Shareholder Vote On Friday To Decide On Reach Energy’s Fate
PETALING JAYA: Reach Energy Bhd is seeking its shareholders vote on Friday to acquire an oil and gas (O&G) field in Kazakhstan, a deal that would make or break the company.
The special-purpose acquisition company (SPAC) needs to get at least 75% of its shareholders’ approval for its qualifying acquistion (QA) to go through.
If its get that 75% approval, Reach would become a full-fledged exploration and production (E&P) O&G company and leave the shreds of being a SPAC behind.
The firm would have about a year to find another potential QA if the deal falls through.
Reach’s proposal is to buy a 60% stake in Palaeontol BV, which is the owner of the onshore O&G field called Emir-Oil LLP in Kazakhstan for US$154.9mil (RM638.2mil).
Shares in Reach closed lower yesterday to 70.5 sen and warrants unchanged at 6 sen.
Kenanga Research reckoned that the proposed acquisition by Reach is attractive for shareholders to approve because of low acquisition price, producing fields with immediate cashflows and potential initiatives to further unlock value.
“We believe Reach will be a good trading proxy for the volatility in oil prices post-QA, while its cash value of 75 sen a share acts as a floor price should the company fail to complete its QA by August 2017,” it said in a report yesterday.
RHB Research said Reach’s proposed acquisition is positive as the oilfield is already in production with visibility to ramp up.
“We understand that Reach is expected to pay out about 30% of its free cashflow as dividends.
“Key risks includes a drop in crude oil price and delays in the construction of the central processing facility,” it said in a report.