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Monday, January 20, 2014

Dalton's ready for Sumatec challenge



MUCH has been said about Sumatec Resources Bhd, its oilfields in Kazakhstan and most definitely its major shareholder, Tan Sri Halim Saad.
Not much, however, is known about Chris Dalton, the British CEO appointed by Halim to head the company’s turnaround and give it a fresh start.
Investors see Dalton as the “face” of the company but Halim as the one who calls the shots. Work wise though, Dalton is coming to his own. He’s been in Malaysia for 10 years, and is familiar with the intricacies and sensitivities of doing business here. He has huge plans for growing Sumatec, although he’s quiet about it for now.
“Before we do any rebranding, the first priority is to see the company get out of its PN17 position,” says Dalton.
He says that it was back in 2008, when he was working for Halliburton, he first met Halim. Dalton must have made an impression, because subsequently, when Halim decided to make his comback via Sumatec, Dalton was one of the shortlisted candidates for the CEO position.
“I knew what I was up for when I took up the job in Sumatec. I knew the company’s financial position and its reputation. I was up for the challenge, and I also wanted something different,” says Dalton, who had previously worked for 16 years with Halliburton.
Having worked on rig sites from the North Sea to Venezuela, Colombia and Central Asia, Dalton says that this experience became very helpful when managing Sumatec’s oil production in Kazakhstan.
Dalton has mentioned before that he wants to see Sumatec become an independent oil and gas player with oil reserves of 200 million by 2017. Now, that’s a tall order, and would mean Sumatec acquiring an average of 50 million reserves a year.
“Last year was all about completing the restructuring. We definitely are looking to make asset acquisitions this year. Ramping up our production is very high on the priority list,” says Dalton.
After five years of bleeding, the company’s restructuring scheme, which raised RM452mil in cash, was finally completed last year. The debt free company also looks set to get out of its Practice Note 17 category by the middle of this year.
Sumatec will be announcing its 2013 fourth quarter results next month, and management has guided for a one-off gain from its joint investment agreement that will see the company netting RM86mil. For the nine months to Sep 30, Sumatec is still in the red with losses of RM15.3mil.
While the company may still suffer from reputational issues, its value proposition could be something to consider.
In many ways, Sumatec’s business model is similar to special purpose acquisition company (SPAC) Sona Petroleum Bhd and Cliq Energy Bhd. Both Sona and Cliq are exploration and production companies looking to make their qualified acquisitions on developing or matured fields. The difference here is that Sumatec isn’t a SPAC, but has made its exposure on a proven field.
Dalton says that his main goals for 2014 is to turn in a profit, acquire some assets and ramp up oil production.
So what does Sumatec have to offer investors as this juncture?
In a nutshell, Dalton says that the investment case for Sumatec is a chance to gain access to a proven oil and gas producing field.
There are presently two contracts in the Rakushechnoye oil field (Shelly field), which more or less guarantees a steady stream of income up to 2025.
The first was signed in March 2012, when Sumatec inked an agreement withMarkmore Energy (Labuan) Ltd for a product-sharing contract at Kazakhstan’s Rakuschechnoye oil field.
Markmore is the owner of the concession and holds the sub-surface user rights for the Rakushechnoye field through its unit CaspiOilGas LLP up to 2025. Halim owns 99% of Markmore and is also Sumatec’s major shareholder at 25%.

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