The group announced this in a filing with Bursa Malaysia today, saying it will pay RM1.55 billion to assume full ownership of the O&G field.
The plan, first announced in July 2016, involves the acquisition of Markmore Energy (Labuan) Ltd (MELL) for US$205 million from Markmore Sdn Bhd, which is owned by businessman Tan Sri Halim Saad, who is also a substantial shareholder of Sumatec.
MELL, through its wholly-owned subsidiary Markmore Central Asia BV, holds the entire participatory interest in CaspiOilGas LLP (COG), who in turn is the concession owner and operator of the Rakushechnoye O&G field.
Sumatec’s managing director Abu Talib Abdul Rahman had told reporters after the group’s annual general meeting on June 15, that the group will likely abort the plan and would instead focus on its gas utilisation plan, which includes building a liquefied petroleum gas (LPG) plant In Kazakhstan.
Today’s announcement, however, made no mention of Abu Talib’s statement.
Instead, the group said it has signed a heads of agreement with Markmore Sdn Bhd to acquire a 100% stake in MELL. The agreement is to lead to a share sale agreement within six months, failure of which would lapse the initial agreement.
It said RM1.22 billion of the purchase price will be paid in cash and the balance via the issuance of 1.68 billon new shares at 20 sen per share (equivalent to RM336 million).
Sumatec is currently the designated operator of the Rakushechnoye field, after sealing a joint investment agreement in March 2012 with MELL and COG, under which it is allowed to carry out all operations relating to the production of oil from the Rakushechnoye field.
The agreement entitles Sumatec to 100% of the profits for the first two million barrels of produced oil, and 50% of it thereafter.
The group said the proposed acquisition is expected to enable it to effectively own the entire oil and gas reserves at the Rakushechnoye field, as well as to enhance the effectiveness and efficiency of operations there.
“It is also a step in increasing the hydrocarbon reserves for Sumatec to arrest the natural production decline of the hydrocarbon production, thereby ensuring the continuous growth of Sumatec,” the filing added.
Sumatec’s board has also proposed to undertake various corporate exercises to address current financial issues. This includes a rights issue to raise a minimum of RM1.52 billion.
The rights issue involves the issuance of 7.61 billion new shares, together with 3.04 billion warrants and 1.01 billion bonus shares on the basis of 15 rights shares, together with 6 warrant and 2 bonus shares for every 2 existing shares at an indicative issue price of 20 sen per rights share.
The final issue price and exercise price of the warrants will be determined by the board at a later date.
Sumatec’s share price closed unchanged at 5 sen today, giving it a market capitalisation of RM182.63 million.
Source: The Edge Markets