Ramba seeks for waiver of shareholders? approval over Lemang PSC farm-out

By Ruli Setiawan

SGX-listed Ramba Energy Ltd said on Friday in a statement it has made an application to the Singapore Stock Exchange for a waiver of shareholders? approval over a proposed farm-out of interest in Lemang production sharing contract (PSC) in Jambi, arguing among others that the transaction is a normal course of business and would not cause material change to the company?s core business.

Under the proposed divestment transaction, first unveiled in October of last year, Ramba through its 80.4 percent owned subsidiary PT Hexindo Gemilang Jaya had on October 4 entered into an agreement with Mandala Lemang Singapore Pte Ltd, under which Hexindo shall farm-out a 35 percent interest in the Lemang PSC.

Concurrently, Hexindo has also entered into a back-to-back agreement with Eastwin Global Investments Limited, which owns the remaining 49 percent participating interest in the Lemang PSC. Under this back-to-back agreement, Hexindo shall acquire a 15 percent participating interest in the Lemang PSC from Eastwin. As such the net effect of the proposed transaction is that Hexindo will effectively farm-out a 20 percent participating interest, and retain a 31 percent participating interest in Lemang PSC while Eastwin will retain a 34 percent interest.

Ramba explains in the following release its reasons for a waiver of the shareholders? approval.

Further to the Announcements, the Board of Directors of Ramba Energy Limited had on 13 October 2015 made an application to the SGX-ST seeking waiver from the requirements of Rule 1014(2) of the Listing Manual which requires the Proposed Transaction to be conditional upon the approval of the Shareholders.

The Application was made on the following grounds:

The Proposed Transaction is in the ordinary course of business of an oil and gas exploration and production company, and will not result in a material change to the nature of the Company?s core business

Hexindo will still retain a 31 percent participating interest in the Lemang PSC and will remain as the operator after the Proposed Transaction.

The Company?s core business of oil and gas exploration and production comprises not only its participating interest in the Lemang oil and gas block, but also it?s 100 percent and 70 percent participating interests in the West Jambi and Jatirarangon oil and gas blocks respectively. Of these three (3) blocks, only the Jatirarangon block is currently producing oil and gas. The Proposed Transaction will not change the nature of the Company?s core business, which is oil and gas exploration and production.

There will be no material change to the risk profile of the Company arising from the Proposed Transaction:
(a) The Proposed Transaction does not concern the disposal of an existing income- generating or cash flow-generating asset. Currently, the Lemang block is still in the exploration and appraisal stage with no production of oil and gas. The Proposed Transaction is merely the sharing of the right of a participating interest in the Lemang PSC.
(b) The Proposed Transaction has the beneficial effect of reducing the future operational, commercial and financial risks faced by the Company as well as balancing the reward from any potential future discoveries of oil and gas at the Lemang block.

The Proposed Transaction enhances the Company?s ability to manage its future risks and strengthens financial and capital resources while realising value for its shareholders
(a) The Farm-in Partner will be seconding its technical personnel to commence work at the Lemang block after the completion of the Proposed Transaction. This arrangement would benefit the Company as there will be a transfer of technical knowledge and experience from the Farm-in Partner?s technical personnel to the Company.
(b) The Proposed Transaction allows the Company to realise value for its shareholders. The Company?s effective 41 percent participating interest through Hexindo in the Lemang PSC was acquired for US$7,000,000. Therefore, the price of up to US$102,600,000 that a Farm-in Partner is now willing to pay for a 20% participating interest in the Lemang PSC represents a huge realisation of value for the Company?s shareholders.
(c) The Proposed Transaction will have a positive balance sheet impact on the Group, especially in their net tangible assets, net working capital and cash position.

The Company has obtained a confirmation by KPMG, the Company?s independent financial adviser, that the Board?s opinion and the basis for stating that the Proposed Transaction will have no material change to the nature of the Company?s core business or to its risk profile, have been stated after due and careful enquiry.

Editing by Reiner Simanjuntak