KUALA LUMPUR: Reach Energy Bhd has completed its proposed debt settlement amounting to RM206.51 million.
The company said the debt settlement entailed the offset of RM206.51 million debt or 76 per cent from a total of RM279.36 million owing to Super Racer Ltd (SRL) via the issuance of 1.03 billion settlement shares to SRL.
The completion of the settlement also marked SRL's entry into a shareholder loan facility agreement to make available a shareholder loan facility of up to US$5.0 million or RM22.87 million to the company.
"About RM20.37 million or 89 per cent of the total proceeds from the shareholder loan facility will be used for working capital which encompasses the day-to-day administrative, operational and financing expenditure as well as general corporate purposes," it said.
Chief executive officer Tan Siew Chaing said the completion marked a new beginning for Reach Energy.
"SRL shares our vision, and with the available funding, we will not only be ensured of sustainable operations but we will also be able to pursue opportunities and plans that will accelerate our growth," said Tan.
According to Tan, Reach Energy's first course of action would be to increase its productivity and efficiency, especially production volume.
To achieve this, it said the drilling of more development wells was high on the agenda in the near term.
"We also intend to install and replace electrical submersible pumps while simultaneously continuing gas injection measures which are crucial to improve reservoir pressure and ultimately increase our production volume," she said.
Notwithstanding the promising outlook of the oil and gas industry, Reach Energy has been adversely impacted by the price differential between its 60 per cent-owned subsidiary Emir-Oil LLP (Emir-Oil) export sale price and the global benchmark Brent oil price caused by the sanctions on Russia.
Further, the Kazakhstan government imposes a concession tax on exported oil based on the global benchmark Brent oil price instead of the Emir-Oil export sale price.
This has resulted in a significantly higher tax price on the export sale of oil than Emir-Oil's export sale price which has depressed the export sales margins.
"Another way for us to improve our profitability is to address the price differential issue we have been encountering.
"On this note, we intend to explore new export routes to enable Emir-Oil to export its oil at a price close to the international oil price.
"We are happy to note that we have identified several alternative export routes and we are in the midst of negotiating the terms with several potential buyers," Tan added.