KUALA LUMPUR: Dagang NeXchange Bhd (DNeX) is raising its stake in Ping Petroleum Ltd by 60 per cent for RM314.3 million.
DNeX, in a statement today, said it had entered into a conditional share sale and purchase agreement with other shareholders of Ping.
The additional stake increases DNeX's shareholding in Ping Petroleum to 90 per cent through wholly-owned DNeX Energy Sdn Bhd.
"The proposed acquisition will be satisfied by a combination of U$40.95 million in cash, and the issuance of new ordinary shares in DNeX and new redeemable preference shares in DNeX Energy, for the remaining U$D37.05 million," it said.
DNeX group managing director Datuk Seri Syed Zainal Abidin Syed Mohamed Tahir said Ping had proven to be a strategic fit with its energy division and had contributed to group earnings over the past few years.
Syed Zainal said Ping was a solid investment having been consistently profitable, generating positive operating cash flow, and was debt-free with a strong balance sheet.
"This transaction also supports DNeX's strategy to further establish its presence in the upstream oil and gas (O&G) business, which can be progressively scaled up over time," he said.
The acquisition is expected to be completed by June this year.
Syed Zainal said the key management team of Ping had deep O&G sector experience and would continue to remain at the helm of the company.
"We are leveraging their extensive expertise and business acumen in brownfield assets turnaround, with the objective of building an international portfolio of cash-generating assets," he added..
Since DNeX acquired a 30 per cent stake in Ping in 2016 for US$10 million, Ping has built a track record and a balanced portfolio of O&G assets in the North Sea, the United Kingdom.
This includes a 50 per cent effective interest in the Anasuria oil cluster, comprising a cluster of assets that has mature O&G fields, which can offer further upside production and development opportunities.
Ping also owns various O&G assets that are in development and exploration with one greenfield asset ready for development.
"Ping has successfully kept and continues to reduce operating costs to below US$20 (RM81) per barrel to ensure the company remain profitable and generate a positive operating cashflow despite the soft and volatile market conditions," Syed Zainal said.
"Ping's focus in the near term will be to unlock its untapped potential and maximise economic value from its asset portfolio. There is opportunity to further improve Ping's production output by rejuvenating existing wells to monetise economically attractive reserves in the Anasuria cluster."
It was estimated that the Anasuria cluster had proved and probable (2P) reserve of about 26.6 million barrels of oil equivalent (MMboe)," said Syed Zainal.
The independent market valuation of the entire Ping's 2P reserve stood at US$212.7 million.
DNeX said the US$78.0 million for the 60 per cent stake represented a discount of around 40 per cent to the market valuation of Ping's 2P reserve.
Syed Zainal said this was an attractive deal and put DNeX in a strategic position to benefit from the eventual upturn in global economy and energy demand.
"As international O&G majors are divesting their upstream assets as part of their global portfolio rebalancing, DNeX is also looking into acquiring additional late cycle producing assets in such target markets as the North Sea, Malaysia and within the region as well," he added.