BTM jumps into LPG

HOW do you get from running a loss-making downstream timber business in Malaysia to becoming a player in the liquefied petroleum gas (LPG) scene, all the way in Kazakhstan? That’s the ambitious plan announced by BTM Resources Bhd.

In a filing with the stock exchange, BTM Resources said it is partnering Markmore Energy (Labuan) Ltd (MELL) – a company controlled by Tan Sri Halim Saad – to participate in the proposed production of LPG using natural gas supplied from the Rakushechnoye oil and gas (O&G) field in Kazakhstan.

The company says the proposed venture will give it an opportunity to diversify and expand its source of income, as it has been hit by higher production cost and lower profit margins of wood products in recent years.

MELL owns Caspioilgas LLP (COG), which holds a 25-year concession that expires in August 2025 for subsoil use of the Rakushechnoye O&G field.

Halim is the largest shareholder of Sumatec Resources Bhd, which had entered into the agreement with MELL and COG for the Rakushechnoye oil field project in 2012.

However, the inability to raise new funding to develop the oilfield and various litigation issues arising from the legacy shipping debts had impacted Sumatec’s financials.

Sumatec, in an Oct 7 stock exchange filing, said that it has received notice from COG terminating a joint-investment agreement for the Rakushechnoye oil field project in Kazakhstan.

COG cited the constraints faced under the current financial and legal predicaments of financially-distressed Sumatec as a reason for the termination.

That said, the proposed deal between BTM and MELL is only at a heads of agreement stage. A due diligence on MELL will be undertaken in the next two months.

So, is investor euphoria on BTM a little premature?

Since the proposed deal was announced on Wednesday, shares in BTM have risen close to 70% and have doubled in just a week.

It also remains to be seen whether BTM, which has been struggling to run a profitable saw-mill business, can turn this new idea into a profitable venture if the deal does formalise.