Reach En­ergy se­cures ap­proval from share­hold­ers for QA

The Sun (Malaysia) - - SPEAK UP - BY LEE WENG KHUEN

KUALA LUMPUR: Reach En­ergy Bhd re­ceived ap­proval from its share­hold­ers for its qualifying ac­qui­si­tion (QA) at its EGM yes­ter­day, be­com­ing the sec­ond spe­cial pur­pose ac­qui­si­tion com­pany (SPAC) in the in­dus­try, af­ter Hibis­cus Petroleum Bhd, to cross the cru­cial hur­dle and grad­u­ate into a full-fledged oil and gas firm.

“Our con­fi­dence is in the as­sets that we have, so I think this turned the tide for us, even in­vestors who are new to the in­dus­try saw its value,” Reach En­ergy man­ag­ing di­rec­tor/CEO Shahul Hamid Mohd Ismail ( pix) told a press con­fer­ence af­ter its EGM, which was de­ferred ear­lier this month to yes­ter­day.

About 81.07% of its share­hold­ers, rep­re­sent­ing 790.95 mil­lion shares, voted for the ac­qui­si­tion of a 60% stake in Palaeon­tol BV, which is the owner of the on­shore oil and gas field called Emir-Oil LLP in Kaza­khstan, for US$154.89 mil­lion (RM640.54 mil­lion).

“It has been a long jour­ney for us, par­tic­u­larly my­self for the last four years. A lot of peo­ple that I need to thank for mak­ing the suc­cess,” Shahul said.

The suc­cess of Reach En­ergy has raised hopes for the SPAC in­dus­try in Malaysia fol­low­ing the fail­ure of its peers Sona Petroleum Bhd and CLIQ En­ergy Bhd to con­vince their share­hold­ers on the mer­its of their pro­posed QAs.

An­other SPAC, Red Sena Bhd, is in­volved in the food and bev­er­age in­dus­try and is in the midst of look­ing for a QA.

Reach En­ergy’s QA is slated for com­ple­tion by the end of this month, but the con­tri­bu­tion from the oil field is to be booked into its ac­counts from the agree­ment date of Oct 1, 2015. For the first six months of 2016, the oil field’s rev­enue stood at RMB659.42 mil­lion (RM417.7 mil­lion), 11.4% higher than RMB592.18 mil­lion in the same pe­riod last year.

Shahul said the oil mar­ket has shown pos­i­tive signs and de­mand is on the rise de­spite short­term un­cer­tain­ties caused by events like the US pres­i­den­tial elec­tion.

“I think it will be just tem­po­rary, the oil price is show­ing signs of re­cov­ery. The Opec coun­tries are de­ter­mined to bring it un­der bet­ter con­trol and the de­mand is ris­ing,” he noted. As Reach En­ergy’s rev­enue is de­rived in US dol­lars, Shahul said, the strength­en­ing of the green­back bodes well for the com­pany. “So, I see pos­i­tive times ahead for the com­pany.” At the cur­rent Brent price of around US$45, he said, it is still com­fort­able for Reach En­ergy. “We could go to US$30 per bar­rel kind of price be­cause this is an on­shore op­er­a­tion, it is well es­tab­lished and the cost has been con­tained and con­tin­ues to be op­ti­mised.” At yes­ter­day’s EGM, Reach En­ergy also re­ceived the green light for a pri­vate place­ment ex­er­cise, which is ex­pected to raise up to RM180 mil­lion to ad­dress the po­ten­tial cash short­fall to pur­chase shares from dis­sent­ing share­hold­ers in re­la­tion to its QA. Shahul said it is not the com­pany’s in­ten­tion to di­lute share­hold­ers’ value, but the pri­vate place­ment will act as a con­tin­gency plan for fund­ing, as it is dif­fi­cult for it to go for bank bor­row­ings as a SPAC. Reach En­ergy shares fell 4.5 sen or 6.3% to 66.5 sen yes­ter­day. How­ever, its war­rants soared 1.5 sen or 23.1% to 8 sen on 354.04 mil­lion units traded, and was the most ac­tive stock of the day.

Newspapers in English

Newspapers from Malaysia

© PressReader. All rights reserved.