Sumatec - Featured Companies | INSAGE

Sumatec
A rare opportunity to gain access to a proven
oil and gas producing field
IMPORTANT NOTICE
This presentation document is NOT a prospectus. The contents of this document are intended for general information purposes only for sophisticated investors (namely, persons falling within the exempted categories set out in Schedule 6 of
the Capital Markets and Services Act 2007). Persons into whose possession this document comes are solely responsible to duly ascertain, and ensure compliance with, all applicable laws, requirements and restrictions which may apply to
them. In particular, such persons must ensure that any action or conduct in relation to this document which is prohibited or restricted in any jurisdiction is not carried out in such jurisdiction. Nothing contained in this document constitutes an
offer for subscription or purchase, or an invitation to subscribe for or purchase, or the making available of any securities or products. Circulation or reproduction of this document (whether in whole or in part) is strictly prohibited. Some photos
used are for illustrative purpose only and does not represent our property or our operations.
Republic of Kazakhstan
Capital
Astana
Official languages
Kazakh (National)
Russian
Government
President
Area
- Total
51º10’N71º25’E
Kazakhstan: A Developed
2,724,900 km
1,052,085 sq mi
- Water (%)
1.7
Population
- 2013 estimate
16,967,000
- Density
5.94/km
15.39/sq mi
GDP (PPP)
- Total
2012 estimate
$231.787 billion
- Per capita
$13,892
GDP (nominal)
- Total
2012 estimate
$196.419 billion
- Per capita
$11,772
Currency
Tenge
Economy in Central Asia
Credit Ratings of Kazakhstan compared to
major oil producing countries:
Country
1
It was the first former Soviet
Republic nation to repay all
of its debt to the International
Monetary Fund (IMF), seven years
ahead of schedule.
2
It was also the first country in
the CIS to receive an investment
grade credit rating from major
international credit rating agencies
such as S&P, Fitch & Moody.
3
Energy is the leading economic
sector for Kazakhstan.
4
In 2012, the estimated GDP
totalled USD196.4 billion, whilst
the per capita income stood at
USD11,772.
5
In 2013, the country’s Human
Development Index was ranked
69th on a global scale.
Country
Sovereign
Rating
Country Credit
Rating
S&P
S&P
Fitch
Singapore
AAA
AAA
AAA
United Kingdom
AAA
AAA
AA+
United States
AA+
AA+
AAA
China
AA-
AA-
A+
Taiwan
AA-
AA-
A+
South Korea
AA-
A+
AA-
Malaysia
A
A-
A-
Thailand
A-
BBB+
A-
Mexico
A-
BBB
BBB+
Brazil
A-
BBB
BBB
Ireland
BBB+
BBB+
BBB+
Italy
BBB+
BBB+
BBB+
Kazakhstan
BBB+
BBB+
BBB
Russia
BBB+
BBB
BBB
India
BBB-
BBB-
BBB-
Philippines
BBB-
BBB-
BBB-
Turkey
BBB
BB+
BBB-
Indonesia
BB+
BB+
BBB-
Contents
21
Low Entry Cost
for Sumatec
10
22
A rare opportunity
to gain access to a
proven oil and gas
producing field
Sumatec ready
for immediate
production
11
26
The
Rakushechnoye
Oil Field has
exceptional large
onshore reserves
with high upsides
Fresh New Start
Cash Injection,
Zero Debt Position
13
28
New Sumatec
Management
20
Low Risk,
High Rewards
Prospective
Valuation
29
31
36
39
High crude oil
quality demands
premium pricing
Onshore oil field
Kazakhstan:
Largest oil and gas
reserve in Central
Asia & extensive
supporting
infrastructure
Risk Assessment
34
Attractive
Fiscal Regime
46
Oil and Gas Value Chains
47
FAQs
SUMATEC to Start
Producing Oil and Gas
The recent signing of the
Joint Investment Agreement
between Sumatec Resources
Berhad (Sumatec), Markmore
Energy (Labuan) Limited
(“MELL”) and CaspiOilGas
LLP (“COG”) for the development of the Rakushechnoye Oil
& Gas Field (Rakushechnoye
Oil Field) has given Sumatec
direct access to oil reserve
& gas resource of up to
331 million barrels of oil
equivalent (mmboe). This
marks the start of a direct
correlation between Sumatec’s
future profit and the world oil
price.
Astana, capital city of Kazakhstan
Key
Highlights
3
Large
onshore reserves
with high upsides
1
Rare
opportunity to
gain access to a proven
oil and gas producing field
2
CaspiOilGas LLP holds the Concession to the
Rakushechnoye Oil Field. By entering into the
Joint Investment Agreement, Sumatec gains
access to the share of profit from the production
and sale of oil from the Rakushechnoye
Field. The Field is currently under early
production and is ready for
immediateramp-up of
its production.
4
Sumatec’s
share of oil profit
up to USD21/bbl
@ oil price of
USD120/bbl
Total oil reserve and gas resource of
331 mil barrels of all equivalent (boe).
Most of proved reserves are within
the 9% of the total area of the field
(354.45sqkm) in the north. Reserves
are expected to increase upon
further drilling and testing
in the southern area.
Quick Profit
Returns
Onshore
oil field
Fast-track development,
quicker profit returns (projected
RM86 million FYE2013 and
RM69 million FYE2014)
Much lower capex and opex
compared to offshore oil fields.
Drilling cost: USD3-6m per well
compared to USD30m per well for
offshore Production facility:
USD20m compared to
USD300m – 1.5bn
for offshore
High crude
oil quality demands
premium pricing
The oil from Rakushechnoye is
of very high quality. Very light oil
(47 deg API) and low sulfur
content, comparable to
Tapis (44 deg API).
7
Kazakhstan:
Largest oil and gas
reserve in Central Asia
and extensive supporting
infrastructure
Fresh New Start
for Sumatec
All debts will be eliminated upon
completion of restructuring exercise.
New management and Board
of Directors to steer the company
into profitability and good
corporate governance.
Reserves have
been certified and
oil field is already in
production.
9
8
5
No
exploration risk
Key
Risks
6
10
Attractive profit
share for Sumatec
(on oil only)
Kazakhstan has 30 bn barrels of
proved reserves (11th largest in the world),
with oil production of 1.6 mmbbl/d.
Extensive network of pipelines exist in
the country to access export markets
(Europe, Russia, China)
The low capital and operating costs
as well as attractive fiscal regimes
allow Sumatec to enjoy profit share
(before tax) of up to USD21/bbl if
oil price remains at current
levels of USD120/bbl.
2
1
Volatility
in commodity
prices (oil)
Delays & Cost
Overuns
VALUATION
2013E
4
3
Policy change
in Kazakhstan
Drilling
and production
risks
2014E
Market Cap @ 15 x P/L
RM mil
1,290
1,039
EBITDA*
RM mil
1.307
107.915
NPAT**
RM mil
86.02
69.287
Number of ordinary shares
mil shares
3,063
3,063
EPS
RM
0.028
0.023
Share Price
10 x P/E
RM
0.28
0.23
15 x P/E
RM
0.42
0.34
20 x P/E
RM
0.56
0.45
Notes
* EBITDA for 2013E and 2014E is derived only from the Rakushechnoye Oil Field operations
** NPAT for 2013E includes one-off items such as waiver of debts and gain from disposal of PPE
Rare opportunity
to gain access to a
proven oil and
gas producing field
CaspiOilGas LLP (“COG”)
holds the Concession for
exploration & production
of hydrocarbons at the
Rakushechnoye Oil Field
in the oil-rich region of
Mangystau, Kazakhstan.
The term of the Concession is 25
years, from 25 August 2000 to
25 August 2025. The gas reserve
can last for more than 30 years.
COG has the right to apply for
extension of the Concession
period no later than 12 months
before the expiration date. The
total oil reserves and gas resource
as estimated by SRK Consulting
is 331 mil barrels of oil equivalent
(mmboe), which consists of 74.7
mmbbl of oil and 257 mmboe of
Proximity of Rakushechnoye to Export Infrastructure
06
natural gas.
Exploration in the Field has been
completed, and the Field is now
undergoing early production.
A total of 47 wells have been
drilled in the field and 3D
seismic was acquired in 2009.
Fast-track development program:
Production increase to 2,000
bpd within 12 months and reach
a 6-year plateau of 8,000-9,000
bpd by year 3. Close proximity to
export infrastructure; 120km to
Aktau Port and 60km to main oil
and gas pipelines.
Field Location
10
The Rakushechnoye Oil
Field has exceptional
large onshore reserves
with high upsides
The majority of the reserves are
located within the early production area of 33 sqkm (9% of
the total field area) located on
the northern part of the field,
which has been fully explored
and appraised. It is expected that
reserves will be substantially
increased when the southern part
is fully appraised.
The area awarded to Sumatec
under the JIA includes the whole
354.45 sqkm area of the field;
northern and southern areas.
SRK Consulting (Australasia) Pty Ltd (“SRK”) has
provided an assessment on Rakushechnoye Oil
Field reserves. The methodology used in their
assessments conforms to industry standards. SRK
has estimated that the Rakushechnoye Oil Field
has the following reserves:
Rakushechnoye Oil and Gas Reserves
(mmboe)
Oil
Gas
Total
Oil & Gas
Proved
5.2
17.2
22.4
Proved + Probable
32.8
89.3
122.1
Proved + Probable +
Possible
74.7
257.0
331.7
6000 SCF is equivalent to 1BOE
11
12
New Sumatec
Management
Photo used is for illustrative purpose only and does not represent our property of our operations.
In preparation for the new
business, Sumatec has
appointed a new Chief
Executive Officer, Chris
Dalton, who, prior to his
appointment, served 16
years in the Oil & Gas
Industry with Halliburton.
His operational experience
is global, having worked
in South America, North
13
America, Europe and Asia,
including Kazakhstan.
The new CEO is currently
revamping and enhancing
Sumatec’s capabilities to
undertake the oil and gas
production at the
Rakushechnoye Oil Field.
14
Directors’
Profiles
Sumatec has appointed new directors to lead the company
upon completion of its Regularisation Plan.
Tan Sri Abu Talib
Othman, aged 74
including Attorney-General of
Malaysia from 1980 to 1993.
He also sits on the board
of other public and private
companies including IGB
Corporation Berhad, Tan &
Tan Developments Bhd, MUI
Continental Insurance
Berhad, Alliance Unit Trust
Management Berhad, Alliance
Merchant Bank Berhad and
CYL Corporation Berhad.
Christopher
Layton Dalton, aged 38
Consulting Manager (20072011) and Drilling &
Completions Consulting
Manager (2004-2006). Prior
to this he held the position
of Business Sales Consulting
Manager in Houston, Texas
(2003-2004). He has held
positions in operational,
financial and technical
management throughout his
career. His technical
background is comprehensive.
Having worked at the rig site
and clients offices in the
geoscience and drilling
Malaysian, is proposed to be
appointed as an Independent
Director of Sumatec.
Tan Sri Abu Talib Othman
holds a Barrister at Law from
Lincoln’s Inn, United Kingdom.
He was a member of the
Judicial and Legal Service of
the Government of Malaysia
from 1962 to 1993 where he
served in various capacities
British, is the Chief Executive
Officer of Sumatec Resources
Berhad.
Prior to his appointment in
June 2012 to Sumatec
Resources Berhad, he served 16
years in the oil & gas industry
with Halliburton. While
working for Halliburton he
held senior management
positions in Kuala Lumpur,
Malaysia as the EurAsia & Asia
Pacific Halliburton
15
Dato’ Ahmad Johari bin
Abdul Razak, aged 58
firm from 1981 to 1994. He left
Shearn Delamore and became
Managing Director of Ancom
Berhad and later the Executive
Chairman of Ancom Berhad.
He rejoined Shearn Delamore
on 1st August 2007. He is
currently a partner of Shearn
Delamore & Co. in the
Corporate and Commercial
Department involved in all
the work in the Department
particular in relation to
advising on mergers and
acquisitions, joint ventures,
restructuring and listing of
public companies. In the
academic field, he is presently
an Adjunct Professor at
University of Technology Mara
Law Faculty. He is also currently
the non-executive Chairman of
Ancom Berhad and Daiman
Development Berhad and a
director of Deutsche Bank
(Malaysia) berhad, Hong Leong
Industries Berhad and British
American Tobacco (Malaysia)
Berhad. He is also a director
of several private companies
including Courts (Malaysia)
Sdn Bhd and Linfox Transport
(Malaysia) Sdn Bhd.
Datuk Mohd Nasir
Ahmad, aged 58
Division of Tenaga Nasional
Berhad (TNB) before moving
to several other corporations.
In January 1993 he joined
Malaysia Transformer
Manufacturing Sdn Bhd,
a subsidiary of TNB as the
Financial Controller, before
being made Chief Executive in
June 1994. In January 2000, he
joined Sharikat Permodalan
Kebangsaan Berhad as its
Chief Executive Officer. On 1
June 2001 he was appointed
Chief Executive Officer of
Perbadanan Usahawan
Nasional Berhad, a position he
held until his retirement on 1
June 2011. Currently he is an
Independent Non-Executive
Director and Chairman of Audit
Committee of Bina Darulaman
Berhad, Bank Perusahaan Kecil
& Sederhana Malaysia Berhad
(SME Bank) and Pelaburan
Mara Berhad, besides being on
the boards of UKM Holdings Sdn
Bhd and UPM Holdings Sdn
Bhd. He is also a Member of the
Board of Universiti
Kebangsaan Malaysia and the
Energy Commission. He is an
Adjunct Professor with
Universiti Putra Malaysia.
He was awarded the Panglima
Jasa Negara (P.J.N.) by Seri
Paduka Baginda Yang Di
Pertuan Agong on 4 Jun 2005.
Malaysian, is proposed to be
appointed as an Independent
Director of Sumatec.
Ahmad Johari Bin Abdul Razak
graduated with a Bachelor of
Laws degree from the University
of Kent, United Kingdom. He
was called to the Bar of England
and Wales at Lincoln’s Inn in
1976 and was admitted as an
advocate and solicitor of the
High Court of Malaya in 1977.
He practiced law with Messrs
Shearn Delamore & Co. from
1979 and was a partner of the
domains since he first joined
Sperry-Sun in 1996. His
operational experience is
global, having worked in
South America, North
America, Europe and Asia,
including Kazakhstan.
He holds a B.Sc in Geology
from University Wales and
M.Sc in Petroleum Geology
from University of Aberdeen.
Chris Dalton is proposed to
be appointed as an Executive
Director of Sumatec.
is proposed to be appointed
as an Independent Director of
Sumatec. Datuk Mohd Nasir
Ahmad is the President of the
Malaysian Institute of
Accountants for 2 years from
8 August 2011. He is a Fellow
of the Association of Chartered
Certified Accountants (United
Kingdom) and holds a Master
of Business Administration
(Finance) from Universiti
Kebangsaan Malaysia. He
commenced his career in 1979
as a Trainee Accountant rising
to Manager in various
departments of the Finance
16
Datuk Shireen Ann
Zaharah Muhiudeen,
aged 49
the CEO of AIG Investment
Corporation (Malaysia) for 12
years, and has over 25 years
experience in managing funds.
Datuk Shireen is the author of
the popular monthly column
“Governance Matters”, which
is published in the largest
English Malaysian daily. In
2007, she authored a self-help
financial handbook for young
adults: “Learn to Make Sense
of Your Money – What They
Don’t Tell You When You First
Start Work”.
Datuk Shireen is also a wellknown speaker at local and
international forums.
Datuk Shireen was named
one of the 25 most influential
women in Asia Pacific region
for Asset Management by Asian
Investor in June 2011.
Datuk Che Mokhtar
Che Ali, aged 58
Magistrate for the districts of
Kajang and Sepang from 1981
to 1982. Upon completing
his chambering and being
admitted as an Advocate
and Solicitor of High Court
of Malaya in 1983, he joined
the firm of Messrs. Mian
Lee & Partners (Advocates &
Solicitors) as a partner. He
left the firm in August 1985
and founded his own practice
under the name of Messrs.
Che Mokhtar & Co., Advocates
& Solicitors. Datuk Mokhtar
specialises in banking and
corporate conveyancing matters
including advising developers
and listed companies. He is
also well-versed with loans
documentations, restructuring
of loans and property
development. Datuk Mokhtar
is also a member of the
Disciplinary Committee Panel
of the Advocates and Solicitors’
Disciplinary Board.
Mohamad bin Ismail,
aged 62
Petronas Carigali for Baram
Delta Operations in Miri
(Sarawak) in 1984. He was
promoted in 1996 to become
the General Manager for
Petronas Indochina based
in Hanoi, Vietnam. In 2000,
he moved on to assume
the position as General
Manager for Exploration
and Production Division
of Greater Nile Petroleum
Operating Company (GNPOC),
a Joint Venture company
between Petronas, Talisman
and Sudan Petroleum
based in Sudan. He was
appointed Country Manager
for Africa, Middle East and
Asia for Petronas Carigali in
2003 before moving back to
Kuala Lumpur to take up the
position of Head of Production
Operations in Petronas E&P
Services Company in 2005.
In 2006, he took up the job
of Vice President (Business
Development) for Bergesen
Worldwide Offshore, a public
listed company based in Oslo
Norway before setting up his
own business in 2010. He has a
total of 23 years of experience
in the upstream business of
Exploration and Production in
the oil and gas industry.
James Chan Yok Peng,
aged 60
the Chartered Association
of Certified Accountants
(ACCA), United Kingdom.
He is a fellow member of
the Institute of Engineers,
Malaysia. He started his
career as a Project Engineer
with Jurong Engineering
Pte Ltd (Singapore) and
later joined FELDA as an
Assistant Mill Manager before
joining ESSO Production
Malaysia Incorporated in
1980. He was involved in the
construction of the RM650
million ESSO Terengganu
Crude Oil Terminal including
the supervision of pipe coating
and laying of 123miles of
24-inch submarine pipeline
from offshore Tapis Pumping
Platform to Kerteh, Terengganu
where the Crude Oil Terminal
is located. He later joined
Tenaga Waja Sdn Bhd, a
joint-venture of Wah Chang
International of Singapore
and Malaysian Bumiputra
businessman, before starting
his own business via Sumatec
Corporation Sdn Bhd in 1985.
Michael Lim Hee
Kiang, aged 64
he was admitted to the High
Court of Borneo, Kuching and
the High Court of Brunei. In
1975, Mr Michael Lim took
up a position as a lecturer in
the Law Faculty of University
Malaya, KL where he taught
company law and land law
for 3 years. In 1978, he joined
Messrs. Shearn Delamore &
Co and in 1979 was made
a partner of the firm. Since
then, he has worked with the
same firm until he retired on
1 January 2010, some 31 years
later, specialising in company
and securities law. Mr Michael
Lim is currently a consultant
with Messrs. Jeff Leong, Poon
& Wong, a leading law firm in
Malaysia and he also sits on
the Board of various public
listed companies, namely
DKSH Holdings Bhd, Selangor
Properties Bhd, Wawasan TKH
Holdings Bhd, Seloga Holdings
Bhd, Paragon Union Holdings
Bhd and Major Team Holdings
Bhd.
Wan Kamaruddin
bin Dato’ Biji Sura
@ Wan Abdullah,
aged 57
maintenance department.
In 1987, he joined Sarawak
Shell as a Rotating Equipment
Engineer and progressed
through a series of positions
including Project Engineer,
Senior Facilities Engineer
and Company Representative
on the M3 Integrated Deck
fabrication and the Beryl/
Helang development projects.
In 1996, he was seconded
to Shell Malaysia Trading
as the Project Manager for
the PETRONAS/Shell joint-
venture Multi-Product Pipeline
and Klang Valley Distribution
Project. He has twenty-over
years of experience in the
operation, maintenance and
construction of oil & gas
facilities.
Malaysian, is proposed to be
appointed as a Non-executive
Director of Sumatec. Datuk
Shireen is the founder and
managing director of CorstonSmith Asset Management which
emphasises on governance
and responsible investments
in the ASEAN region. Prior to
Corston-Smith, Shireen was
is proposed to be appointed
as an Independent Director of
Sumatec. Mohamad bin Ismail
holds a Bachelor of Science
Degree (Chemical Engineering)
from the University of Malaya.
He started his career as a
Reservoir Engineer (Exploration
and Production Department)
of Petronas in 1977 and was
appointed as Head of Drilling
and Production Operations
in 1980 before assuming
the position as the Regional
Operations Manager for
Malaysian, is proposed to be
appointed as an Independent
Director of Sumatec. Michael
Lim graduated from Victoria
University of Wellington, New
Zealand with a Bachelors of
Laws with honours in 1972 and
Master of Laws with Distinction
in 1973. He was subsequently
admitted to practise law in
the Supreme Court of New
Zealand in 1973, and upon
his return to Sarawak in 1974,
17
Malaysian, is proposed
to be appointed as an
Independent Director of
Sumatec. Datuk Mokhtar
holds degrees in Bachelor
of Arts (Political Science
and Public Administration)
and a Bachelor of Law, both
from Victoria University of
Wellington, New Zealand. He
served as a Magistrate in Kuala
Lumpur, Malaysia, in 1980 and
was appointed to the Board
on 27 August 2003 as the
Managing Director. He is a
member of the Remuneration
Committee. He holds a
Bachelor degree in Mechanical
Engineering (Honours) from
University of Malaya and is
registered as a professional
Mechanical Engineer with the
Board of Engineers, Malaysia.
He also holds a Certified
Accounting and Finance from
was appointed to the Board
on 27 August 2003 as an
Executive Vice Chairman.
He holds a Bachelor of
Science degree in Mechanical
Engineering from the Brighton
Polytechnic (UK). He started
his career with Tenaga Nasional
Berhad where he worked in
the operations and turbine
18
Risks are low
but rewards may
be high
The upstream oil and
gas industry is a high
risk high return game. In
the upstream oil and gas
industry, the highest risks
lie in the exploration
phase.
For Sumatec, the
Rakushechnoye Oil Field has
completed its exploration
program. The Rakushechnoye
Oil Field already has oil and
gas reserves and is already in
production. So for Sumatec
there is no more of the high
risk, they only enjoy the high
returns.
Risk and cost profile of the Rakushechnoye Oil Field
<1 yr
Bidding/
Acquisition
• Licensing Round
• Contract
• Negotiation
• Work Program
• Fiscal Regime
$5 - 10m
140
USD million
120
100
Risk
Profile
3 - 5 years
1 yr
2 - 3 years
Exploration
Appraisal
Early
Production
Commercial Scale
Production
• Geological Study
• Seismic Survey
• Exploration Wells
• Reservoir Mapping
• Delineation Wells
• Confirm Reserves
• Development Concepts
• Construction of
surface facilities
• Drilling of production wells
• Upgrade surface facilities
• Expanded drilling program
$30 - 40m
$15 - 20m
40
$30 - 40m
More than $50m
• High risk mainly on exploration
• Low certainty of oil/gas content
• If there is on oil and gas find, the
exploration costs will be totally lost
80
60
15 - 20 years
• No more exploration risk
• Oil reserves confirmed and certified
Cumulative
Cost Profile
20
Current status of
Rakushechnoye
20
Low Entry Cost
for Sumatec
Typical Cash Flow Breakdown for Onshore Oil Fields in Kazakhstan (per barrel basis)
Costs / Profit Breakdown (US$/bbl)
140.00
FCF (COG’s Share)
120.00
21.12
100.00
80.00
60.00
15.52
10.82
10.82
19.08
15.52
19.08
10.58
40.00
10.58
20.00
30.44
36.04
-
3.27
3.27
85.00
100.00
FCF (Sumatec’s Share)
21.12
19.08
10.58
44.84
Capex
Opex
3.27
MET, Export Duty, ERT &
Royalty
120
Transportation
Oil Price (US$/bbl)
Cash Flow Breakdown from Oil Sale (per barrel basis)
The entry cost for Sumatec
into the Rakushechnoye
Oil Field is very low,
considering the oil and gas
reserves volume.
Under the JIA, Sumatec will be
paying a non-refundable
consideration of USD95 million,
which is less than USD0.60 cents
per barrel of oil equivalent of oil
and gas reserves. However, the
returns that Sumatec is expected
to gain will be more than USD20
per barrel, depending on the
oil price.
21
No waiting
period: Sumatec
ready for
immediate
production
Sumatec is expected to
generate large profits from
oil and gas production from
the Rakushechnoye Oil
Field.
The oil production is targeted to
be increased to an average 2,000
bpd within the first 12 months
followed by a ramp-up to 6,000
bpd by the second year and 8,000
bpd by the third year. The plateau
oil production of more than 9,000
bpd will be reached on the fourth
year and will last for 6 – 7 years
before the production starts to
gradually decline. At the same
time, Sumatec is also expected
to produce natural gas (17 billion
cubic feet per year) from the
Rakushechnoye Oil Field starting
from the third year of operations.
22
CaspiOilGas, Markmore and
Sumatec are now in discussions
with several potential gas buyers,
including a gas-fired power plant
in Aktau (120km from the field).
The directors project that
Sumatec’s results for the financial
year ending 31 December 2013
and for year ending 31 December
2014 will be as follows:
Financial Projections of Sumatec
Field Production Profile (Rakushechnoye)
JIA profits
Profit before interest expenses, taxation, depreciation,
amortisation and one-off items
10,000
8,000
Depreciation and amortisation
1,307
118,096
107,915
(7,927)
0
(11,160)
- Waiver of debts
78,162
0
- Gain disposal of SISB Group
13,967
- Expenses relating to proposed restructuring plans
(4,250)
0
(942)
0
1,133
0
One-off items:
4,000
2,000
0
9,490
2014
RM’000
(872)
Interest expenses
6,000
2013
RM’000
- Impairment loss on SISB Group
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Ave. daily oil production
- Gain on disposal of property, plant and equipment
Profit before tax
88,505
(1,563)
(19,541)
Profit after tax from continuing operations
86,942
69,287
Loss after tax from discontinued operations
(1,814)
0
Taxation
88,828
Projected Oil Production from Rakushechnoye Oil Field. Gas Production is not included in the projection above.
Non-controlling interest
23
Net profit for the financial year
889
0
86,017
69,287
24
Fresh New Start
Cash Injection,
Zero Debt Position
Sumatec, via its
Regularisation Plan, will
raise at least RM452 million
in cash from new share
issuance and rights issue.
The cash will be used for its
obligations under the JIA as well
as for working capital.
Moreover Sumatec has also
recently announced its disposal
of the Semua International Sdn
Bhd and its subsidiaries (“Semua
Group”). With the disposal
Non Current Assets
Current Assets
Total Assets
Note :
Sumatec’s
debt will be
eliminated upon
completion of
the restructuring
exercise
Share capital
Share premium
Other reserve
Discount on shares
Accumulated losses
Non-controlling interests
Shareholders’ equity (NA)
Non Current Liabilities
Current Liabilities
Total Liabilities
Total Liabilities / Share Cap
of Semua Group, combined
with the completion of the
Regularisation Plan, all Sumatec
Resources Berhad’s debts will be
eliminated from its balance sheet,
enabling Sumatec to start fresh in
the upstream oil and gas business
without any legacy issues.
The board and management of
Sumatec strongly feel that the
Semua Group had to be disposed
so that its performance after the
proposed regularisation exercise
will not be negatively affected.
Before
Restructuring
RM’000
After
Restructuring
RM’000
75,027
0
33,479
(15,005)
(231,331)
70,520
(67,311)
428,786
98,944
59,438
(40,964)
(99,170)
0
447,033
307
618,479
618,786
307
2,124
2,430
8.2
0.0
1,214
550,261
551,475
296,027
154,436
449,463
Sumatec’s Proforma Balance Sheet
26
Prospective Valuation
Oil Field / Block
Vic/P57, Australia
2P Oil
2P Oil
Total 2P
Reserve Reserve Reserve
(mil bbl) (mil boe) (mil boe)
7.3
-
7.30
Buyer
Seller
Hibiscus
Petroleum
3D Oil
Effective
Price
Interest in Oil
Field/Block (US$mil) (US$boe)
56.6%
RAK Offshore, Oman
-
-
-
20.7%
RAK Onshore, Oman
-
-
-
35.0%
22.4%
Block 50, Oman
-
-
-
Sharjah Onshore, UAE
-
-
-
Norway PL 503
-
-
-
Norway PL 518
-
-
-
5.3%
Hibiscus
Petroleum
Rex Oli &
Gas
-
-
-
11.7%
-
-
-
3.5%
BM-C-39 & BM-C40
Offshore Brazil
Rakushechnoye,
Kazakhstan
-
316.7
285.0
32.80
89.30
55+5
4.6%
Norway PL 526
7.02
- Offshore oil field, hence high capex and opex
- Production has not commenced
- Hibiscus acquired the interest in the oil
blocks through its acquisition of 35% stake
in Lime Petroleum
35.0%
Norway PL 530
North Montney,
Canada
29.0
Remarks
n.a.
- The additional US$5m payable to Rex Oil &
Gas upon commercial discovery
- The gas reserves are shale gas, not
conventional gas
316.67
Petronas
Progress
Energy
Shareholders
285.00
Petronas
OGX
40.0%
850
7.46
- Offshore oil field, hence high capex and opex
122.10
Sumatec
Markmore /
CaspiOilGas
50%
95
1.56
- Onshore field, hence low capex and opex
- Production has already commenced
100.0%
5,200
16.42
- Shale gas capex and opex are substantially
higher than those of conventional gas
Comparison of recent purchase pricing by Malaysian oil and gas companies
VALUATION
2013E
2014E
Market Cap @ 15 x P/L
RM mil
1,290
1,039
EBITDA*
RM mil
1.307
107.915
NPAT**
RM mil
86.02
69.287
Number of ordinary shares
mil shares
3,063
3,063
EPS
RM
0.028
0.023
10 x P/E
RM
0.28
0.23
15 x P/E
RM
0.42
0.34
20 x P/E
RM
0.56
0.45
Share Price
Notes
* EBITDA for 2013E and 2014E is derived only from the Rakushechnoye Oil Field operations
** NPAT for 2013E includes one-off items such as waiver of debts and gain from disposal of PPE
Discount Rate
NPV
(USD mil)
NPV
(RM mil)
10%
209
648
NPV of Sumatec’s Free Cash Flow from the Rakushechnoye Oil Field based
on oil production only. The NPV will be substantially higher once the gas
resource has been commercialised.
Photo used is for illustrative purpose only and does not represent our property or our operations.
28
Light sweet crude oils have a
number of analogous marker
crudes, and thus it is relatively
easy to assess their likely market
price by comparing against oil
with similar gravity and sulfur
content. Light oils typically have
densities between 35 and 40 API.
Sweet oils typically have sulfur
content at or below 0.5 wt%
sulfur. As the oil from the Field is
exported solely to Europe, Brent
is used as the marker crude for
the pricing.
Oil Quality and Price Correlation
Density
(deg
API)
Sulfur
Content
(%)
Price
USD/
bbl
Rakushech.
47.0
0.1
= Brent
Price
Tapis
44.6
0.028
108
Brent
39.0
0.3
103
WTI
39.0
0.34
95
Oman
33.0
1.11
100
Arab Light
32.5
1.8
102
Dubai
Fateh
31.0
1.7
100
Arab Heavy
27.0
2.8
99
Maya
(Mexico)
22.1
3.5
98
Crude Oil
Higher price
Very light oil (47 degrees
API) and low sulfur content
(less than 0.1%wt) demands
premium pricing.
Lighter crude oil, lower sulphur content.
High quality
crude oil commands
premium pricing
Source: Bloomberg, May 2013
29
30
Onshore oil field
Benefits: enjoy lower
capex and opex
compared
to offshore
operations
The capital and operating
costs of an oil field depends
highly on the location
(offshore or onshore), the
water depth (if located
offshore), the terrain and
depth of the reservoir.
Not only is the Rakushechnoye
Oil Field located onshore, but
most of the area is flat desert
terrain. The reservoirs are of
31
medium depths (2000m for the
Jurassic formation and 3000m
for the Triassic formation).
The typical cost of drilling a
well in Rakushechnoye Oil Field
is USD3m – 6m per well
depending on the target depth.
Drilling the same well offshore
will cost a minimum of USD15m
while in deep waters not less
than USD35m.
offshore site would require that
the living quarter, processing
facility, oil storage, water storage,
power generation to be installed
on a platform or a floating
production, storage and
offloading facility (FPSO). The
cost of a platform/FPSO due to
its complicated engineering and
design as well as additional
safety features would cost
between USD300m to USD2.0bn
depending on the water depth
and type of installation. An
onshore production system
would typically cost USD15m
to USD50m depending on the
terrain and surface features
(swamp, rivers, mountains, etc).
Onshore
Offshore
Rakushechnoye
Drilling Cost
USD3 - 10m per well
USD15 - 80m per well
USD 3 - 6m per well
Production
Facility
USD15 - 50m
(no platform required)
USD300 - 1,500m
(platform / FPSO required)
USD20m
Opex
USD6 - 10/bbl
More than USD20/bbl
USD9/bbl
Lower Cost
• Flat terrain
• Shallow reservoir
• Close to infrastructure
• Shallow water
• Calm waters
• Shallow reservoir
• Flat seabed
• Low pressure &
temperature reservoir
• Flat terrain
• Medium depth reservoir
(2000-3000m)
• Close to oil and gas
infrastructure
Higher Cost
• Difficult terrain and
geological features
(e.g. mountainous,
swamp)
• Deep reservoir
• Extreme climate
conditions
• Deep water
• Rough waters
• Rough seabed
• Deep reservoir
• High pressure and
temperature reservoir
• Extreme climate
conditions
Cost
Determining
Factor
Comparison between Offshore and Onshore Oil Operations
The production facility for an
32
Attractive
Fiscal Regime
The Rakushechnoye Oil
Field is owned by
CaspiOilGas LLP (COG)
under a Concession
(Subsurface Use
Agreement), which
operates under the EPT
Model
The oil and gas revenue is
subject to:
• Export Duty;
• Mineral Extraction Tax
(“MET”); and
• Export Rent Tax (“ERT”).
Under a Concession, the oil
and gas reserve and
production facilities belong to
the Concessionaire, whereas
in a Production Sharing
Contract (“PSC”) /Risk
Service or Sharing Contract
(“RSC”) /Technical Assistance
Contract (“TAC”), the reserve
and the production facilities
belong to the State or National
Oil Company.
Margin after
Government Take,
Capex and Opex
(oil price =
USD100/bbl)
Ownership of
Oil & Gas Reserves
Treatment of
Capital Cost
Income
Source
Total
Government
Take from
Revenue
Concession
(Sumatec /
Rakushechnoye)
Concessionaire
(reserves can be
booked by
Concessionaire)
Capitalised
Sale of
Oil & Gas
30 - 40%
USD35/bbl
Production
Sharing Contract
(PSC)
State / National
Oil Company
Expensed
Payment
in kind
(oil)/cash
from the
State
Up to 80%
USD15-20/bbl
Up to 85%
USD10/bbl
Up to 85%
USD10-12/bbl
Contract Type
Technical
Assitance
Contract (TAC)
State / National
Oil Company
Expensed
Payment
in kind
(oil)/cash
from the
State
Risk Service
Contract (RSC)
State / National
Oil Company
Expensed
Payment
in cash from
the State
Comparison between Different
Types of Contracts
33
34
Kazakhstan:
Largest oil and gas
reserve in Central Asia
& extensive supporting
infrastructure
Country Snapshot
• Proved oil reserve = 30bn barrels (5 x Malaysia’s oil reserve)
• Oil production = 1.6 million bopd (expected to double by 2020)
• Existing and continually developing oil and gas infrastructure
• Stable political regime
Kazakhstan has the second
largest oil reserve and oil
production among the former
Soviet republics after Russia. At
30bn barrels of proved reserve
Kazakhstan holds 3% of the
world’s oil, and is expected
to increase further following
increasing exploration activity
in the country especially in the
Caspian Sea.
The oil production today averages
about 1.6 mil barrels per day
represents an increase of 250% of
its production in year 2000. The
production is expected to double
by year 2020 following the full
production of the giant Kashagan
and Karachaganak fields. The
relatively low domestic oil
consumption of on 240 thousand
bbls/day allows the country to
export 85% of its oil production.
36
Hydrocarbon
Legislative
Framework
The legislative and
regulatory framework is
developed and overseen
by the Ministry of Oil and
Gas (previously known as
the Ministry of Energy and
Mineral Resources).
The national oil and gas
company, Kazmunaygaz
(KMG), was established in
2002 to represent the state’s
interest in Kazakhstan’s oil
and gas industry. The Law on
Subsurface and Subsurface
Use is the governing law for
the oil and gas exploration
and production. Two contract
models are in use in Kazakhstan
today; the Excess Profit Tax
(EPT) Model and the Production
Sharing Agreement (PSA). In
early 2008 the government has
stopped awarding new PSAs,
and joint-venture EPT Model
has taken its place. KMG has
the first right of refusal for
any exploration blocks, after
which LMG may negotiate with
potential partners on the joint
venture stake and terms.
• Caspian Pipeline Consortium (CPC)
Length: 940 miles (runs from the Tengiz oil field to the
Russian Black Sea port of
Novorossiysk)
Capacity: Reported to
transport an average of 743
thousand bbl/day in 2009
• Kazakhstan-China Pipeline
Length: 1,384 miles (runs from Atyrau Port in
Kazakhstan to Alashankou in China’s northewest
Xinjiang region)
Capacity: 200 thousand bbl/
day (planning for expansion to 400 thousand bbl/day by 2013)
The Kazakhstani economy
is one of the fastest and
most dynamically
developing economies in
the Commonwealth
Independent
States (“CIS”).
• Atyrau-Samara Pipeline
Northbound link to Russia’s Transneft distribution system
mainly by large foreign
investments in the oil and gas
industry, which has spun off
growth in other industries.
The country has considerable
mineral wealth and vast areas
of arable land. Kazakhstan
inherited significant amount
of infrastructure from the
Soviet and has a relatively
well- educated population. The
economy is heavily dependent
on a few commodities and faces
the challenge of diversification.
The Gross domestic product
(“GDP”) of Kazakhstan has been
growing constantly between
2003 and 2008. The largest
input to the GDP comes from
the energy sector. Oil extraction
and oil-related construction,
transportation, and processing
to Baku in Azerbaijan, from which Kazakh oil is loaded into the BTC pipeline. The BTC pipeline has a capacity of 1 million bbl/day, of which 500 thousand bbl/day is
contracted to Kazakhstan.
Economy
The growth has been driven
Infrastructure
Kazakhstan’s oil and gas
fields are well connected
to regional and
international markets via
a network of trans-regional
pipelines, with a capacity
to transport more than 2.5
mmbbls/day of oil.
The 4 main trans-regional
oil pipelines are:
Capacity: 600 thousand
bbl/day
• Baku-Tbilisi-Ceyhan Pipeline (BTC)
Kazakhstan ships oil by tanker to via the Caspian Sea
accounted for 22.3 percent
of GDP in 2009, and fuel
and oil products made
up 68 percent of exports.
Ferrous and non-ferrous
metals and grains are the
only other significant export
products. Its major trading
partners in 2009 were China,
Russia, France, Germany,
Ukraine, Romania and Italy.
Considering the continued
high global oil prices and
the significant level of both
state and private investment
in 2008, it is anticipated
that GDP will increase to
more than USD200 billion
in 2015 giving a per capita
GDP of USD15 thousand,
which will enable the
implementation of large
social projects and socioeconomic programs.
Development of the oil
sector will continue to
benefit the service sectors
such as communications
and retail trade.
Kazakhstan is ranked 11th in terms of
largest proved oil reserves in the world
37
38
Risk Assessment
Sumatec has taken care to identify and
address the possible event of these risk
factors, as well as the upside and downside
effects on its operations and financial
position. In mitigating these risk factors,
Sumatec has conducted the due diligence
work necessary to account for the possible
effects across the lifecycle of its future
operations in the Rakushechnoye Oil
Field, to ensure that the returns of its
operations substantially outweigh the
effects of these risks, by leveraging on the
technical expertise it possesses.
39
Unanticipated
increased costs for
planned capital
expenditure
The oil and gas industry is very
capital-intensive and requires
technical expertise to operate.
Due to the restrictions required
in the JIA, investing in an
operation outside Malaysia
means relying on third party to
execute and supply most of the
daily operation.
Competitive pressures on the oil
field suppliers and contractors
may push the service cost
upwards and subsequently
Nevertheless, due to the
onshore nature of the field, the
Group does not expect as high
of an impact as compared to
offshore oil and gas fields.
translates into higher than
planned budget for the Group.
Conditions such as the
substantial increase in global
price of commodities such as
steel will also affect the cost
of machineries and equipment
that are required for carrying
out the hydrocarbon extraction,
production and development
operations of the concession.
In short, competitiveness in
the oil and gas industry in
Kazakhstan and global economic
condition may subject the Group
to unpredictable costs accretion
of the Company’s planned
expenditure.
Additionally, the Group will
tender all of the service work
out to local and international
qualified contractors to ensure
that the highest service quality
is contracted for the best price.
To ensure that the capital
expenditure is managed
through this tender process,
the Group plans to tender out
the workovers, sidetracks and
infill wells on a turnkey basis
with contracts lasting up to 3
years, which are extendable at
current rates, or will be
re-tendered if the market price
is seen to be dropping.
Fluctuation of
crude oil price
Since February 2011, the price
of crude oil has broken the
USD100 per barrel mark and
the price has been standing
comfortably above USD100
per barrel ever since. As of
April 2013, the crude oil price
is recorded at USD102.64
per barrel. Higher crude oil
price prove to be a boon to the
Group especially when there
are uncertainties caused by
political instability among the
oil producing country which
bolsters the high price of crude
oil. The current high price
is due to demand exceeding
supply.
However, Sumatec is also
exposed to the stability of
crude oil price once the
political instability has settled
down. Lower crude oil price
will reflect a slower rebound
of the Group’s financial profile
from the current state. Within
this period of time, lower
crude oil price may reduce
the Group’s viability to invest
in the gas production in the
Rakushechnoye Oil Field.
Nevertheless, in order to
mitigate these risks moving
forward, the Group may
utilise derivative financial
instruments such as
commodity forwards and
futures contracts, among
others, in the ordinary course
of business to hedge against
the risks of price fluctuations
of sales.
Reserves and
Production
The estimates of oil reserves
provided in the technical
report by SRK Consulting
conform to the definitions
and guidelines of the
2007 Petroleum Resources
Management System approved
by the Society of Petroleum
Engineers, American
Association of Petroleum
Geologists, World Petroleum
Council and the Society of
Petroleum Evaluation Engineers
(SPE/AAPG/WPC/SPEE).
The Canadian Oil and Gas
Evaluation Handbook (2007)
Volumes 1-3, by the SPEE
Calgary Chapter elaborates
the Petroleum Resources
Management System guidelines.
There are numerous
uncertainties inherent in
estimating the quantity and
the quality of reserves and
in projecting future rates of
production, including many
factors beyond Sumatec’s
control.
Estimating the amount and
quality of crude oil and gas
reserves is a subjective process
and estimates made by different
40
pressure or irregularities
in geological formations,
equipment failures or
accidents, premature declines
in reservoirs, blowouts,
uncontrollable flows of
crude oil, natural gas or
well fluids, pollution and
other environmental risks,
adverse weather conditions,
compliance with governmental
requirements and shortages
or delays in the availability of
drilling rigs and the delivery of
equipment.
experts often vary significantly.
In addition, results of drilling,
testing and production
subsequent to the date of an
estimate may result in revisions
to that estimate.
Accordingly, reserves estimates
may be different from the
quantity or quality of crude
oil and gas that is ultimately
recovered and, consequently,
the revenue derived there from
could be less or more than
that currently expected. The
significance of such estimates
depends heavily on the
accuracy of the assumptions
on which they are based, the
quality of the information
available and the ability to
verify such information against
industry standards.
Although there is no recourse
under the terms of the JIA
should the amount of oil and
gas ultimately recovered differs
significantly from the estimate
reserves by experts, it should be
noted that the Rakushechnoye
Oil Field is already a producing
oil and gas field. The geological
and reservoir understanding
of the sub surface is well
developed as stated in
the expert report by SRK
Consulting. The economical
and operational risks are
therefore significantly reduced
compared to a prospect that has
no wells drilled on it, or little
41
or no production history.
In addition, the certified
reserves cover only 9% of
the total area under the
Rakushechnoye Oil Field. The
southern part of the oil field
is not yet included in these
reserves and as such represents
potential upside to Sumatec.
Drilling and
production risks
The Group’s future success is
dependent on the consistent
ability to develop crude oil
reserves in a timely and
cost-effective manner.
However, Sumatec may need
to curtail, delay or cancel
any drilling operations due
to variety of factors including
unexpected drilling conditions,
The Group’s production
operations are also subject to
risks associated with natural
catastrophe, fire, explosion,
blowouts, encountering
formations with abnormal
pressure, the level of water
cut, cratering and crude oil
spills, each of which could
result in substantial damage
to crude oil wells, production
facilities, other property and
environment or in personal
injury.
Any of these risks could
result in loss of crude oil and
could lead to environmental
pollution and other damages
to the Group’s properties
or surrounding areas and
increased costs.
In mitigating these risks,
COG already has 100
experienced personnel
working on site. The Group
is also planning to engage
world class international oil
and gas service providers and
consultants for the preparation
of the field, geological and
geographical studies as well
as project management tasks
in order to ensure that these
operational risks and their
possible impact can be reduced.
Cost of compliance
with environmental
regulations
On 19 June 2009, Kazakhstan
has agreed to cap emission in
accordance to Kyoto Protocol, a
protocol to the United Nations
Framework Convention on
Climate Change, aimed at
fighting global warming.
Compliance with
environmental regulations
may make it necessary for the
Group to undertake measures
in connection with storage,
handling, transportation,
treatment or disposal of
hazardous materials and
waste and the remediation of
contamination, where the costs
may be substantial.
There is likely increase cost of
electricity and transportation,
restrict emission levels,
additional cost imposed
for emissions in excess of
permitted levels and increase
costs for monitoring, reporting
and financial accounting.
Stricter environmental
requirements such as governing
discharges to air and water,
the handling and disposal of
solid and hazardous wastes,
land use and reclamation and
remediation of contamination
may be adopted in near future,
and that the environmental
authorities may move to
a stricter interpretation of
existing legislation. The
cost associated with such
compliance.
The Group’s environmental
liabilities will stem from
gas flaring, the disposal of
waste water and oil spillage.
The costs of environmental
compliance in the future
and potential liability due to
any environmental damage
that may be caused by the
Group could be material and
even include the potential
suspension or revocation of the
Group’s subsoil license.
To mitigate this risk, the
Group plans to employ a
local legal counsel who will
advise on all regulatory and
environmental requirements
and prepare all the required
license/approval submissions.
In addition, he Group, together
with COG, plan to maintain
constant communication with
the relevant authorities to
keep abreast of any potential
problems.
Risk of adverse
sovereign action
by the Kazakhstan
Government
The oil and gas industry
is central to Kazakhstan’s
economy and its future
prospects for development, and
thus can be expected to be the
focus of continuing attention
and debate.
In similar circumstances in
other developing countries,
petroleum countries,
petroleum companies may
face the risks of expropriation
or renationalisation, breach
or abrogation of project
agreements, application to
such companies of laws and
regulations from which they
are intended to be exempt,
denials of required permits
and approvals, increase in
royalty rates and taxes that
were intended to be stable,
application of exchange or
capital controls, and other
risks.
This may impact the Group
negatively in terms of business,
prospects, financial conditions
and results of operations.
The laws and regulations of
Kazakhstan are developing
and uncertain. Any changes in
laws, regulations and permit
requirements to which the
Group is subject to could cause
substantial expenditure or
subject the Group to material
liabilities or other sanctions.
There has also been a history of
changes in the Kazakhstan tax
legislation.
The tax structure is modified
and adapted according to
the state of the economic
condition. Therefore, the Group
is exposed to the uncertainty
42
of tax legislation that might be
imposed on its operations in
the future.
In view of sovereign, political
and other country-related
risks, the Group may face
in the course of operating
in Kazakhstan, the Group
intends to acquire political
risk insurance coverage from
international insurers.
which may adversely impact
the operations and financial
performance of the Sumatec
Group.
Although, the Group plans
to set up a comprehensive
compliance framework and
engage expert advisers to
ensure the compliance with
laws and regulations, there
can be no assurance that this
risk will not have any adverse
impact on the Group.
Failure to
comply with the
Risk of fluctuation
Kazakhstan’s laws in foreign exchange
in relation to the oil rates
and gas industry
The operations of Sumatec
relating to the production of oil
and gas at the Rakushechnoye
Oil Field are governed by the
relevant laws and regulations
of Kazakhstan.
Any failure to comply with
these laws and regulations
may result in inter-alia, fines
or other punitive actions
43
Sumatec’s operations, which
involve entering into oil
and gas contracts as well
as repatriation of income
denominated in foreign
currencies may be subjected
to the risk of fluctuations in
foreign exchange rates.
These fluctuations in the
foreign exchange rates could
bring an adverse impact to the
Group’s financial performance
as the local currency value of
receivables may be eroded and
payables may increase as a
result of such fluctuations.
To mitigate against the impact
of foreign exchange rates
risk, Sumatec will engage a
financial consultant to advise
on the potential impact of the
risk, and if required, devise a
currency hedging plan for the
Company.
Despite these mitigating factors,
there can be no assurance that
the Group’s financial results
will not be materially impacted
in the event of an unfavourable
economic event such as
financial crisis.
Oil and Gas
Value Chains:
From Wellhead to
Gasoline Pump
Rakushechnoye Oil and Gas
(mmboe)
Oil
Gas
Total
Oil & Gas
Proved
5.2
17.2
22.4
Proved + Probable
32.8
89.3
122.1
Proved + Probable +
Possible
74.7
257.0
331.7
Natural Gas
6000 SCF is equivalent to 1BOE
Production
Production
Commercial
TOTAL
PETROLEUM
INITIALLY
IN-PLACE
Discovered
Petroleum
Initially
In-place
1P
PRODUCTION
On Production
Reserves
Under
Development
2P
PV. + PROB
PV.
3P
PV.
+
PROB + POSS.
Contingent Resources (CR)
1C
2C
Sub
Best
Commercial Low Estimates Estimates
3C
High
Estimates
Petronas Status
Categories
Undiscovered
Petroleum
Initially In-place
Petronas Petroleum Resources Classifications
1U
2U
Best
Low Estimates Estimates
3U
High
Estimates
Planned for
Development
Development
Pending
Category #1 - #2
Development on Hold
Category #3 - #6
Development
Not Viable
Category #7 - #8
Prospect
Viable + Committed
Viable + Non-committed
Non-viable
Lead
Play
SPE
Upstream
E&P
Natural Gas Value Chain
Project
Maturity
Crude Oil Value Chain
Higher
Risk
UNRECOVERABLE
RANGE OF UNCERTAINTY
Marketing
Transportation
Refining
Midstream
Marketing
Downstream
R&M
Lower
Risk
UNRECOVERABLE
Prospective Resources (PR)
Transportation
Crude Oil
Exploration
Project Status
Processing
PETRONAS
Exploration
Production
Processing
Transportation
Marketing
Using technology to
find new gas resources
Bringing gas
to the surface
Treating gas to
be sent to markets
Moving gas with
pipelines
Distributing and
selling natural gas
Exploration
Production
Transportation
Refining
Marketing
Converting crude oil
into finished products
Distributing and
selling refined products
Using technology to
find new oil resources
Sumatec’s position in the value chain
Bringing oil to the
Moving oil to refineries
surface using natural and consumers with tankers,
and artificial methods
trucks and pipelines
46
Q
A
FAQs
Q
A
What is Sumatec Resources Berhad’s Vision & Mission, now that it is focused on the upstream oil
and gas business?
Vision
Sumatec Resources Berhad will become the leading Malaysian based Independent Oil & Gas Operator
focused on developing proven oil and gas assets.
Mission
Through innovation, efficiency and safety we will improve the performance of the company’s oil and
gas assets.
The upstream oil and gas business is a high risk business, what will Sumatec’s core values be to ensure
that company manages these risks?
Sumatec’s Executive Management has put in place company core values that all employees will follow
under our code of business conduct policy.
The company values are as follows:
1. Sumatec will produce oil & gas in a lawful, economically, socially and environmentally responsible
way to benefit all of our stakeholders, including host country governments and local communities.
2. Sumatec will apply advanced oilfield practices and international standards to continuously improve
our operational performance and comply with our commercial, ethical and corporate responsibilities.
3. Sumatec will ensure a safe working environment through implementing safety procedures for all
personnel and assets, during all operations; whether that be at the field, office or transit.
Q
A
Q
A
47
How will Sumatec grow its business and what are the growth areas?
Sumatec Resources Berhad will focus on developing oil and gas assets. Our target assets will be mainly
onshore, as this reduces the capital cost of infrastructure required. We will only select the hydrocarbon
assets that provide maximum return for shareholder investment through short term production
enhancement and long term sustainable production.
Why has only 9% of the concession area in the northern part been explored?
In fact the whole concession area has 47 wells drilled, spread over the northern to southern part of the
concession. The pilot production permit was granted for a small area in the northern part to prove that
the asset is commercial, where as only initial well test data was attained from wells outside of that area.
The test data from the wells in the south showed great potential, indicating that there are additional
reserves in the south which can be added to the reserves report once the field is in the commercial
phase.
48
Q
A
Q
A
Q
A
Q
A
Q
A
49
Why has only 9% of the concession area in the northern part been explored?
In fact the whole concession area has 47 wells drilled, spread over the northern to southern part of the
concession. The pilot production permit was granted for a small area in the northern part to prove that
the asset is commercial, where as only initial well test data was attained from wells outside of that area.
The test data from the wells in the south showed great potential, indicating that there are additional
reserves in the south which can be added to the reserves report once the field is in the commercial
phase.
What type of hydrocarbons are present in the concession?
In the Rakuschechnoye Oil Field there is gas, wet gas, under saturated oil and condensate hydrocarbon
resources. The oil is of very high quality, 47.6 api, with no H2S content.
Q
A
Q
A
What is the plan for the gas?
There are three types of gas; Dry Gas, Wet Gas and Associated Gas. The associated gas is a product of
producing the condensate oil. The associated gas will be re-injected into the reservoir to maintain a
pressure drive. The Dry and Wet Gas will be produced once a gas off take agreement is in place. In the
long term the associated gas will be re-extracted for sale once the condensate oil is produced.
When will Sumatec take over operations of the field?
Sumatec will take over operations of the field once the regularization plan is complete. Sumatec in
the mean time is preparing for operations by setting up an entity in Kazakhstan and hiring its key
personnel to be in place before the hand over.
What is the history of Rakuschechnoye Oil Field?
The Rakuschechnoye Oil Field was discovered in 1973. It has 47 wells drilled in the concession, which
covers 354.45km2. It was first put on pilot production in 1978 through to 1987, when it was shut down
at the end of the Soviet union. The Field was bought in August 2000 by CaspiOilGas LLP via a 100%
ownership concession agreement which expires in August 2025. In 2007 CaspiOilGas put the field back
on production.
Where is the field located?
The field is located 105km south of the capital city Aktau of the Mangistau Oblast. It positioned on the
coast line of the Caspian Sea.
Where will the oil be sold?
The oil will be sold to European oil traders and transported to Baku from the main port near Aktau.
50
Bayterek is a monument and
observation tower in Astana,
Kazakhstan. A tourist attraction
popular with foreign visitors
and native Kazakhs alike, it is
emblematic of the city, which
became capital of the country
in 1997.
Adviser
For enquiries, contact us at
[email protected]
603 - 2283 1368