Sona to develop O&G fields in Thailand

Sona to develop O&G fields in Thailand
Business & Markets 2014
Written by Shalini Kumar of theedgemalaysia.com
Tuesday, 22 July 2014 08:36

KUALA LUMPUR: Sona Petroleum Bhd, a special purpose acquisition company (SPAC), is buying a 66.67% stake in Salamander Energy (Bualuang) Ltd (SEBG) for US$281.2 million (RM891.4 million) cash, which gives Sona a 40% participating interest in the G4/50 and B8/38 oil and gas (O&G) blocks in Thailand.

In a filing with Bursa Malaysia yesterday, the SPAC said it had signed a sale and purchase agreement last Friday with London-listed Salamander Energy plc to buy the 40% stake in the latter’s Thai unit, SEBG. This follows a heads of agreement signed on June 5 in relation to the proposed transaction.

The proposed acquisition involves Sona buying 66.67% of Class A shares in SEBG without any voting rights but attaching economic rights in SEBG, and 49% of Class B shares, which carry one vote per share but without attaching any economic rights in SEBG.

The transaction will be funded via a mix of proceeds from Sona’s initial public offering in July last year of US$141.2 million and bank borrowings of about US$140 million.

The proposed acquisition is expected to be completed in the fourth quarter of this year and to start contributing to Sona’s earnings per share for the financial year ending Dec 31, 2014.

Speaking at a press briefing yesterday, Sona managing director Datuk Seri Hadian Hashim was excited about the prospects of the Bualuang field.

“Salamander has spent about US$77 million to develop the exploration area. I’m very excited to see Sona going forward because it offers opportunities for us to be a full-fledged exploration and production company,” he said.

“Working with Salamander also gives us the opportunity to work with an experienced operator which is about twice our size and with an established focus in Southeast Asia with a lot of potential for future collaboration.”

Sona said the B8/38 block is an ongoing production and near-term development asset and consists of the Bualuang field, which has been in production since 2008. The concession expires in 2025, with a possibility to extend for a further 10 years subject to the existence of commercial reserves and approval of the extension by Thailand’s Department of Mineral Fuels.

As at Dec 31, 2013, B8/38 had contingent resources of 6.9 million barrels of oil (MMbo) net to Sona, and proven and probable reserves of 12.5 MMbo net to Sona.

The G4/50 block is a high potential exploration asset, with Salamander planning to drill two exploration wells this year and up to four more in 2015. The concession is scheduled to end in December 2016 although it may be extended for at least 20 years in respect of any discoveries that may be brought forward and approved for development.

Of the 10 high-grade prospects mapped for exploration in G4/50 — the cumulative volumes of the unrisked recoverable prospective resources are about 75.9 MMbo (best-case scenario) and 144.54 MMbo (mean).



Hadian said two development phases have been carried out on the B8/38 asset and the third phase is in progress on the field, where four additional well slots and topsides are being added to the second platform.

“The fourth development phase involving the installation of a third platform, known as Charlie, is targeted for approval in the fourth quarter this year, with the first oil targeted in 2016,” he said.

Analysts contacted by The Edge Financial Daily are positive on the proposed acquisition as Sona is one of the first SPACs on Bursa Malaysia to buy into a producing asset.

“Over the long term, the [Sona] stock is a positive buy and I think it will be the first SPAC to show some profits once the buy is completed since the assets (G4/50 and B8/38) have both development and production capabilities,” said an analyst from a local research house.

“The cash flow is tremendous and the upside from the exploration wells is a bonus. [The area of Bualuang and the Gulf of Thailand] is proven to be a prolific basin with a history of surprising on the upside,” a local fund manager said.

Sona’s shares and warrants were among the most active counters yesterday, following the news.

At the close of trading, Sona shares were two sen or 3.74% higher at 55.5 sen, with 162 million shares changing hands, giving a market capitalisation of RM782.95 million. The counter reached an intra-day high of 58 sen.

Sona’s warrants went up to as high as 31.5 sen before ending the day flat at 29 sen, with 143 million warrants traded.



This article first appeared in The Edge Financial Daily, on July 22, 2014.