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Activist Investors Press Energy Companies On Safety, Spill Risks

Published Friday, 11th February 2011 11:09 pm - © 2011 Dow Jones

By Ryan Tracy


WASHINGTON -(Dow Jones)- As proxy season approaches, activist investors with stakes in energy companies are pressuring oil firms for proof that the companies are improving safety and reducing the risk of a major spill.

The investors include unions, public pension funds, and environmental and religious groups. They are targeting publicly trading companies leading up to the annual shareholder meeting season this spring.

One target is BP PLC (BP, BP.LN), which had a record of occupational safety problems before the spill at its Macondo well last year, but other energy companies are being pressed as well.

After talks with the investment arm of the AFL-CIO, Sunoco Inc. (SUN) agreed in December to make public new details about inspections at its refineries, worker fatigue, and other safety information.

Chevron Corp. (CVX), ConocoPhillips (COP), and ExxonMobil (XOM) are among other firms also being pressed by the AFL-CIO, which is pushing the companies to report more about how their boards of directors oversee safety, among other things.

Those three companies have appealed to the Securities and Exchange Commission to block nonbinding resolutions on safety reporting from coming to a shareholder vote, telling U.S. regulators they are already disclosing the pertinent information. The SEC has already ruled against ConocoPhillips. The other two appeals are pending.

Ceres, a network of environmental groups, unions, pension funds, and other investors that collectively control more than $2.5 trillion in assets, has focused on Murphy Oil (MUR), Petrobras (PETR4.BR, PBR), Husky Energy, Inc. (HSE.T, HUSKF), and A.P. Moller Maersk AS (AMKBF, MAERSK-B.KO). The organization said additional companies could be targeted in the future.

Those four are the only companies that didn't respond to a letter that Ceres set to 27 energy CEOs last fall asking for details about spill prevention, response plans and internal safety controls, said Andrew Logan, oil program director at Ceres.

"A non-response certainly raises investors' concerns about whether companies are taking safety concerns seriously," Logan said.

A spokeswoman for Petrobras pointed to the company's most recent SEC filings, which said the company complied with safety regulations and was improving its readiness for spill response, but didn't provide many of the details Ceres had requested.

Thomas Grondorf, head of communications for Maersk Oil, said that the company would have to hire more people to answer the Ceres questions and that the relevant information was part of reports it makes public to investors. A spokesman for Husky Energy said the company wasn't able to meet Ceres' deadline for a response, but will continue to review its offshore safety program. Murphy Oil didn't respond to requests for comment.

Activist investors can prod companies using several methods, including submitting a resolution on which shareholders can vote at a company's annual meeting. Although such resolutions are often nonbinding, companies often negotiate with investors in order to avoid seeing a resolution on its proxy. Shareholders may agree to withdraw the resolution if they receive concessions.

"This is not about chaining ourselves to fences," said Laura Berry, executive director of the Interfaith Center on Corporate Responsibility, which is leading the U.S. side of a coalition to pressure BP this year. "This is about really sitting down with corporations and saying, 'We think this is right, we think this is just and we think it is material to the valuation of a company.'"

For BP there is some indication that the company is beginning to regain investors' confidence.

In January, the U.S. coalition led by the Interfaith Center backed off a planned shareholder resolution that would have asked BP to conduct a review of safety standards at all its operations and disclose the results.

Instead the coalition joined with a group of socially responsible investors from the U.K. Both agreed to allow new BP CEO Robert Dudley more time before waging a proxy fight. Dudley took the reins of the oil giant in October, which is also when the company launched a new worldwide safety unit charged with auditing compliance with its own internal safety standards. BP declined to comment.

"The investors involved in this group felt enough confidence that we were willing to continue the conversation," Berry said.

BP has also been more responsive to socially responsible investors since Dudley took over. Julie Tanner of Christian Brothers Investment Services, which manages about $3.6 billion for various Catholic institutions and is part of the coalition of investors pressuring BP, said she hadn't met face-to-face with anyone from the company for about three years before this past December, when BP finally sat down with her and colleagues.

"You need that kind of engagement," Tanner said.

-Ryan Tracy; Dow Jones Newswires; 202-862-9245;

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