Sumatec Reduces Acquisition Price for Borneo Energy by $60M to $290M

Malaysia-based Sumatec Resources Berhad trimmed the acquisition price for Borneo Energy Oil and Gas Ltd.'s by $60 million to $290 million in a revised agreement giving the former access to two oilfields in Kazakhstan held by Borneo's Buzachi Neft LLP, according to local media reports.

Sumatec explained that the lower acquisition price for the Kazakh oilfields was due to the sharp fall in oil price, which have declined by over 50 percent since the middle of 2014 to just below $50 a barrel this week.

Both parties have accepted the change in the terms of the sale and purchase agreement signed Sept. 8, 2014 as oil price has declined from an average of $103.19 a barrel in August 2014 to $57.33 a barrel in December 2014.

Under the revised deal, $210 million will be paid in cash, with the balance $80 million by way of issuance of 1.22 billion new shares in Sumatec at $0.0647 (MYR 0.23) to Borneo's owners Abu Talib Abdul Rahman and Murat Safin, according to Malaysian daily The New Straits Times.

Sumatec and Borneo agreed to extend the timeline to fulfill the conditions precedent from Jan. 30 to July 31.

Buzachi holds exploration and production contracts for two shallow water oilfields -- Karaturun Vostochnyi and Karaturun Morskoi fields located approximately 141 miles from Aktau city in the northern part of Mangistau Region in Kazakhstan -- that will expire only in November 2026.

"Despite the decline in oil prices, the board remains optimistic of the long-term prospects of the proposed acquisition due to the long-term potential of the oil and gas industry in the global energy market," Sumatec said in a filing with local stock exchange Bursa Malaysia, as reported in another local newspaper The Star.

The two Buzahi oilfields has 2P reserves of 68 million barrels.


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