Sumatec to miss RM1b revenue target

KUALA LUMPUR: Oil and gas firm Sumatec Resources Bhd's will miss its initial revenue target of RM1 billion by 2015 by a mile, with it only likely to be in sight in the next two to three years given the current low oil price scenario.
"It's possible to achieve the target in the next two to three years with increase in production," its CEO Chris Dalton told a press conference after the company's three-hour long EGM here yesterday.
Sumatec, in which local tycoon Tan Sri Halim Saad owns a 24.49% stake, had set the RM1 billion in revenue target some two or three years ago when the price of crude oil was averaging at US$100 a barrel.
For the financial year ended Dec 31, 2014, Sumatec's revenue was at RM81.87 million. Its net profit meanwhile dropped 27.26% from RM73.63 million to RM53.55 million.
Dalton expects the financial performance to improve for FY16 following the full profits recognition of the new acquisition.
Yesterday, Sumatec obtained shareholders' nod for the acquisition of 100% in Borneo Energy Oil & Gas Ltd for US$290 million (RM1.02 billion), which will be satisfied through RM210 million cash payment and the issuance of new Sumatec shares.
Borneo Energy owns two Buzachi Neft oil and gas assets in Kazakhstan. The deal is expected to be completed by early June.
At yesterday's EGM, Sumatec shareholders also approved the proposed rights issue to raise up to RM1.1 billion to partly fund the deal.
Sumatec was uplifted from the Practice Note 17 (PN17) status in September last year after it completed its regularisation exercise.
Dalton noted that the new asset will offset the loss in profit it expects for its Rakushechnoye oil field in Kazakhstan, once a 50:50 profit sharing with its joint venture partners kick in.
According their agreement the the partners this will happen when accumulated production hits 2 million barrels, by 2017. Sumatec acquired the oilfield in November 2013.
"It's critical for Sumatec make its first own acquisition to supplement revenue going forward," he said.
Sumatec CFO Roshidah Abdullah said the accumulated production level for Rakushechnoye has been kept minimal for the time being, considering the current oil price level.
She however said that the group will operate at least 25 producing wells by year-end, with five and 20 wells for Rakushechnoye and Buzachi Neft respectively.
Based on the current oil prices of US$50 to US$55 per barrel, Dalton said the Sumatec could still make a gain of US$10 to US$15 per barrel from the new acquisition after deducting the capital and operating expenditure costs as well as petroleum taxes.
"The taxes in Kazakhstan are scalable, when the oil prices drop, the petroleum taxes also drop, it's still profitable below US$40 per barrel," he stressed.
Sumatec has aside a higher capital expenditure (capex) of US$20 million for 2015 due to the new acquisition and the capex is expected to increase to US$30 million to US$40 million in 2016.
Roshidah said the proceeds from the rights issue are sufficient for the business development over the next two years, while subsequent investment will be internally generated.
"Hopefully when the market recovers, we can go into the debt market to see how to further our investment," she added.
Dalton said Sumatec is committed to its investments in the upstream operations, with no intention to diversify into the downstream segment despite low oil prices.
"We will remain in the upstream business, we're not going to diversify into downstream or any other," he added.