Interra Resources to raise US$3.47m from private placement

Singapore

A BUSINESS partner of Interra Resources is buying a 13.6 per cent stake in the petroleum oil and gas production company for US$3.47 million.

The partner, China ZhenHua Oil Co, is subscribing to 79.5 million new shares through a wholly-owned unit at 5.9 Singapore cents apiece, Interra told the Singapore Exchange in a filing on Friday.

It will also get to nominate a director to Interra's board as its second-largest shareholder.

China ZhenHua Oil, which has a joint venture with Interra in Myanmar, is a Chinese state-owned enterprise that specialises in oil and gas exploration and production, oil industry investment, international oil trading, refining and storage and transportation of crude oil and oil products.

Other than Myanmar, the firm operates oil fields in Iraq, Egypt, Kazakhstan and Pakistan.

The subscription price represents a 1.667 per cent discount to Interra's volume-weighted average price of six Singapore cents on Thursday, before the announcement was made.

The placement will raise net proceeds of around US$3.47 million, which will be used for working capital purposes.

Interra said that the placement is aimed at strengthening its strategic partnership with China ZhenHua Oil, which started in 2011 when the latter acquired a 40 per cent interest in Goldpetrol Joint Operating Company Inc (GJOC) - the operator of Interra's Chauk and Yenangyaung fields in Myanmar. The remaining 60 per cent is held by Interra.

"The placement also validates the confidence that both partners have in the development of GJOC's fields in Myanmar," said Interra, adding that the deepening relationship will allow it to leverage on China ZhenHua Oil's strengths and resources, as well as explore further opportunities for cooperation.

The deal is subject to a number of conditions, including the approval of Interra's board and shareholders.

Interra chief executive Marcel Tjia said the alliance with China ZhenHua Oil will "benefit Myanmar from the onset as the country's energy requirements continue to grow".

"We believe ... it is an opportune time to undertake more work in emerging Myanmar as well as regionally," he added.

China ZhenHua Oil vice president Yin Lifeng said that there is "great production potential" in the Chauk and Yenangyaung oil fields, and that a recent 11-year contract extension on the two fields will give the companies more time to implement a "more ambitious oil field development plan".

Interra, which called for a trading halt before making the announcement at around 11.30am, later closed 6.7 per cent or 0.4 Singapore cent up at 6.4 Singapore cents on Friday.