Sumatec to pay RM818mil for full ownership of Kazakh oil concession

Saturday, 2 July 2016 | MYT 1:53 AM

Sumatec to pay RM818mil for full ownership of Kazakh oil concession

by m. hafidz mahpar


KUALA LUMPUR: Sumatec Resources Corp Bhd, which is currently entitled to only half of the profits from the the Rakushechnoye oil and gas field in Kazakhstan as its designated operator. plans to take full control by buying the concession owner for US$205mil (RM817.95mil).

In a filing with Bursa Malaysia, the company said it had inked a heads of agreement on Friday to acquire 100% equity interest in Markmore Energy (Labuan) Ltd (MELL) from Tan Sri Halim Saad (via his 99.9%-owned Markmore Sdn Bhd). MELL’s unit CaspiOilGas LLP (COG) is the concession owner and operator. 

Halim is also Sumatec’s largest shareholder with 24.5% interest, according to the announcement.

Under the joint investment agreement signed by Sumatec, MELL and COG in March 2012, Sumatec would get 100% of the profit in the first two years while from the third year onwards, the profit would be divided 50:50 between Sumatec and COG. The net production was expected to reach a threshold of 2 million barrels within the first two years, with Sumatec’s appointment as the designated operator becoming effective in December 2013.




Also in December 2013, Sumatec signed a gas development and production agreement with MELL to develop and deliver to MELL the gas development, implementation and production plan that will meet the minimum supply of 120 million std cu ft of gas per day from the Rakushechnoye field, also known as Shelly field.

Sumatec would charge MELL a fee of US$45mil (RM179.4mil) over three years from 2014 to 2016 for works carried out under the gas development and gas implementation plan stage plus an operator fee of 75 US cents per thousand std cu ft supplied at well heads.

The parties to the heads of agreement signed on Friday agreed in principle that the purchase consideration for the proposed acquisition would be US$205mil and that Sumatec would reimburse the US$45mil in gas development expenses incurred or to be incurred to fast-track the monetisation of the Shelly field’s gas reserves.

Based on the 2P oil and gas reserves as certified by SRK Consulting (Australia) Pty Ltd in May 2014 and adjusting for the oil reserves effectively owned by Sumatec under the profit sharing, the purchase consideration represents about US$1.74 (RM6.95) per barrel of oil equivalent.

Sumatec and Markmore will later set out in the share sale agreement (SSA) the manner as to how the purchase consideration will be satisfied. Sumatec also agrees to pay oil royalty on future oil production from the Shelly field to Markmore subject to the rate and terms to be mutually agreed and stipulated in the SSA.

On the rationale for the proposed acquisition, Sumatec said it would effectively own the entire oil and gas reserves at the field.

The proposed acquisition is also expected to enhance the effectiveness and efficiency of operations at the oil and gas field.

This is because Sumatec will be able to “take control and consolidate the operations of COG instead of having our subsidiary, Sumatec Oil and Gas LLP to manage the operation of the Rakushechnoye field, thereby eliminating duplication in human resources functions, office facilities and potential conflict of interest as well as streamlining the line of reporting and co-ordination of work activities, which is expected to result in operations efficiency and cost saving.”

The share sale agreement is expected to be signed within six months or an extended time mutually agreed on; otherwise, the agreement in principle set out in the heads of agreement will lapse.

Sumatec shares rose half a sen to close at 10.5 sen on Friday, with 13.147 million shares traded.