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Malaysian special-purpose acquisition company to buy Salamander Energy

Thai unit SEBG holds concession right to two blocks

After months of speculation, special-purpose acquisition company (SPAC) Sona Petroleum Berhad has announced plans for its "qualifying asset" after inking a heads of agreement with London-listed Salamander Energy Plc. It involves Sona forking out US$280 million for a 40 per cent stake in the Thai unit of Salamander.

The unit, called Salamander Energy (Bualuang) Ltd (SEBG), owns two concessions called B8/38 and G4/50.

Sona said B8/38 had been producing hydrocarbons since 2008 and based on Salamander's 2013 annual report, it was this field that accounted for the bulk of its income.

Salamander is an independent upstream oil and gas (O&G) exploration and production company listed on the main market of the London Stock Exchange. It has a portfolio of production, development and exploration assets in Thailand, Indonesia and Malaysia.

"The proposed transaction is intended to be Sona's qualifying acquisition and gives Sona a balanced portfolio of production, development and exploration assets in Thailand, as it takes its first step in developing into an independent usptream O&G company," Sona told Bursa Malaysia.

"The target interests are expected to contribute positively to the earnings of the company upon completion of the proposed transaction."

The proposed acquisition is subject to shareholder approval for Sona and Salamander, as well as the approval of the Securities Commission.

The market, however, reacted slightly negatively to the proposed acquisition, with both the mother share and warrants dropping three sen and 1.5 sen, respectively, to 56.5 sen and 29.5 sen.

The mother share was the third-most actively traded stock with 116.82 million shares being done. The warrant was the heaviest-traded counter of the day with 123.69 million warrants being done.

Meanwhile, the purchase consideration for SEBG has been calculated on the basis of SEBG's valuation as at January 1.

The US$250 million relates to the acquisition of a 40 per cent effective working interest in the B8/38 concession, while $30 million relates to the acquisition of a 40 per cent effective working interest in the G4/50 concession.

Salamander has also agreed to carry Sona's costs associated with the drilling of two exploration wells in the G4/50 concession up to an agreed cap.

The purchase consideration will be satisfied via cash and will be funded via a combination of the company's internal funds, raised from its initial public offering in July 2013, and bank borrowings.

Sona said the parties had made significant steps in agreeing to the terms of the proposed transaction, and would finalise the terms and conditions of the sale and purchase agreement (SPA) and related transaction agreements with a view to signing a legally binding SPA prior to June 26.

On its website, Salamander describes itself as an Asia-focused independent exploration and production company with a number of licenses spread throughout Indonesia and Thailand.

The Bualuang oil field is the group's flagship production asset and has been on-stream since 2008. When Salamander took over the development of the field, it was thought to contain about 14 million barrels of oil (MMbo) of 2P reserves with a productive lifecycle of about five years. Having now undergone six reserve upgrades, it is expected to ultimately recover about 75 MMbo.

"Between 2008 and 2012, production averaged between 7,000 and 8,000 barrels of oil per day (bopd). Following additional investments, the production increased 71 per cent to 12,300 bopd in 2013," said Salamander on its website.

Further development drilling is planned during 2014 and production is expected to average between 11,000 and 14,000 bopd.

Meanwhile, Block G4/50 covers 2,900 sqm surrounding the Bualuang production licence and contains five sub-basins.

As of December 31, 2013, the Salamander group recorded operating profits of $74.08 million on the back of $482.2 million in revenue.

Its post-tax operating cashflow was $300.26 million, while its operating cost per barrel was $16.60.

Sona, which raised RM550million in its initial public offering in July last year, is the third SPAC to be listed on Bursa Malaysia.


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