SAPURAKENCANA PETROLEUM BERHAD (“SKPB” OR “COMPANY”)
PROPOSED ACQUISITION OF NEWFIELD INTERNATIONAL HOLDINGS INC. MALAYSIAN OIL &
GAS ASSETS (“PROPOSED TRANSACTION”)
Unless otherwise stated, the exchange rate of United States Dollar (“USD”) 1.0000:RM3.1697, being the
middle rate as quoted by Bloomberg as at 5.00 p.m. on 21 October 2013, is used throughout this
Announcement.
1. INTRODUCTION
The Board of Directors of the Company (“Board”) wishes to announce that the
Company (“Purchaser”) and Newfield International Holdings Inc. (“Seller”) have today
entered into a conditional sale and purchase agreement (“SPA”) in relation to the
Proposed Transaction.
2. DETAILS OF THE PROPOSED TRANSACTION
2.1 Background Information on the Proposed Transaction
(i)
Pursuant to the SPA, Purchaser shall acquire from the Seller all of the Seller’s 100%
issued and outstanding common shares of the Target Company (“Shares”), for a total
purchase price of up to US$ 898,000,000.00 (equivalent to RM 2,846,390,600.00)
(“Purchase Price”).
(ii)
Throughout this Announcement, the following definitions shall apply:
(a)
(b)
(c)
(d)
(e)
(f)
Newfield Malaysia Holding Inc., a company incorporated under the laws
of the Commonwealth of The Bahamas shall be referred to as the “Target
Company”;
Newfield Sabah Malaysia Inc., a company incorporated under the laws of
the Commonwealth of The Bahamas shall be referred to as “Newfield
Sabah”;
Newfield Peninsular Malaysia Inc., a company incorporated under the
laws of the Commonwealth of The Bahamas shall be referred to as
“Newfield Peninsula”;
Newfield Sarawak Malaysia Inc., a company incorporated under the laws
of the Commonwealth of The Bahamas shall be referred to as “Newfield
Sarawak”;
Newfield Peninsula, Newfield Sabah and Newfield Sarawak are all 100%
subsidiaries of the Target Company, and shall be referred to as the “Target
Company Subsidiaries”; and
The Target Company and the Target Company Subsidiaries shall be
referred to as the “Target Company Group”.
(iii)
It should be noted that the production sharing contracts partners (“PSC
Partners”) of the Target Company Subsidiaries are to be offered preferential rights to
acquire the Assets of the Target Company Group. In the event any of the PSC Partners
exercise their preferential rights for a particular Asset, the allocated value for the
respective Asset shall be reduced from the Purchase Price.
2.2
Settlement of Purchase Price
(i)
Deposit
Company shall pay an earnest deposit of US$ 89,800,000.00 within 10 business
days of the date of the SPA (“Deposit”).
(ii)
Adjustment to Purchase Price
Prior to completion of the Proposed Transaction (“Closing”), the Purchase Price
for the Shares shall be adjusted (“Adjusted Purchase Price”) taking into account
working capital adjustments, prepaid expenses, intergroup advances and
intergroup receipts, the preferential rights exercise by the PSC Partners and any
other adjustment under the SPA. On Closing, the Adjusted Purchase Price less the
Deposit shall be paid to the Seller.
(iii)
Economic Benefit – Effective Time
The Proposed Transaction is structured on the basis that economic benefit of the
business in the Target Company Group accrues to the Purchaser from 1 July 2013
(“Effective Time”).
(iv)
Funding
Company intends to finance the Purchase Price via a combination of internally
generated funds and external bank borrowing.
2.3
Basis of Purchase Price
(a) The Purchase Price was based on accrual of economic benefit from the
Effective Time.
(b) The Purchase Price was derived based on a ‘willing seller willing buyer’ basis.
2.4
Salient Terms of the SPA
Salient terms of the SPA are as follows:(a) The completion/closing of the SPA is conditional upon :- The approval of Company’s shareholders for the Proposed Transaction;
- The approval of Bank Negara Malaysia;
- The approval of Petroliam Nasional Berhad;
- All the representation and warranties of both Seller and Purchaser
remaining true and correct in all material respects as at the Closing Date;
- Purchaser shall have paid the Adjusted Purchase Price less the Deposit;
- Delivery of closing transaction documents; and
-
Performance of all the covenants and agreements prior to the Closing
Date.
(b) The SPA includes customary representation and warranties for a transaction
of this kind;
(c) The SPA will terminate at any time prior to Closing either:
(i) by mutual written agreement;
(ii) by either Party if Closing does not occur by 30 April 2014 after execution
of the SPA, unless Closing did not occur due to such Party failing to
perform its covenants/agreements; or
(iii) by either Party in the event of damage/destruction of Assets in excess of
20% of the Purchase Price.
(d) The PSC Partners of the Target Company Subsidiaries are to be offered
preferential rights to acquire the Assets of the Target Company Group. In the
event any of the PSC Partners exercises their preferential rights for a particular
Asset, the allocated value for the respective Asset shall be reduced from the
Purchase Price.
(e) The SPA is governed by and construed in accordance with the laws of Texas,
USA. Any disputes shall be settled through arbitration in London.
(f) The Seller has undertaken to cause the Target Company and the Target
Company Group to carry on their respective businesses in the ordinary course
consistent with past practices and as a prudent operator.
2.5
Background information on the Target Company Group
Target Company was incorporated in the Commonwealth of Bahamas under the
International Business Companies Act (2000) (Section 12) on February 22, 2013 as an
international business company.
As at 22nd day of April 2013, the authorised share capital of the Target Company was
USD5,000 comprising 5000 shares of USD1.00 par value each, all of which have been
issued and credited as fully paid-up.
The Target Company is a indirect wholly owned subsidiary of Newfield International
Holdings, which is a wholly owned subsidiary of Newfield Exploration Company a
publicly-held corporation formed under the laws of the State of Delaware in the United
States of America (“Newfield Exploration”). All of Newfield Exploration’s Malaysian
assets and operations are held by the Target Company Subsidiaries and include the
following participating interests(“Assets”):
(a) 50% interest in Block PM318,
(b) 60% in PM323,
(c) 70% in PM329,
(d) 50% in AAKBNLP,
(e) 30% in SK310,
(f) 40% in SK408,
(g) 50%, limited to New Oil Production and New Facilities in Tembungo,
(h) 40% in Block 2C and
(i) 25% in Block SK319.
2.6
Background information on the Seller
Seller is a wholly-owned subsidiary of Newfield Exploration. Newfield Exploration is an
independent energy company engaged in the exploration, development and
production of crude oil, natural gas and natural gas liquids. Newfield Exploration is
focused on North American resource plays of scale. Its principal domestic areas of
operation include the Mid-Continent, the Rocky Mountains and onshore Texas.
Internationally, Newfield Exploration has oil developments offshore Malaysia and China,
which are held by Seller and its subsidiaries. In Malaysia, Seller’s subsidiaries have an
interest in 9 PSC Blocks, spread between the Peninsula Malaysia oil producing region
and the gas producing regions of Sarawak and Sabah. The total Malaysian portfolio
comprises 3.3 million net acres.
3. RATIONALE AND BENEFITS OF THE PROPOSED TRANSACTION
The Proposed Transaction will enable SKPB to gain an immediate foothold and
recognition as an upstream resource owner and operator as follows:
(a) Access to Proven and Probable Resource (2P)
• Seller’s reported 2P of 36Mmboe as of 31 December 2012
• Current estimated production of oil – 23,000 bbl/day
(b) Operatorship
• Ownership of an operator company – operating in offshore environment
(c) Proven Track Record
• Excellent HSE and operational track record.
The acquisition will further strengthen and diversify the Company’s existing business
portfolio.
4. OVERVIEW AND PROSPECTS
4.1
Overview and Prospects of the O&G sector
Malaysia's upstream sector has been built upon the oil and gas fields in the shallow
waters offshore Peninsular Malaysia and Sarawak, which have been the focus for
development activity since the 1960s. PETRONAS and other operators have enjoyed
considerable success in recent years discovering large gas accumulations in carbonate
pinnacle reef structures in Sarawak. Opportunities for smaller players remain in mature
areas.
Gas accounts for the majority of remaining reserves, and production is used to supply
domestic demand in Peninsular Malaysia or converted to LNG for export at the Bintulu
LNG plant in Sarawak. Increasing domestic demand has led to the construction of
several import pipelines from Indonesia and Thailand, and a new LNG regasification
terminal in Peninsular Malaysia is now operational. Domestic gas production is currently
forecast to peak in 2018, in line with the ramp-up of output from several new
developments in Sabah, including the Kebabangan Cluster and the Belud Complex.
Two domestic floating LNG projects (FLNG) are also planned, one each off Sabah and
Sarawak. Recent large gas discoveries offshore Sarawak have also allowed PETRONAS
to proceed with the expansion of the Bintulu MLNG facility, with the construction of a
ninth train.
Liquids production peaked in 1995 and around 75% of Malaysia's commercial liquids
reserves have now been produced. With the majority of remaining liquids held within
fields smaller than 100 million barrels in size, PETRONAS, has announced its intention to
focus on maximising domestic production and stimulate investment in marginal fields by
offering fiscal incentives. (Source: Wood Mackenzie, July 2013)
5. RISK FACTORS
Below are some non-exhaustive risk factors that may be inherent to SapuraKencana
Group in relation to the Proposed Transaction. While the Company and the Target
Company will seek to limit the impact of such risks, there is no assurance that any
change in the factors as described below will not have a material adverse effect on
the business and operations of theTarget Company and/or SapuraKencana Group:
(i)
Future impairment of assets and goodwill/intangibles
The SKPB Group expects to recognise goodwill arising from the Proposed
Transaction, the amount of which will depend on fair value of the Target
Company Group as at the completion of the Proposed Transaction. Any fair
value adjustment to the assets and liabilities arising, and the effect of the
amortisation of intangible assets identified, if any, from the Proposed Transaction,
may materially and adversely affect the SKPB Group’s financial position. Further,
any impairment in the carrying amount of intangible assets (including any
goodwill arising from the Proposed Transaction) pursuant to impairment test will
also affect the SKPB Group’s financial position.
(ii)
Foreign Exchange Risk
The operating and reporting currency of the Target Company is mainly
denominated in USD. As the Target Company will be consolidated into the
financial results of SapuraKencana Group which is reported in RM, any
fluctuation of USD against the RM may impact profits and financial position of
the enlarged SapuraKencana Group, arising from such consolidation.
There can be no assurance that fluctuations in foreign exchange rates will not
have a material and adverse effect on SapuraKencana Group’s financial
performance. Nevertheless, the Group will assess the need to utilise financial
instruments to hedge its foreign exchange exposure to mitigate both transaction
and translation exchange risk exposure.
(iii)
Completion Risk
The completion of the Proposed Transaction is subject to the fulfillment of the
conditions precedent to the SPA as set out in Sections 2.4(a) of this
Announcement, which may be beyond the control of the Purchaser. In the
event any of these conditions precedent are not fulfilled or waived, the SPA may
be terminated and hence, the Purchaser will not be able to complete the
Proposed Transaction.
(iv)
Borrowings
The indebtedness of SKPB will increase pursuant to the Proposed Transaction. The
Target Company Group are already income generating and is expected to
contribute towards the cashflow of SKPB Group, Notwithstanding, there can be
no assurance that the enlarged SKPB Group will be able to generate sufficient
cashflow in the future to fulfill its debt obligations.
6. REPATRIATION OF PROFITS
Since the Target Company Group’s operations and accounts are established in
Malaysia, there is no repatriation of profit risks for the Company.
7. LIABILITIES ASSUMED
Pursuant to the Proposed Transaction, liabilities that will be assumed by the Company
are customary operational liabilities under the PSC setup.
8. EFFECTS OF THE PROPOSALS
The Proposed Transaction will not have an effect on the share capital or shareholding
structure of the Company. The effects of the Proposed Transaction on the earnings, net
assets and gearing will be dependent inter alia on the final Purchase Consideration and
will be announced later.
9. APPROVALS REQUIRED
The Proposed Transaction is subject to the following being obtained:
-
The approval of Company’s shareholders for the Proposed Transaction;
The approval of Bank Negara Malaysia; and
The approval from Petroliam Nasional Berhad.
10. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED
WITH THEM
None of the Directors, major shareholders and/or persons connected with them has any
interest, direct and/or indirect in the Proposed Transaction.
11. DIRECTORS’ STATEMENT
The Board, having considered all aspects of the Proposed Transaction, amongst others,
the rationale and benefits of the Proposals, salient terms of the SPA, basis and
justification for the Purchase Consideration, the effects of the Proposed Transaction and
the prospects of the Target Company Group, is of the opinion that the Proposed
Transaction is in the best interest of the Company.
12. ESTIMATED TIMEFRAME FOR APPLICATION TO AUTHORITIES AND COMPLETION
The application to the authorities in relation to the Proposed Transaction is expected to
be submitted as soon as possible from the date of this Announcement. Barring
unforeseen circumstances and subject to all required approvals being obtained, the
Proposed Transaction is expected to be completed in the 1stquarter of financial year
ending 31 January 2015.
13. PERCENTAGE RATIO
Pursuant to Paragraph 10.02(g) of the Main Market Listing Requirements of Bursa
Securities, the percentage ratio applicable to the Proposed Transaction is more than
25% based on the aggregate value of the consideration given or received in relation to
the transaction, compared with the net assets of the listed issuer.
14. ADVISERS
KPMG Services Sdn Bhd was appointed as tax and financial consultant and LXL was
appointed as the legal advisor assisting Company in performing the due diligence and
valuation of the Proposed Transaction. Bank of America Merryl Lynch was appointed as
valuation consultants.
15. DOCUMENT AVAILABLE FOR INSPECTION
The SPA is available for inspection at the Company’s corporate office at Level 6,
Menara SapuraKencana Petroleum, Solaris Dutamas, 1, Jalan Dutamas 1, 50480 Kuala
Lumpur during normal business hours from Monday to Friday (excluding public holidays)
for a period of three (3) months from the date of this Announcement.
This Announcement is dated 22 October 2013.