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CATALIST-LISTED OEL (Holdings) on Wednesday announced that it has entered into a conditional sale-and-purchase agreement to acquire 51 per cent of the entire issued share capital of Allied Resources, an investment holding company with interest in the oil and gas business.
The consideration of the proposed acquisition is approximately S$18.2 million, subject to adjustments made pursuant to the sales-and-purchase agreement, and will be satisfied by S$11.9 million in cash and by way of issue of new ordinary shares in the capital of the company at S$0.075 per share, amounting to an aggregate value of S$6.3 million.
The payment of the consideration will be carried out in tranches and upon fulfilment of certain conditions such as renewal of the joint venture agreement and achievement of oil production targets.
The group intends to finance the proposed acquisition using a combination of internal funds, bank borrowings and/or fund-raising in the capital markets.
At its extraordinary general meeting on June 23, the company had obtained the approval of shareholders to diversify the group's business scope to include mineral, oil and gas businesses.
Allied Resources holds a 50 per cent interest in Qian An, a joint venture company that is principally engaged in the exploitation, development and production of oil and natural gas from two oilfields in Jilin, China. The remaining 50 per cent interest in Qian An is held by PetroChina Company.
The vendor of the sale shares has represented that the oilfields operated by Qian An cover two formations, namely Qianshen-12 and Qian-209, encompassing a total area of approximately 15 sq km and have over 100 producing and suspended well and related facilities in the Qian An, Jilin area of China. The oilfields have a current combined production of approximately 313 barrels of oil per day.
The relevant exploration and exploitation rights over the oilfields belong to PetroChina, which holds 50 per cent interests of Qian An.
The duration of the joint venture agreement with PetroChina over the oilfields is from Nov 1, 2002, to Dec 19, 2016.
Since the disposal of its distribution business and equity stake in a biofuel business, OEL has been exploring business opportunities in the mining and oil & gas industry to generate new revenue and income streams, as well as to diversify from its current businesses in shipyard operations and property management.
Completion of the proposed acquisition will be within 14 days of the satisfaction of the conditions precedent or such other date as the parties may agree in writing, in any event not later than Oct 31, 2015.
As at 11.08am on Wednesday, OEL's counter was trading up 4.76 per cent at S$0.044.