This article first appeared in The Edge Financial Daily, on February 16, 2016.

Sona Petroleum Bhd (+ve)

SHARES of Sona Petroleum (Fundamental: N/A, Valuation: N/A) closed one sen or 2.22% higher at 46 sen yesterday. The stock was heavily traded with 14.4 million shares changing hands in comparison to its 200-day average volume of 2.13 million shares.

The oil and gas (O&G) special purpose acquisition company (SPAC) was last featured in “Stocks with Momentum” in September last year, but has since risen by 5.7%.

In a filing with Bursa Malaysia last Friday, Sona said it is currently in negotiation with the sellers of the Stag Oilfield to reduce the acquisition price after a valuation report dated January 20 this year by independent valuers Gaffney, Cline and Associates (Consultants) Ptd Ltd considered the purchase price was “not fair” and above the fair market value of Stag Oilfield.

Sona also announced that it had received approval from the Securities Commission Malaysia (SC) for the acquisition last Friday, subject to certain conditions. Among the conditions are that the SPAC is expected to utilise up to 80% of the amount in its trust account for the acquisition and to finance part of the infill development, which the regulators deemed as necessary.

According to the SC, the proposed deal would only be commercially viable if the proved plus probable (2P) reserves are produced and immediately result in oil production. Therefore, the infill development (to enhance production) is part and parcel of the proposed acquisition.

The proposed acquisition of the Stag Oilfield is intended to be Sona Petroleum’s qualifying acquisition (QA), allowing it to become an independent upstream O&G company. 

Sona has until end-July 2016 to make a QA. Failure to do so will see the company liquidated and custodian account monies distributed to respective shareholders.

The company had RM523 million in its custodian account as at Sep 30, 2015.