Battle in Bermuda: Oil exploration company Gulf Keystone Petroleum at the centre of spectacular power struggle

A former Foreign Legionnaire and a retired Army head are fighting M&G and a genius tycoon for control of their £1.5bn oil giant. With the final showdown looming in the Caribbean, Gideon Spanier reports from the frontline

It is one of the most colourful rows seen in the City for years. The oil exploration company Gulf Keystone Petroleum is at the centre of a spectacular power struggle involving billions of barrels of Kurdish oil, eight-figure pay packages and some big egos, including that of a retired chief of the British Army.

The row is coming to a head now – with signs of a possible peace deal – because Gulf Keystone’s annual meeting is in Bermuda next Thursday. The Caribbean tax haven might sound a curious place for a £1.5bn company listed on the London stock market to be based, but it says a lot about the City’s oil and energy sector, which has attracted so many foreign companies in recent years.

At the heart of the battle is Todd Kozel, the flamboyant American founder and well-paid chief executive of Gulf Keystone, who earned $22m (£15m) last year and $13m this year. The company’s stock has soared since he floated it on London’s Alternative Investment Market in 2004. At one point last year, its value was close to £4bn on the strength of a huge oil find in Kurdistan, part of northern Iraq.

But its value has more than halved since then amid legal rows and criticism of Mr Kozel’s pay. Some investors are fed up, and the top City fund manager M&G Investments, a 5 per cent shareholder, wants to put four non-executive directors on the board, including Gulf Keystone’s former deputy chairman Jeremy Asher, who controls 1.7 per cent. They call themselves “reforming” shareholders, rather than dissidents, and say the company is suffering because its share-price slump limits its options for expansion and investment. They want greater scrutiny of Mr Kozel, but insist they are not seeking control by stealth.

However, Gulf Keystone’s board, which includes new chairman Simon Murray (pictured), a former French Foreign Legionnaire, and the independent director Field Marshal Lord Guthrie, a former head of the British Army, is not convinced. Relations have been tense, and a meeting between Gulf Keystone and the M&G camp in London last Friday ended in a shouting match. Pencils were thrown, said one source.

Little wonder that the Gulf Keystone board publicly opposed the plan for the four non-executives in a circular sent to shareholders on Monday. A source close to Gulf Keystonesaid: “The real agenda here is about a group of people trying to take creeping control of the board.”

M&G, whose fund manager Tom Dobell oversees the shareholding in Gulf Keystone, denied this. “At no point has M&G tried to interfere or take control of the board,” said a spokesman, adding that it just wanted four “truly independent non-executive directors”. Their proposed candidates are John Bell, Philip Dimmock and Thomas Shull as well as Mr Asher, a savvy City veteran who also chairs another Aim oil explorer, Tower Resources.

Gulf Keystone agrees about appointing new directors to improve its governance, ahead of a move from Aim to the main London Stock Exchange, but argues that M&G’s candidates lack “quality” or independence. The company’s circular to shareholders pointed out that Mr Asher attended Harvard Business School with Mr Shull, and that Mr Asher has links with Mr Bell and Mr Dimmock because Tower Resources interviewed them both for the chief executive’s job last year. Mr Asher also went to the London School of Economics at the same time as Mark Denning, a senior figure at Capital.

The message is clear: Gulf Keystone is suggesting that Mr Asher, who left the board in 2010 after a bust-up, has a personal grudge. Those close to Gulf Keystone also claim that Mr Asher cannot be truly independent as he holds a 1.7 per cent stake.

Friends of Mr Asher, who plans to go to Bermuda for the vote, insist he only cares about the best interests of the company, and that M&G, part of the insurance giant Prudential, is hardly a patsy. They are not opposed to Gulf Keystone appointing other non-executive directors to its board.

So, despite the earlier fighting talk, those former military men Mr Murray and Lord Guthrie have continued talking to the M&G camp this week about a compromise. There was talk last night a peace deal was imminent.

One suggestion was that just Mr Asher could be named to the board, but that proposal apparently failed to satisfy him and the M&G camp, which is thought to have close to a majority of shareholders’ support.

A new idea being floated is for all four of M&G’s appointees to go on the board, along with several other names picked by Gulf Keystone’s board. After the bad blood of recent weeks, Mr Kozel will have to be in a forgiving mood if he has to welcome Mr Asher back on to the board.

The antagonists

Todd Kozel, 46, has been in the industry since the 1980s and co-founded Gulf Keystone in 2001. The American has made tens of millions of pounds and enjoys the lifestyle that comes with it. But he was hit by a costly split from wife Ashley in 2011 when details emerged about company entertaining at a strip club and yacht. Mr Kozel is hands-on and went into northern Iraq to negotiate with local Kurds about oil exploration after the fall of Saddam Hussein.

Jeremy Asher, 55, has multiple oil business interests and chairs Tower Resources. He was deputy chairman of Gulf Keystone until 2010, when he fell out with Mr Kozel, but still controls a 1.7 per cent stake. He ran the oil and trading business for notorious Marc Rich in the 1980s at the company that would become Glencore. Mr Asher, who passed his A-levels at the age of 15, studied at London School of Economics and Harvard Business School.