A general view shows an drilling rig at the Lukoil company owned Imilorskoye oil field, as the sun rises, outside the West Siberian city of Kogalym, Russia, January 25, 2016. Picture taken January 25, 2016. REUTERS/Sergei Karpukhin
KUALA LUMPUR: Sona Petroleum Bhd has received the Securities Commission’s (SC) conditional approval to acquire the Stag Oilfield offshore Western Australia although the regulator also noted that the purchase price of US$50mil (RM207.8mil) was deemed “not fair” by an independent expert.
The special-purpose acquisition company (SPAC) told Bursa Malaysia that the SC had noted that technical and asset valuation expert Gaffney, Cline and Associates (Consultants) Pte Ltd (GCA), in its valuation report dated Jan 20, considered the purchase price “not fair”.
Sona Petroleum, however, is negotiating with the sellers - the oilfield’s operator Quadrant Northwest Pty Ltd and Santos Offshore Pty Ltd - to reduce the purchase consideration which GCA felt was above its fair market value.
The proposed acquisition of the Stag Oilfield is intended to be Sona Petroleum’s qualifying acquisition (QA), allowing it to become an independent upstream oil and gas company. So far, the SPAC has received a notice of no objection from the Australian Foreign Investment Review Board, but still requires the approval of Sona Petroleum’s shareholders, among others.
Sona Petroleum said the SC recognised that the purchase price was only one of several factors that shareholders would consider in approving the proposed transaction and in deciding whether to exit their investment in the company and receive the amount in the trust account due to them.
According to the regulator, shareholders may still take the view that the QA acquisition is reasonable although the price is “not fair”.
“As such, where the difference between the transaction price and the fair value range will not necessarily make the proposal detrimental to the interest of investors, the SC may allow shareholders to decide on whether to proceed with the transaction, provided all the required information is communicated fully and appropriately.
“Having considered the specific circumstances of Sona Petroleum’s application to the SC, the SC is of the view that shareholders should be given the opportunity to decide on the proposal,” Sona’s statement said, without specifying whether this was a direct quote from the SC.
On behalf of Sona Petroleum, CIMB Investment Bank Bhd also sought relief from the requirement of the SC’s Equity Guidelines whereby the fair market value of the QA must equal to at least 80% of the amount in its trust account.
Among others, the SC’s approval is subject to Sona Petroleum using up to 80% of the amount in its trust account for the purchase of the Stag Oilfield and to finance part of the proposed drilling of additional infill production wells, which the regulator deems as necessary.
According to the SC, the proposed deal would only be commercially viable if the proved plus probable (2P) reserves are produced and immediately result in increased oil production. “Therefore, the infill development (to enhance production) is part and parcel of the proposed acquisition.”
“The funds to be utilised for the infill development will be placed in another trust account specifically for this purpose with a proper approval process in place for the monitoring and disbursement of funds. Sona Petroleum will also issue monthly and quarterly updates through announcements on Bursa Malaysia Securities Bhd on the amount of cash drawn down and balance in the trust account,” the statement said.
The SC also requires Sona Petroleum to appoint, prior to issuing the circular to shareholders, an additional independent non-executive director who has the “appropriate qualification and experience” to carry out effectively the role of an independent director of a listed company,
Sona Petroleum’s unit Sona E&P (Perth) Pty Ltd signed the agreement to acquire the production and pipeline licences for the Stag Oilfield, a producing oilfield located 60km offshore Western Australia, in November last year.
The oilfield has been in production since 1998. As at June 30, 2015, it was producing 4,600 barrels of oil per day from 10 active wells.
Based on GCA’s estimates of the Stag Oilfield, which takes into account the implementation of infill development, Sona Petroleum is expected to have access to 13.0 million stock tank barrels (MMstb) of proved (1P) oil reserves, 16.2 MMstb of 2P reserves and 24.0 MMstb of proved plus probable plus possible (3P) reserves.
Sona shares closed unchanged at 45 sen on Friday, with 865,000 shares being traded.
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