Reverse takeover to propel Loyz Energy into big league
Home-grown Loyz Energy could be joining the ranks of Singapore’s largest listed upstream oil and gas companies.
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JACQUELINE WOO
12 June 2015
Home-grown Loyz Energy could be joining the ranks of Singapore’s largest listed upstream oil and gas companies.
The firm announced on Tuesday it has inked a reverse takeover deal to acquire Primeline
Energy Holdings (PEH), a Chinese oil and gas exploration and production company, for $197 million.
Loyz will fund the acquisition, which is expected to be completed by the end of this year, by issuing 1.79 billion new shares at 11 cents each. It will seek a transfer of its listing from the Catalist board to the mainboard.
Managing director Adrian Lee told The Straits Times in an interview yesterday that the deal, if completed, would triple its market capitalisation, which stood at $51.3 million as of yesterday.
“We will become one of the largest listed upstream players in Singapore in terms of pre-tax profits, revenue, earnings,” he said. “Having a much larger base and a much stronger balance sheet will also allow us to be in a better position to negotiate with banks and (financing bodies).”
Mr Lee noted that the acquisition is being done at a discount to PEH’s asset value, based on Loyz’s own valuations.
About 60 per cent of the enlarged entity will likely be held by PEH shareholders, while the remaining 40 per cent will be owned by Loyz shareholders.
PEH, which is listed on the TSX Venture Exchange in Canada, owns exploration and development rights in the East China Sea via two petroleum contracts.
One of them includes a 49 per cent stake in a gas field with an estimated net present value after tax of US$294 million (S$396 million), assuming PEH completes its acquisition of Prime Petroleum Corporation.
Mr Lee said the acquisition will allow Loyz Energy, which has oil-producing concessions in Thailand, to enter the gas business. “It gives us the stability of cashflow, given the long-term offtake agreements for gas in China, and an upside to the oil price until it recovers,” he noted. “It will be a more holistic portfolio.”
The key factor driving the acquisition is Loyz’s plan to “create a platform where we will be able to take up good opportunities when the next cycle comes”, said Mr Lee, who has set his sights on buying oil and gas-producing assets across Asia.
“We do see a lot of foreign independents and oil majors exiting Asia, so there will be interesting assets to buy,” he noted. “Right now, we’re preparing for when something interesting is for sale and we want to make sure we’re financially ready. There will come a time when things are too cheap to not invest in.”
He acknowledged that with oil prices down, it “doesn’t make sense to throw money into the oilfields”. Crude prices are down by nearly half since last June.
But he remained optimistic that the sector will turn around by as early as the end of the year.
“The industry has been starved of cash. But money will start flowing in at some point, and that’s when you’ll see a turnaround. You’ll see projects being developed and new oil starting to flow again.
“It all goes back to demand and supply. And in my opinion, global demand for oil will always outweigh supply.”
Loyz shares closed 0.1 cent up at 12.2 cents yesterday.