Sona-Stag US$25 Mln Deal, Lowest In O&G Industry

From Azizul Haji Ahmad PERTH, April 9 (Bernama) -- The deal clinched by Sona Petroleum Bhd to acquire the Stag oilfield for US$25 million is the lowest psychological level in the oil and gas (O&G) industry, says Mark Robertson. This price is 50 per cent off what was originally agreed, and significantly lower than the ‘fair’ value recommended by independent consultant, Gaffney Cline & Associates Pte Ltd (GCA). "GCA’s fair valuation for this asset was between US$30 to US$40 million," said Robertson, Managing Director of Sona E&P (Perth) Pty Ltd, a unit established by Sona Petroleum Bhd's early this year. He said in order to undertake exploration studies and to have a similar set up like Stag, would cost at least US$1 billion. "To do something like Stag from the very beginning, it would require at least a billion US dollars in investments. "So US$25 million (for Stag) isn't too much in the game of oil and gas installation," he told Malaysian journalists here of Sona Petroleum’s planned qualifying acquisition (QA) deal. Sona Petroleum had, on Feb 29, finalised the sales and purchase agreement (SPA) of the Stag oilfield at US$25 million, a 50 per cent reduction, from the original US$50 million price. The special-purpose acquisition company (SPAC) is in a midst of complying the qualifying acquisition (QA) conditions set by the Securities Commission of Malaysia to secure a lower price (compared to the original US$50 million purchase price) and appoint an independent executive director to oversee the infill development spending. The acquisition will be jointly effected through Sona Australia headed by Robertson and the transaction is targeted for completion this month. Robertson said Stag's assets were being valued in light of low oil price and operating cost environment, with an upside potential in oil price and reduction in operating cost. "Our cost of production of US$30 per barrel is a reasonable margin below the current Brent crude price, even before pricing in the premium over Brent given Stag Oilfield’s higher quality oil. "Further cost optimisation is possible. We will be developing the asset to reduce cost of production by a further 10-20 per cent," he said. The Stag Oilfield is located in shallow waters of 50 meters thus the cost of production in shallow waters is lower than deep waters. Ongoing production at the Stag Oilfield, which is currently at 4,000 barrels per day (bpd), will provide immediate and continuing revenue and cash flow to Sona group. An infill development planned for Stag, presents an opportunity to enhance total production by about 36 per cent, increase the probable reserves and extend the economic life of the field to 2030 at current projected oil prices. "Between 2016 to 2018, we intend to drill three infill wells near Stag. Robertson said the current production licence will expire in 2018 but can be renewed for another 21 years. -- BERNAMA