duties.
The Audit Committee is Chaired by the Senior Independent Director, GB Stein. The Non-Executive Director, TH Reynolds, is the other member of the Committee. The Remuneration Committee is Chaired by the Senior Independent Director, GB Stein. The Non-Executive Chairman, RL Grant, is the other member of the Committee.
Communicate how the Group is governed and is performing by maintaining a dialogue with Shareholders and other relevant stakeholders
The Group communicates with Shareholders through the Annual Report and Accounts, full-year and half-year announcements, the AGM and one-to-one meetings with large existing or potential new Shareholders. The Group also keeps Shareholders updated on progress and developments through its regular market announcements. The CEO remains a key part of encouraging Shareholder interaction and listening to feedback. A range of corporate information (including all Group announcements and presentations) is also available to Shareholders, investors and the public on this website.
The Board receives regular updates on the views of Shareholders through briefings and reports from the Chief Executive Officer, Finance Director and the Group’s brokers. The Group communicates with institutional investors frequently through briefings with management. In addition, analysts’ notes and brokers’ briefings are reviewed to achieve a wide understanding of investors’ views.
The Group’s website includes the following:
- Disclosure of any instances where a significant proportion of votes (e.g. 20% of independent votes) have been cast against a resolution at any general meeting, an explanation of what actions the Group intends to take to understand the reasons behind that vote result, and, where appropriate, any different action it has taken, or will take, as a result of the vote.
- Historical annual reports and other governance-related material, including notices of all general meetings over the last five years
The Board and its committees
Formal Board meetings are scheduled, on average, every four to six weeks with regular contact between meetings as required. During the year there were nine formal Board meetings, in addition to regular informal Board discussions, and each of these nine meetings was attended by every Director. The meetings are held to monitor and implement strategy, to review performance (including cash forecasts, ESG compliance), potential acquisitions, fundraising activity and to consider communications to the London Stock Exchange and Shareholders.
The matters reserved for the Board include, amongst others, approval of the Group’s long-term objectives, policies and budgets, changes relating to the Group’s management structure, approval of the Group’s financial statements and ensuring maintenance of good systems of internal control. Procedures are established to ensure that appropriate information is communicated to the Board in a timely manner to enable it to fulfil its duties.
There is also an established procedure for all Directors to take independent professional advice, if necessary, at the Group’s expense. Additionally, all Directors have access to the advice of the Group’s advisers. The Group maintains Directors’ and Officers’ liability insurance.
The Board members are mindful of the need to keep skills and experience up to date which is done through a combination of training, continuing professional development through professional bodies, reading and on the job experience.
All Directors are expected to devote such time as is necessary for the proper performance of their duties. Directors are expected to prioritise and attend Board meetings and any additional meetings wherever possible.
Details of Directors who served during the year are set out in the latest Directors’ Report. The Board is currently comprised of two Executive Directors and three Non-Executive Directors, one of whom acts as Chairman. There are separate roles for the Chairman and the Chief Executive Officer.
The Board has established an Audit Committee, which comprises of two Non-Executive Directors. The Audit Committee meets two or three times a year and the Group’s external auditor is invited to meetings where appropriate. The main responsibilities of the Audit Committee are to review and report to the Board on matters relating to:
- the integrity of the financial statements of the Group, including its annual and interim accounts;
- the effectiveness of the Group’s internal controls and risk management systems;
- the accounting policies and practices of the Group;
- audit plans and auditor’s report, including any significant concerns the external auditor may have arising from their audit work; and
- the terms of appointment, remuneration and independence of the auditor.
The Board also has an established Remuneration Committee, which comprises the Non-Executive Chairman and one Non-Executive Director. The Remuneration Committee meets at least twice a year and reviews the performance of the Executive Directors and the scale and structure of their remuneration having due regard to the interests of our Shareholders. The Committee is also responsible for awards under the Group’s share option plans. No Director is involved in any decision relating to their own remuneration.
The remuneration of the Non-Executive Directors is determined by the Board.
Communication with shareholders
The Board encourages regular and transparent dialogue with the Group’s Shareholders. All Shareholders are invited to the Annual General Meeting at which Directors are available for questioning. The notice of AGM is sent to all Shareholders at least 21 clear days before the meeting. The number of proxy votes received for and against each resolution is disclosed at the AGM and a separate resolution is proposed on each item.
Internal controls
The Board is responsible for establishing the Group’s system of internal controls and for reviewing its effectiveness. Reflecting the size of the Group, a key control procedure is the close day-to-day supervision of the business by the Executive Directors, supported by the senior management with responsibility for key tasks and operations.
The key procedures that have been established, and which are designed to provide effective internal control are as follows:
- each of the Group’s subsidiaries is managed by an Executive Director and there is a management reporting process in place to enable the Board to monitor the performance of the Group on a regular basis;
- Monthly cash forecasts are prepared and formally adopted by the Board;
- the Board reviews the major business risks faced by the Group and determines the appropriate course of actions required to manage those risks;
- the Board approves proposals for the acquisition of new businesses and sets guidelines for the development of new properties. Capital expenditure is regulated and written proposals must be submitted to the Board for any expenditure above specified levels;
- consolidated management information is prepared on a regular basis; and
- The Board has regular briefing from the Company’s Nominated Adviser and Legal Counsel.
The Board reviews the effectiveness of the system of internal controls and the control environment. No significant control deficiencies were reported during the year and no weaknesses in internal controls have resulted in any material losses, contingencies or uncertainty which would require disclosure as recommended by the guidance for Directors on reporting on internal controls. The Board has reviewed the need for an independent internal audit function and has concluded that, at the current time, the Group is not yet large enough to warrant this.
Latest updated 26 June 2024