Petroleum – Dato’ Sri Hadian bin Hashim, Managing Director and Non-Independent Executive Director – Malaysia
Managing director Dato’ Sri Hadian bin Hashim of Sona Petroleum Bhd, one of Malaysia’s largest listed special-purpose acquisition company, comments on the company’s recent acquisition of a 40 per cent interest in the B8/38 concession and the G4/50 concession in Thailand for US$281.5 million. The transaction is Sona Petroleum’s qualifying acquisition and gives the company a balanced portfolio of production, development and exploration assets in Thailand, as it takes its first step in developing into an independent upstream oil and gas company.
As a means of introduction, why did Sona Petroleum opt to choose for a SPAC vehicle rather than a regular E&P company?
First and foremost in order to start E&P activity we needed capital. The most common route for this kind of business is usually private equity. However, the end game, whether you raise money via private equity or a special purpose acquisition company (SPAC), is the same. Sona Petroleum decided to opt for a SPAC; essentially a shell company raising funds from the capital market for the purpose of acquiring businesses in oil and gas industries. A SPAC is essentially a shell company with no operations. We did not have assets prior to the company’s initial public offering (IPO) in July 2013.
Malaysian SPACs are given three years to secure a Qualifying Acquisition (QA), or 90% of the IPO proceeds must be returned to investors. For that reason Sona Petroleum had set aside 90 per cent of the proceeds raised from the IPO to complete its QA. The remaining of the IPO proceeds will be utilised for working capital within 36 months from the listing and listing expenses. The demand for Sona Petroleum’s shares has been overwhelming and we are pleased to have a good mix of local and international institutional investors. Overall, the company has successfully raised a total of RM550 million in the Retail and Institutional Offering.
Can you please give us an insight into how you achieved such a successful IPO without having purchased any assets?
The successful IPO had demonstrated the confidence of investors in the management of Sona Petroleum. Eventually It’s up to the management to identify a suitable acquisition or merger (or more), and to secure shareholder approval to use IPO proceeds to pay for that deal. That being said, the success of a SPAC depends solely on the management team, which basically comprise of experienced people with expertise to conclude a deal.
At Sona Petroleum we have compiled an international team with skills in both upstream and downstream, across the exploration and production value chain, from drilling, reservoir engineering, field studies, greenfield and brownfield development, to contracting and procurement. And, not just technical skills, but also banking, legal and corporate finance.
Sona Petroleum’s board is populated by international faces, including Chairman Andreas Johannes Raymundus van Strijp, a Dutchman, as well as an Indonesian and Myanmar national.
What could you tell us about your background?
I have over 30-year experience in oil and gas industry; I spent 12 years of my career as a well site engineer for Sarawak Shell Bhd offshore Sabah and Sarawak. Later on I moved to the services industry providing support services to the offshore O&G industry in Malaysia, Southeast Asia and Central Asia. As a result I gained experience on both sides of the spectrum; E&P as well as oil and gas services industry.
October 2014 Sona Petroleum, said it is to borrow US$140 million to part finance a proposed purchase of a stake in London-listed oil exploration and production company Salamander Energy Plc. What makes Salamander’s asset the right match?
In fact, the financing has been signed end of October 2014. Sona Petroleum acquired a 40 per cent interest in the B8/38 concession and the G4/50 concession in Thailand by acquiring participating equity interests in SEL from Salamander Energy (Bualuang Holdings) Ltd, for US$281.5 million. As you rightfully mention we secured a US$140 million loan facility to part finance this acquisition. We entered into a facility agreement with BNP Paribas and RHB Bank, as joint lead arrangers for the facility. The remaining amount comes from our IPO.
When we started our journey for a QA we were interested in buying smaller fields in shallow waters with depths of not more than 120 meters. These assets are abundant in oil-producing regions such as the Middle East, Africa and Asia. Fields with reserves of between 5 million and 30 million barrels, and production of 2,000-5,000 barrels per day were also part of the criteria.
After the listing we identified about 30 different opportunities that we deemed appropriate to take to the next stage and then we walked through a selection process being as objective as we could. Finally we narrowed our scope to three prospects located in the Philippines, Indonesia and in Thailand. Salamander’s asset in Thailand has eventually been picked up as it met all the criteria and we believed it to give us the best return on investment. This purchase has been our qualifying acquisition and gives the company a balanced portfolio of production, development and exploration assets in Thailand, as it takes its first step in developing into an independent upstream oil and gas company.
How has the drop in oil prices affected the atmosphere in the industry?
Naturally, the oil price is one of the considerations choosing an asset. At the end of the day, it is commercial. Are we picking the right asset with the right return?
Regarding to the recent drop in oil price, we have seen highs and lows over the past decades. Much depend on events beyond our control. However looking at the long term up until 2030 oil prices are expected to trend upwards on the back of world population and income growth, which would drive energy demand, while oil majors continue to sell their stakes in smaller, less lucrative fields. As a result small and independent E&P’s such as Sona Petroleum will play an increasingly important role.
It is imperative for small and independent E&P’s to work on operational improvements. That’s how we bring value; by increasing efficiency, conducting additional studies and driving costs down.
Will we see Sona Petroleum continuing to grow its business by making selective acquisitions in the near future or are these times of consolidation?
Our priority rests with the next phase of the life of Bualuang field, which is the “ C” project, expected to be sanctioned late 2014. The development of this project will increase production and extend the life of the Bualuang field.
Going forward we want a mixed portfolio of assets, but we plan to own more production and development assets. If it (an asset) fits our business model and is a good opportunity, why not? However for the moment we aim to generate value for our shareholders.
To read more articles and interviews from Malaysia, and to download the latest free report on the country, click here.