Reach Energy shortlists 4 candidates

KUALA LUMPUR: Special purpose acquisition company (SPAC) Reach Energy Bhd has shortlisted four potential candidates and is confident of securing a qualifying asset (QA) by year-end, said its managing director and CEO Shahul Hamid Mohd Ismail (pix).
"As soon as we listed, we quickly embarked on evaluating the assets or candidates that we had in our portfolio and that's what we've been doing all these months. An oil and gas (O&G) asset acquisition is not like, simply put, buying something in the market. There's a lengthy process. That is why the three-year period is given to make sure our search and evaluations are done in good time," he told SunBiz in an interview.
Shahul said since its listing in August last year, it has screened over 30 candidates and shortlisted four potential candidates from its preliminary evaluation process. It is currently in the advanced stage of discussions with these four candidates.
"We will look at economic valuations and start talking to the vendor about pricing and valuation matters. There are a lot of technical matters, more information; definitely we would have signed by now non-disclosure agreements and they are trusting us and giving us data. These four candidates we already have non-disclosure agreements with them," he added.
He said it aims to come to an agreement with the vendor this year.
"We must have something that is agreed upon and say we are comfortable to submit to the regulator. That stage we want to get to within this year, by fourth quarter this year," Shahul said.
A SPAC is required to acquire a QA within three years upon listing and Reach Energy's deadline falls in August 2017. Reach Energy was the fourth SPAC listed on Bursa Malaysia after Hibiscus Petroleum, CLIQ Energy Bhd and Sona Petroleum Bhd.
Although it is already in serious discussions with four candidates, Shahul said it is still receiving proposals from interested parties and is open to evaluating them.
"My strategy is not to break that line. You must have that coming because you must always have Plan A, Plan B and Plan C. You must continuously be evaluating but that doesn't mean you are waiting for the best asset or anything like that. As soon as you have something that qualifies your criteria, you go on. Until that firms up, you have to keep evaluating assets that come your way," he said.
He said there is no shortage of candidates in the market and the company often gets visits from companies or brokers that represent potential candidates.
Location-wise, he said it is still looking within the Asia Pacific region as well as some candidates at the fringes of Asia Pacific.
"We are allowed technically, to buy anywhere really, just that the internal rate of return (IRR) criteria is different. If it is within Asia Pacific region, IRR must be at least 15%, if it is outside then it must be at least 20%. All are brownfield assets and we must be the operator," he said.
Commenting on its share price, Shahul said the performance has been a little disappointing, due to market sentiments arising from the low oil price and other economic factors.
"Generally the markets are down, not just us or anybody in particular but what the market has not realised is that SPACs are different. We are not owning any assets, we are not owning any oil field, we are not in revenue stream at the moment. All the money we raised for Reach Energy, close to 95% is sitting in a trust fund," he said.
"I think a lot of investors may not be familiar with the SPAC mechanism. For us, we take it for granted, everything is in the prospectus, in the website but I think investors may not be familiar or at least those people who represent may not be briefing them accordingly," he added.
Despite that, Shahul said its cornerstone investors remain confident in the company and on its part, it will continue addressing its existing and interested investors.