Brent crude futures were trading at $47.58 per barrel at 0041 GMT, down 43 cents, or 0.9 percent, from their last settlement. U.S. West Texas Intermediate futures were down 50 cents, or 1.1 percent, at $45.38 a barrel. Traders said the price falls on Monday and Friday were a result of increasing oil drilling activity in the United States, which indicated that producers can operate profitably around current levels.
KUALA LUMPUR: Hong Leong Investment Bank (HLIB) Research sees the weak oil market benefitting Reach Energy Bhd
’s acquisition plan.
It said on Monday Reach proposed to buy 60% of Palaenotol B.V., holding company of Emir-Oil, and 60% of shareholders loan for US$154.9mil (RM647.86mil). The plan has to get shareholders' nod at the Nov 4 EGM.
It pointed out the weak oil market enabled Reach to acquire Emir-oil at bargain pricing with no abandonment charges in mid-term. The deal was also done when oil prices are at US$30-$40 per barrel range, in the first quarter of this year.
Emir-oil has four producing fields coupled with two development fields and six drillable prospects, pointing to high potential growth in pipeline of reserves.
It also produces high-value light and sweet crude oil and possesses high condensate yield in one of its producing fields, complemented with existing infrastructure and gas evacuation facilities in place.
Reach, which isa special purpose acquisition company (SPAC), had also identified three major value-adding measures which require minimal capital expenditure.
They are liquified petroleum gas extraction facility which has already been completed, transportation tariff reduction of US$2 per barrel through pipeline tie-in and well cost reduction of US$1.95mil development well.
HLIB Research expects Reach’s future performance to be catalysed by oil price rally, completion of the phase one of its central processing facility, entry into production asset at early stage and expansion of 2P reserves (the sum of proved and probable reserves ) upon successful appraisal drilling of exploration wells.
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