Malaysia's Special Purpose Acquisition Companies Expands Upstream

BP says it will cut around 275 staff and contractor jobs in its Alaska operations in early 2015 following the sale of its interests in four oil fields in the North Slope area.
Four special purpose acquisition companies have listed in Malaysia since 2011, making upstream acquisitions from Australia to Norway.

Three years has passed since Malaysia’s first special purpose acquisition company (SPAC) was listed on local stock exchange Bursa Malaysia. Interest has however remained high, with Reach Energy Berhad becoming the country’s latest and largest SPAC to be listed on Bursa in August. Like the SPACs that listed earlier, Reach Energy plans to shed its asset-free status by acquiring local or foreign upstream petroleum assets.

SPAC is a “shell company” with no operations or income generating business at the point of initial public offering (IPO), but it will utilize funds from the IPO to take over operating firms or businesses.

Under Bursa’s regulations, SPACs are given 36 months from the IPO listing to make a qualifying acquisition by utilizing up to 90 percent of the funds or a minimum of $49.8 million (MYR 150 million). To be listed as a SPAC, the management team must have at least 10 percent ownership of the firm and possess relevant industry experience.

Hibiscus Petroleum Berhad became the first upstream oil and gas-focused SPAC to list in Malaysia and in Southeast Asia in July 2011 after raising $78 million (MYR 235 million) from its IPO on Bursa.

Despite Hibiscus’ listing over three years ago, “SPAC is still relatively new to Malaysia … and Malaysia is just catching on to global trends,” Arhnue Tan, an analyst with Malaysia’s Alliance Research told Rigzone.

Malaysia is currently home to a few local petroleum exploration and production (E&P) firms, including state-owned Petroliam Nasional Berhad (Petronas). Petronas Carigali Sdn Bhd – the upstream arm of Petronas – has E&P operations at home and abroad. Last year, Petronas Carigali established Vestigo Petroleum Sdn Bhd to focus on E&P development and production activities for small, marginal and mature fields in Malaysia and abroad.

Despite the dominance of Petronas and its related firms in Malaysia’s petroleum industry, SapuraKencanca Petroleum Berhad – whose business was originally focused on the provision of oilfield services – has emerged as an integrated oil and gas company after acquiring Newfield Exploration Co.’s Malaysian upstream assets for $898 million in October 2013.


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