Sona deal to buy Australian field falls through

08 June 2016, Week 22 Issue 528

Malaysia’s Sona Petroleum was notified last week by the owners of Western Australia’s Stag oilfield that its planned purchase of the asset had been terminated.

The news has further dented prospects for the Kuala Lumpur-based independent, which has been scouting for acquisition opportunities for three years now without clinching a single deal.

Sona agreed to buy a 100% stake in offshore licence WA-15 L, which houses the Stag field, together with pipeline licence WA-6-PL, from Australia’s Santos and Quadrant Energy in 2015.

The deal had initially valued the acreage at US$50 million, but earlier this year Sona managed to barter the price down to US$25 million. This was after it hired Gaffney, Cline & Associates to carry out an independent assessment of the assets, which found that the original price was higher than the market value.

Last week, however, Sona received letters from Santos and Quadrant stating that the sale had been aborted “with immediate effect”. The Malaysian company had failed to convince its shareholders to back the deal, with a 77.4% majority voting against the purchase in April.

Stag is located 60 km off the coast of Western Australia at an average water depth of 50 metres. It was brought on stream in 1998, initially flowing 30,000 barrels per day of heavy crude from the Dampier sub-basin. Yields have rapidly declined since then, however, with 10 wells flowing just 4,600 bpd as of June 2015. It is understood that current output is even lower.

Quadrant operates the mature field with a 33.33% stake, while the remaining equity is held by Santos. 2P reserves are estimated at 17.2 million barrels.

Sona was hoping to revive Stag’s output with a US$110 million development programme spanning the next two years, which included the drilling of additional infill wells. The company said in a March presentation that this would raise yields to an average of 4,400 bpd in 2017, 5,300 bpd in 2018 and 4,700 bpd in 2019.

Race against time

Sona was set up as a special purpose acquisition company (SPAC) targeting oil and gas plays in Africa, the Middle East and the Asia-Pacific region.

In order to fund this expansion, it secured a 550 million ringgit (US$135 million) war chest from an initial public offering (IPO) on the Bursa Malaysia stock exchange in July 2013. But thus far, the company’s efforts to build up an upstream portfolio have been in vain.

In 2014 it agreed to buy two oil and gas blocks in the Gulf of Thailand from Salamander Energy in a deal that would have marked its maiden acquisition. The transaction fell through, however, after Salamander was taken over by London-listed Ophir Energy.Sona is now in a precarious position, as Malaysian SPACs are required to make a qualifying acquisition (QA) within 36 months of their IPOs.

“We still have [around] three months…before our QA deadline on July 29,” Sona’s chairman, Mohamed Khandar Merican, was quoted as saying on April 27 by local business outlet The Edge Markets. “We will discuss with our lawyer and explore what are the options we have.”

Edited by

Andrew Kemp

Editor

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