Investors in the small cap oil and gas sector are enduring a torrid few years as companies struggle to deliver on their promises. Shareholders have the opportunity to hold management teams in two firms in this universe to account with 9 May's extraordinary general meeting (EGM) at Russia-focused Petroneft (PTR:AIM) and 15 May's EGM at Wessex Exploration (WSX:AIM).

Taking the meetings in reverse order, the Wessex one has been requisitioned by 4.7% shareholder Milroy Capital with the support of the company’s former managing director Frederik Dekker. It looks to replace the current management with a new board which includes Robert Milroy as non-executive chairman, Robert McAndrew as chief executive officer, Alastair Murray as chief of production and operations and Ian Burns as an independent non-executive director.

Formal action

In an open letter to shareholders Milroy says the ‘sad and continuing negative story’ has motivated it to ‘take formal action’. At 0.5p Wessex has lost half its value in the last six months and management rebuffed a 10p a share offer from French major Total (FP:PAR) in March 2012.

95%: The amount in percentage terms Wessex shares are down on the 10p offered by Total in 2012

At the end of 2011, on the back of the Zaedyus oil discovery in the Guyane Maritime Permit, Wessex (which had a 1.25% stake, now reduced to 1.1%) raised £12 million in order to participate in the Royal Dutch Shell (RDSB) operated four-well forward programme alongside Tullow Oil (TLW) and Total. In the event, the costly well campaign disappointed and the Stena Icemax drill ship was released from contract in December 2013.

Milroy notes that over the last three financial years from 2010 to 2013, encompassing the interim results for the six months to the end of December, the company has generated no revenue or cashflow and has found no proven producing reserves. Through that period it has incurred administration costs of £4.5 million and reported operating losses of £12.6 million.

In its defence Wessex says it is in advanced talks on the acquisition of an offshore asset in the ‘Far East’ capable of near-term production - though adds this is contingent on shareholders voting against the EGM resolutions. It also notes the involvement of Dekker who was ousted from his position in November 2012 and supported the decision to reject Total’s offer.

Shareholder advisory group ISS - a US firm owned by international financial information group MSCI to which most institutional investors in Petroneft subscribe - has backed calls for a proposed shake-up of the board tomorrow. Biggest shareholder Natlata Partners (14%) is pushing for the removal of as many as five of the seven directors. ISS is endorsing the removal of just two of these - David Sanders and Vakha Sobraliev - and their replacement with Natlata-nominated Anthony Sacca and David Sturt.

Natlata is controlled by Maxim Korobov a Tomsk-based oil investor and political ally of president Vladimir Putin. Petroneft characterises Natlata’s action as an attempt to give itself a controlling position in the company without paying a fair price. It has itself requisitioned a meeting the same day to confirm an $85 million farm-out deal with OIL India on its License 61. Like the more opaque deal referenced by Wessex, the transaction is conditional on shareholders rejecting the Natlata proposals.