REACH Energy Bhd, a small oil and gas (O&G) company, made history in August when it became the largest special-purpose acquisition company (SPAC) to be listed on the Main Market of Bursa Malaysia with an initial public offering (IPO) of RM750 million.
The listing came on the back of three other SPACs, namely Sona Petroleum Bhd, Cliq Energy Bhd and Hibiscus Petroleum Bhd, which raised RM550 million, RM364 million and RM235 million, respectively.
SPACs have no income-generating business prior to the IPO but undertake listing for the purpose of raising funds to acquire businesses or assets, otherwise known as qualifying acquisition (QA).
Reach Energy’s IPO was oversubscribed by 41.86 times. There were 23,821 applications for 857.295 million public issue shares, thus making it one of the stronger stocks to debut on the Main Market this year.
Among its cornerstore buyers were Norway’s Norges Bank Investment Management, Koperasi Permodalan Felda Malaysia Bhd and Lembaga Tabung Haji, which signify the industry’s confidence in the firm.
The story is just beginning for Reach Energy but with such a strong opening, the market can expect greater things to come from the company, especially since it is helmed by industry expert Shahul Hamid Mohd Ismail as managing director and chief executive officer.
The 64-year-old has been in the O&G industry for the past 36 years. He was first with mega player Exxon and moved on to Royal Dutch Shell Plc, where he was rotated on assignments globally, covering a wide variety of technical and commercial aspects.
He sat down with Business Times recently to talk about the vicious cyclical nature of the industry, the need for further development of human capital as well the bright future that awaits Reach Energy, even in these trying times.
“I have lived through the times when the oil price plummeted to US$10 (RM34.94) per barrel. It is always a challenge as global forces are beyond one’s control. This is a period where there is instability for numerous reasons and one of them is overproduction,” he said, noting that it is not all doom and gloom.
“The prices will go down to a level where producers will feel the pinch and they will come together and do something to amend this.”
Shahul, however, said the low price of global crude oil benefits exploration and production (E&P) companies, even small ones like Reach Energy.
“If the price of oil continues to be depressed longer, say through 2015, I believe this will be beneficial to us as it means that more companies in the industry will look towards consolidating and will help Reach Energy to fulfil our QA.
“I expect we will be able to acquire our first asset next year as my team and I am completely dedicated towards the QA as we have nothing to distract us.”
Reach Energy currently has about a dozen employees, which is the way Shahul wanted.
“The idea is to have a small O&G firm so that we can operate cost-effectively because when we do acquire, we will be able to absorb the new staff.
“I am not a fan of retrenchment, so to be lean and mean is the way to go.”
He also said Malaysian and foreign retail investors need to look at E&P stocks as they have massive potential to spur liquidity on Bursa Malaysia.
“It is my desire to see more E&P stocks in the market as these are good stocks. If you look at other exchanges, you will see E&P highly regarded as premium stocks.”
He said there is low demand for E&P stocks because investors are not aware of their profit potential. Investors are more aware of end-products and service activities like drilling and barges.
Shahul, a Colombo Plan scholar, holds a master’s degree in mechanical engineering from University of Adelaide in Australia.
He was also awarded a grant by the University of Adelaide and co-authored a pioneer research paper on statistical energy analysis entitled “In situ determination of loss and coupling loss factors by the power injection method” in 1981 in the Journal of Sound and Vibrations and the Acoustical Society of America, which has been widely acclaimed.
The subject of knowledge sharing with Malaysia’s budding talent in O&G is one that he holds close to his heart as he has been an adjunct lecturer at Universiti Teknologi Petronas (UTP) and a member of the Engineering Board of Studies and Industry Advisory Panel at the International Islamic University Malaysia (IIUM) for the last seven years.
“I am an engineer by profession but I have acquired numerous experiences and knowledge through the years. I have always had this intention to give back to the community and that’s why I am an adjunct lecturer at UTP and sit on the board of IIUM.”
He also said he is concerned with the lack of talent in the O&G industry in Malaysia, thus it is up to the hiring
companies to give local graduates additional training.
Going forward, Shahul not only wants Reach Energy to be a successful O&G story, but also one that boasts of a commendable corporate culture.
“I want to develop a corporate culture that nurtures, develops and gives the employee room for creativity and which is not hierarchical.
“I have had this kind of development in my career which has benefited me tremendously. I would like to pass it on to those who work in the company for the advancement of the industry.”