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The Times: Seven sacked in Max Petroleum scandal

October 18, 2007
Steve Hawkes

Max Petroleum, the London-listed oil explorer, said yesterday that it had dismissed its chief executive, chief operating officer and five other staff over a share option scandal.

The company, which owns four lucrative licences in Kazakhstan, said a month-long investigation had confirmed that all seven had broken company rules. Steve Kappelle, the chief executive, and Ole Udsen, the chief operating officer, were suspended last month when the company first brought in Barlow, Lyde and Gilbert, the international law firm.

In a statement yesterday, Max Petroleum said it was confident that none of the issues arising from the investigation “will have a material negative impact on the group’s licences, assets, core business, or financial condition”.

The shares, which have been suspended for the past month at 110¼p, will resume trading when the company publishes its annual report alongside delayed full-year results, possibly tomorrow. Cantor, the spread-betting specialist, said the shares were likely to open between 90p and 105p.

A Max Petroleum spokesman insisted that “chapter and verse” on the reasons behind the dismissals would be provided in the report.

But yesterday the company said the move related to “undisclosed receipt” of share options by the staff involved when it raised £37 million last year to buy the licence for the vast Astrakhanskiy field near the Kazakh-Russian border. An insider said that share options the company thought had gone to third-party investors had been pocketed by Mr Kappelle and the other six employees.

The scandal at Max Petroleum has captivated the City’s independent oil sector, given the company’s roller-coaster ride since it was floated on AIM by Cazenove in 2005.

Shares in the group hit a high 209½p in July, nearly six times the 35p listing price, valuing the business at more than £670 million. The stock collapsed by half in one week in August.

Mr Kappelle, a former Shell business development manager in Dubai, is Australia’s honorary consul in Kazakhstan and known in the sector for his strong contacts in Almaty, the Kazakh capital. He is listed in last year’s annual report as holding ten million share options, with nearly nine million priced at the 35p flotation price.

Jim Jeffs, Max Petroleum’s chairman, said the company’s short-term objectives were to increase production and generate cashflow to fund a drilling campaign. He added that the company hoped to bring in partners to help shoulder the cost.

A number of bigger rivals, such as BG Group and Gazprom, could be interested, given the potential of Max Petroleum’s portfolio. Two of its exploration blocks are just 45 kilometres from the huge Kashagan oilfield, which is thought to hold up to 15 billion barrels of crude.

Mr Jeffs said: “Whilst this has been a challenging time for the company, these events have led to no material changes in our outlook or underlying business. We thank our shareholders, bondholders and employees for their patience and continued support.”

Industry experts yesterday said they expected Max Petroleum to bounce back now it had drawn a line under the affair.

One banker told The Times: “They were a very well-perceived oil company. This has obviously been pretty disruptive but they can now arguably put it all behind them.”

None of the seven dismissed executives was available for comment yesterday. and its sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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