BY TEE LIN SAY
Kee is seasoned oil man with more than 30 years of experience. He worked for Halliburton for 26 years.
Globaltec Formation Bhd, the merged entity of AutoV Corp Bhd, AIC Corp Bhd and Jotech Holdings Bhd, is about to become a different animal.
A shareholder who puts his money in Globaltec is no longer just buying into an integrated manufacturer. He will be buying into a full-fledged oil and gas exploration and production company with a focus on unconventional resources.
In a nutshell, Globaltec, upon completion of its investment agreement with NuEnergy Gas Ltd (NGY), will be an asset owner and operator, (via NGY), of three coalbed methane (CBM) concessions in the south and central of Sumatra, Indonesia.
CBM is a form of natural gas extracted from coal beds.
Says Globaltec executive chairman Datuk Seri TC Goh: “This deal will fast track our entry to the oil and gas industry with minimum cost and risk. This was part of our business diversification strategies discussed in our last annual general meeting with our shareholders.”
Last week, Globaltec subscribed for a 60% stake in New Century Energy Resources Ltd (NCER) and New Century Energy Services Ltd (NCES) for an aggregate of US$200,000 (RM640,000).
The next part of the deal involves NCER subscribing for 83.3 million shares in Australian listed NuEnergy Gas Ltd (NGY) for for 3 Australian cents (8.91sen) to raise A$2.5mil (RM7.4mil), thus owning 19.9% of NGY.
NCER will further subscribe to shares of NGY and participate in its rights issue for a total commitment of A$10mil (RM29.7mil), to be completed by Dec 31, 2014 for a minimum price of 3 cents per share.
NGY has 3 production sharing contracts (PSCs) in South and Central Sumatra, covering about 4,856 square kilometres.
It is the operator of all 3 PSCs which are Muara Enim (40% share), Muara Enim II (30% share) and Rengat (100% share).
“We are buying into NGY at only A$3 cents with a total investment of A$12.5mil. That kills two birds with one stone.
“It doesn’t just give us a significant stake in NGY, but the funds injected will also be used to drill more wells,” says Goh.
On arguments that Goh is new to the oil and gas sector, Goh doesn’t refute it.
“The existing business activities of Globaltec is in the provision of integrated manufacturing services.
“All my existing business divisions are headed by the respective founders of the companies who know the business very well. Likewise, NCER and NCES will form the oil and gas division of Globaltec, where I am the group chairman,” says Goh.
He adds that the group is currently reviewing its strategic options which include the divestment and shutting down of non profitable business and product lines.
Goh: ‘This deal will fast track our entry to the oil and gas industry with minimum cost and risk.’
Betting on Kee and his team
A huge reason for Goh’s confidence in the oil and gas venture is down to Kee Yong Wah - the group CEO of NCER, along with his team.
A seasoned oil man with more than 30 years of experience, Kee formerly headed a listed oil and gas company in Hong Kong and also worked for Halliburton for 26 years.
Meanwhile, Lim Beng Hong, the CEO of NCES, has 27 years of oil and gas experience of which 24 years were in Halliburton and Weatherford, heading senior management in various countries.
He was previously the country manager in China for Greka Drilling.
The key management in both companies have extensive experience in the unconventional oil and gas industry including subsurface, geological, reservoir, production, project management, well drilling, completion and production optimisation techniques that can significantly enhance the productivity of unconventional oil and gas wells.
Says Kee: “In this region, drilling CBM is still relatively new compared to conventional oil and gas. A lot of operators are not successful in CBM as they are from conventional oil and gas background.
“We need the unconventional mind set and best practices to do this. We have the expertise, technology and the proven track record in CBM which we will deploy for this project.”
Kee adds that the CBM formation in Sumatra is attractive as the coal seams are thicker than the formation of China.
“In general, thicker coal means more gas and its easier to produce. Of course, there are other factors to consider. We have spent significant time studying the fields. Our team has also operated in South Sumatera hence Sumatera is not new to us,” says Kee.
Kee explains that he named his company ‘New Century’ as unconventional resources such as CBM is relatively new compared with conventional resources and is a huge untapped market.
“Look at the US. It will be a net exporter of oil over the next few years thanks to the discovery of unconventional resources. The sudden rise in the unconventional resource of shale was made successful by the smaller servicing companies at the beginning.
“The smaller players are a lot more flexible, innovative and are quick to respond to operational requirements which is important to unconventional industry,” he says.
Drilling in Q1 2015
So what is the plan moving forward?
Firstly, as the team has conducted seismic studies over the last one year and secured all required approvals, drilling can start almost immediately.
The team also has identified a few sweet spots.
Kee says the immediate plan will be to drill 3 wells in Muara Enim 2, and 3 wells in Rengat, starting from the first quarter of 2015.
“The PSC for Muara Enim is right smack in the middle of Australian based Santos and Darts Corp. Many wells have been drilled in the area for conventional oil, hence there are extensive data available to us. We are in an area where CBM wells have been drilled,” says Kee.
He adds that in the past, over 1,500 wells have been drilled in this basin for oil. The oil reservoir is a lot deeper than the targeted coal layers,” says Kee.
NGY drilled 3 wells in Muara Enim II previously with encouraging results.
“We are very confident to achieve even better success with the combination of our experience in CBM and local knowledge from NGY.
“If the wells we drill in the first quarter of 2015 are a success, it can be a pilot program within the next 6 to 12 months,” explains Kee.
On another important note, Kee points out that they can sell the gas at the range of US$7.50 to US$10 per mmbtu.
In addition, the PSC areas have a well established pipeline infrastructure that connects the fields to Jakarta and Singapore.
These pipes have capability of handling 1.2 billion cu ft of gas per day.
Meanwhile, the trading volume of Globaltec continued to hog the volume list over the week.
On Thursday, Globaltec closed at 10 sen, up 67% from a week ago where it had been hovering at the 6 sen level.
Goh is the biggest shareholder of the company with a 19.51% stake, while its deputy chairman Kong Kok Keong has a 13.11% stake.
Lembaga Tabung Angkatan Tentera is also a substantial shareholder with a 6.25% stake.
Globaltec’s share base is 5.27 billion shares and it has a market capitalisation of RM511.3mil.
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