Malaysia's Reach Energy Acquires 60% Stake in Kazakhstan Block for $155M

Malaysia's Reach Energy Berhad entered into a tripartite conditional Sale and Purchase Agreement March 5 with Palaeontol Cooperatief U.A. and MIE Holdings Corp. to acquire a 60 percent stake in Palaeontol B.V., the company announced Monday on local exhange Bursa Malaysia.

Palaeontol B.V., a unit of MIE Holdings' subsidiary Palaeontol Cooperatief, is the exclusive owner of Emir-Oil LLP which holds full working interest in an onshore block in Mangistau Oblast in southwest Kazakhstan.     

The 328.3 square mile (850.3 square kilometer) block, located around 24.9 miles (40 kilometers) northeast of Aktau -- Kazakhstan's largest port in the Caspian Sea coast, comprises four existing oil and gas producing fields. They are the Aksaz, Dolinnoe, Emir and Kariman fields, occupying around 17.6 square miles (45.5 square kilometers) in the block. 

Reach Energy revealed that exploration, development and production of hydrocarbons will continue in the remaining 349.3 square miles (804.8 square kilometers) of the block, including two discovered fields and six drillable prospects.

RPS Energy Consultants Ltd., the independent technical and asset valuation expert appointed by Reach Energy, estimated that the indicative gross proved plus probable (2P) reserves of the producing fields and development fields in the block at around 72.1 million stock tank barrels (MMstb) of oil and 102.4 billion standard cubic feet (Bscf) of gas as at Jan. 1.The net 2P reserves attributable to the firm upon completion of the proposed acquisition are around 43.3 MMstb of oil and 61.4 Bscf of gas, equivalent to total net 2P reserves due to Reach Energy of 53.5 million barrels of oil equivalent.

The firm, a special purpose acquisition company, will pay $154.9 million (MYR 638.2 million) for the stake in Palaeontol B.V., which upon completion will give Reach Energy majority ownership and control over the Emir-Oil fields.

"The Proposed Acquisition represents Reach Energy’s qualifying acquisition as stipulated under the Equity Guidelines issued by the Securities Commission Malaysia and will transform Reach Energy into an independent Malaysia-based E&P (exploration and production) company with its maiden operation in Kazakhstan," the firm said in a press release.

“Reach Energy entered into this Proposed Acquisition after identification and evaluation of some 40 candidates. The Producing Fields and Exploration Area (collectively known as Emir-Oil Fields) provide a unique opportunity for Reach Energy for investing and operating a balanced portfolio of O&G (oil and gas) fields covering the wider spectrum of upstream O&G production, development and further exploration activities," Reach Energy's Managing Director Shahul Hamid Bin Mohd Ismail commented in the press release.

"We are confident that we can deliver much value to our shareholders from this asset with the co-operation of our partner, MIEH, who is an established independent E&P company with operations in China, Kazakhstan and the U.S. The Producing Fields are in their early and prime stage of production and the Development Fields are currently under pilot production. We believe that there is significant upside potential through further planned efforts, techniques and schemes,” he added.

The proposed acquisition of the onshore Kazakhstan block meant that Reach Energy had dropped a plan to purchase an upstream target in the Asia Pacific.

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