PETALING JAYA: Dagang NeXchange Bhd (DNeX) has entered into a conditional share sale and purchase agreement (SSPA) with the other shareholders of Ping Petroleum Limited to acquire an additional 60% stake in Ping not owned by DNeX, for US$78.0 million (RM314.3 million).
Based on the SSPA, DNeX may nominate its wholly owned subsidiary DNeX Energy Sdn Bhd to be the transferee and registered holder of those shares.
DNeX currently owns 30% in Ping through DNeX Energy. The proposed acquisition will be satisfied by a combination of US$40.95 million in cash, and the issuance of new shares in DNeX and new redeemable preference shares in DNeX Energy, for the remaining US$37.05 million.
The acquisition is expected to be completed by the end of the second quarter of 2021 subject to all required approvals under the SSPA being obtained. Upon completion of the exercise, DNeX will own 90% of Ping, and this is expected to contribute positively to DNeX’s financial performance.
DNeX group managing director Datuk Seri Syed Zainal Abidin Syed Mohamed Tahir (pix) said Ping has proven to be a strategic fit with DNeX’s Energy division and has contributed positively to the group’s earnings over the past few years.
“Ping is a solid investment having been consistently profitable, generating positive operating cash flow, and is debt-free with a strong balance sheet. This transaction also supports DNeX’s strategy to further establish its presence in the upstream oil and gas (O&G) business, which can be progressively scaled up over time.
“We are pursuing a growth trajectory that is anchored on pursuing and capturing quality assets at attractive prices during the current downturn and riding on the upturn in the coming years. We are seeing early signs of macro recovery of demand amidst supply discipline, which has resulted in rising Brent crude prices,” he said in a statement today.
The O&G sector has shown improvements with the price of Brent oil currently trading at US$56 per barrel range, the highest in 10 months, and from a low of US$19 per barrel on April 21, 2020.
The rise in oil prices have been supported by market optimism that vaccines will revive the global economy, coupled with production output cuts by OPEC+. Recently, Saudi Arabia pledged to cut oil output by one million barrels per day in February and March 2021, leading to tighter supply outlook.
“The key management team of Ping have deep O&G sector experience and will continue to remain at the helm of Ping. We are leveraging on their extensive expertise and business acumen in brownfield assets turnaround, with the objective of building an international portfolio of cash-generating assets,” said Syed Zainal.
Since DNeX acquired a 30% stake in Ping in 2016 for US$10 million, Ping has built a successful track record and a balanced portfolio of O&G assets in the North Sea, UK. This includes a 50% effective interest in the Anasuria Oil Cluster, comprising a cluster of assets that has mature O&G fields, which can offer further upside production and development opportunities. In addition, Ping also owns various O&G assets that are in development and exploration with one greenfield asset ready for development.
