DNeX to acquire additional 60% of issued share capital in Ping

By ANIS FARHANAH MALEK
anisfarhanah@dagangnews.com

KUALA LUMPUR 22 Jan. - Dagang NeXchange Berhad (DNeX) has entered into a conditional share sale and purchase agreement (SSPA) with the other shareholders of Ping Petroleum Limited (Ping) to acquire an additional 60% of the issued share capital in Ping not owned by DNeX, for US$78.0 million (RM314.3 million).

Based on the SSPA, DNeX may nominate DNeX Energy Sdn. Bhd. (DNeX Energy), its wholly owned subsidiary, to be the transferee and registered holder of those shares.

DNeX currently owns 30% in Ping through DNeX Energy, according to the group in a statement today. 

The proposed acquisition will be satisfied by a combination of US$40.95 million (RM165.0 million) in cash, and the issuance of new ordinary shares in DNeX as well as new redeemable preference shares in DNeX Energy, for the remaining US$37.05 million (RM149.3 million).

The acquisition is expected to be completed by the end of the second quarter of 2021 (2Q21) subject to all required approvals under the SSPA being obtained.

Upon completion of the exercise, DNeX will own 90 per cent of Ping, and this is expected to contribute positively to DNeX’s financial performance.

Group Managing Director of DNeX, Datuk Seri Syed Zainal Abidin Syed Mohamed Tahir 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," said him in the same statement. 

The O&G sector has shown improvements with the price of Brent oil currently trading at USD56 (RM226) per barrel range, the highest in ten months, and from a low of USD19 (RM77) per barrel on 21 April 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,” Syed Zainal Abidin further explained. 

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, United Kingdom.

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. 

The independent market valuation of the entire Ping’s proved and probable (2P) reserve stood at US$212.7 million (RM857.2 million).

DNeX’s transaction price of US$78.0 million (RM314.3 million) for a 60% represents a discount of around 40% to the market valuation of Ping’s 2P reserve.

“We believe this is an attractive deal for the group and puts us in a strategic position to benefit from the eventual upturn in global economy and energy demand.

"As international O&G majors are divesting their upstream assets as part of their global portfolio rebalancing, DNeX is also looking into acquiring additional late cycle producing assets in such target markets as the North Sea, Malaysia and within the region as well," he added. 

As at Ping’s latest audited accounts for the financial year ended 30 June 2020 (FY20), Ping recorded revenue of US$47.7 million (RM204.1 million) and profit after tax of US$2.5 million (RM10.5 million). - DagangNews.com