Sumatec to fund Borneo Energy buy via rights issue

KUALA LUMPUR: Sumatec Resources Bhd plans to undertake a rights issue to partly fund the proposed acquisition of Borneo Energy Oil and Gas Ltd, which it aims to complete this year, said its CEO Chris Dalton.
He said the deal is currently valued at US$250 million, which will be funded via a combination of cash and shares. The proposed acquisition, which was announced last Friday, will see Sumatec taking 100% ownership of Borneo Energy, which had in turn bought two oil and gas assets from Buzachi Neft LLP.
Buzachi Neft LLP has two 25-year subsoil use contracts (namely Karaturun More and Karaturun Severo Vostochunyi in Kazakhstan) that are valid till November 2026 and a quarry that will last till Jan 31, 2030.
"We are looking at raising maybe 50% of the US$250 million from rights issue and the balance from special issue shares," he told reporters at a media briefing on the acquisition yesterday.
The company aims to complete the acquisition this year and is set to sign the sale and purchase agreement soon, after which it will disclose the price of the rights issue. It aims to takeover the assets by year-end.
It will also spend an additional US$150 million to set up facilities at Karaturun More and Karaturun Severo Vostochunyi, which will be funded via bonds.
"Our gearing is zero at the moment, so we have a lot of room to move," said Dalton.
Dalton said if it successfully completes the deal by the third quarter of this year, it will be able to recognise profit contribution from the new assets in the fourth quarter.
"It is already producing 400 to 600 barrels of oil per day with estimated profits of US$25 to US$30 per barrel," he said, adding that majority of returns will be recognised next year onwards as it plans to ramp up production at the two sites.
Dalton said it aims to achieve production of 25,000 barrels per day in three years' time at the two sites and 5,000 barrels per day at its existing Rakushechnoye site.
The acquisition is part of its plan to become a large independent oil and gas player in Malaysia, after completing a restructuring exercise last year.
"To be a large independent oil and gas player, we need to have 200 million barrels reserves in our portfolio in five years' time.
"We have been exploring assets since day one and this one came out on top. We will continue to look at other assets as well," he said, adding that it is not limited to assets in Kazakhstan.
He also said that the company is on track to exit Practice Note 17 status by September this year.
On the selling of shares by its CFO Roshidah Abdullah, its director James Chan said the shares sold were ESOS shares and were sold before the acquisition of Borneo Energy was announced.
Sumatec shares were the most actively traded yesterday, closing 6.33% higher at 42 sen with a total of 198.4 million shares changing hands.