Sunday 19 May 2024
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KUALA LUMPUR (Feb 15): Reach Energy Bhd said its sub-subsidiary Emir-Oil LLP (EO) is facing a reduced fine of RM9.6 million along with a state duty of RM300,000 amid a dispute with the Ministry of Energy (MOE) in Kazakhstan, pertaining to the deferment of contractual obligations for the Dolinnoe's oil field.

In a Thursday filing with Bursa Malaysia, Reach Energy said the MOE has filed an appeal against the Jan 29 decision on the dispute, at the Specialised Inter-District Economic Court of Astana.

The reduced fine and state duty were a result of partially satisfied claims by the MOE of approximately RM27.4 million in November last year. The ministry had sought compulsory recovery of debt due to alleged non-performance of EO’s financial obligations in 2020-2021 under the Dolinnoe's contract.

Reach Energy had made provisions of RM27.4 million in relation to the suit, up from RM24.76 million recorded at the end of last year.

“Currently, we are awaiting the transfer of the case to the second instance court for the consideration of the ministry's appeal by the judicial panel of the Court of the City of Astana.

“Hence, the company is seeking necessary legal advice to resolve and/or to defend the legal suit,” said Reach Energy.

As a background, EO had submitted several applications to the MOE for the postponement of contractual obligations for the period of 2020 to 2021 to the period of 2022 to 2025, but these were rejected by the MOE.

Reach Energy’s involvement in EO can be traced back to March 2016, when it acquired a 60% interest in the concession from Hong Kong-based MIE Holding Corp (MIEH) for US$175.9 million (RM840.89 million).

MIEH kept the remaining 40% and left the operations of EO to the management of Reach Energy.

Reach Energy slipped into Practice Note 17 status in April 2023 after its shareholders’ equity fell below 50% of its share capital for the financial year ended Dec 31, 2022 (FY2022).

Subsequently, speculation surfaced about the group's intention to divest EO, but the group refuted these rumours. It has until April to submit a regularisation plan.

Reach Energy has been loss-making since FY2014. For the nine months ended Sept 30, 2023 (9MFY2023), Reach Energy’s net profit rose 11.54% to RM12.58 million against RM11.28 million a year earlier, as revenue jumped 44.36% to RM164.78 million from RM114.15 million.

According to Bloomberg data, Reach Energy’s largest shareholder is Super Racer Ltd with a 48.5% stake, while the group’s chairman Tan Sri Azmil Khalili Khalid owns a 2.66% stake in the group.

As at end-September, the company’s total borrowings stood at RM11.96 million against deposits, cash and bank balances of RM1.55 million.

Shares of Reach Energy closed unchanged at three sen on Thursday, giving it a market capitalisation of RM63.87 million.

Edited ByAdam Aziz
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