DNeX’s unit to acquire 50% stake in Avalon Oilfield

The proposed acquisition will allow the company avoids any potential conflicting decisions which may arise

by S BIRRUNTHA / Pic by TMR GRAPHIC

DAGANG NeXchange Bhd’s (DNeX) indirect subsidiary Ping Petroleum UK Ltd is acquiring the remaining 50% interest in the development of the Avalon Oilfield in the UK for a total purchase consideration of US$17 million (RM71.86 million).

In a filing to Bursa Malaysia on Monday, the group said Ping UK had signed a sales and purchase agreement with Summit Exploration and Production Ltd to acquire the stake in Avalon Oilfield development that it has not owned.

It said Ping UK will pay an initial cash consideration of US$5 million to the vendor after completion of the transaction and settle the balance sum of US$12 million on a contingent basis upon completion of key project milestones and via a production-linked payment.

The group noted that Summit Exploration and Production, a wholly-owned subsidiary of Sumitomo Corp, had been actively sourcing for a buyer for its 50% interest in the development of the Avalon Oilfield as it reportedly intends to shift away from the fossil fuel business.

“As the joint-owner and operator of the Avalon Oilfield, the proposed acquisition would allow Ping UK to avoid any potential conflicting decisions which may arise should the vendor sell its 50% interest to a third party,” it said in a statement.

Additionally, DNeX said the development of the Avalon Oilfield is expected to result in a significant increase in oil production and reserves for Ping UK.

It added that the development will also provide significant portfolio risk mitigation as Ping UK’s revenues would be realised from two independent installations namely from the Anasuria cluster and the Avalon Oilfield after the first production from the Avalon Oilfield.

Furthermore, the Avalon Oilfield is a proven discovery with significant upside in a politically stable region.

Ping UK is a wholly owned subsidiary of Ping Petroleum Ltd, which in turn is a 90% owned subsidiary of DNeX Energy Sdn Bhd, a wholly owned subsidiary of the company.

Following submission of the field development plan (FDP), Ping UK intends to begin work on the frontend engineering and design for the selected development concept whilst sourcing for long-lead items and materials for drilling and development activity.

After the approval of the FDP, which is expected to be done by the second quarter of 2022 (2Q22), Ping UK plans to commence drilling of development wells on Avalon in 3Q22, while installation and hook-up of the production facility is planned one year later in 2Q23.

Based on the current estimates, Avalon Oilfield is expected to begin producing oil by July 2023.

DNeX said the proposed acquisition is not expected to have any material effect on the earnings per share of the company for the financial year ending June 30, 2022.

Barring any unforeseen circumstances, the acquisition is expected to be completed in 3Q21.

In another filing, DNeX announced that a business unit under the company’s IT and e-services division, Innovation Associates Consulting Sdn Bhd (IAC), has received an information and communication technology contract from the Finance Ministry (MoF).

The group noted that the contract is valued at RM88.1 million in relation to the maintenance services, support services and enhancement for the Malaysian government’s accounting system known as iGFMAS (integrated government financial and management system).

Under the letter of award (LOA) terms, the contract shall be for a period of 45 months commencing from Aug 10, 2021, and ending on May 9, 2025.

Under the contract, IAC will be responsible for the maintenance, support services and application improvement of iGFMAS.

IAC is required to furnish a performance bond amounting to some RM1.17 million to MoF within 30 days from the date of the LOA with a validity period commencing from Aug 10, 2021, to May 9, 2026, or the date of the last obligation under the contract, whichever is later.

IAC is also required to implement a training program known as the Professional Training and Education for Growing Entrepreneurs, or PROTÉGÉ, for a minimum of 34 participants at no cost to the government.

IAC is 60% held via Genaxis Group Sdn Bhd, which in turn is 51% held by Dagang Net Technologies Sdn Bhd, a wholly-owned subsidiary of the company.

DNeX shares ended one sen or 1.21% lower at 82 sen on Monday, valuing the company RM2.48 billion.