Monday, September 2, 2013

Protasco keen on onshore exploration

Protasco keen on onshore exploration
Posted on 2 September 2013 - 05:37am
Rupinder Singh

PETALING JAYA (Sept 2, 2013): Protasco Bhd, which saw its net profit double in the second quarter ended June 30, 2013, jumping to RM14.85 million from RM7.11 million a year ago, thanks to higher contributions from its maintenance, construction and trading segments, said its proposed acquisition of an oil and gas (O&G) outfit in Indonesia would be a stepping stone for the group to secure more future upstream jobs in the region, its top executive said.

Protasco executive chairman and group managing director Chong Ket Pen (pix) said the group is keen to go into onshore O&G exploration if it is successful in its US$55 million bid to buy 75% of PT Anglo Slavic Indonesia (PT ASI).

"We plan to go into onshore exploration. If the whole acquisition of PT ASI is successful, then we will build our next business in onshore exploration," Chong told SunBiz in an interview.

He said the group will use its experience in exploring soil and water in the past to venture into onshore O&G exploration.

"Our engineering division has done deep boring for soil samples and even water exploration for the Malaysian government. We have bored down few hundred meters for soil and water for the past 10 to 20 years," he said.

Protasco, he revealed, could delve into upstream exploration on its own or through acquisitions.

However, Chong said Protasco's first priority is to get the acquisition of PT ASI completed before moving into onshore exploration activities.

"We need to sink in quite a number of wells first to increase production. So, this would help build up our expertise in the oil and gas field and then expand to other countries in the region including Malaysia if the right opportunity arises," he said.

"This will be the stepping stone for me to get into the O&G exploration aspect and get familiar with the oil extraction process. It won't stop me from buying another oil field if the right opportunity arises," he said.

Chong hopes to complete the acquisition of PT ASI by October this year if it is commercially viable.

"If our consultant says it is not viable then we will look for other brownfield developments," he said.

He added that going into brownfield developments involves potentially lower risk and less capital intensive than greenfields.

"To me, the risk to acquire or not is not very high because if there is not enough (oil) reserves to last for the next 10 years then we won't buy," he said.

"All oil fields whether new or abandoned has seismic data to show what are the oil reserves, if there is any left. Our consultants will advise us based on the data. I'm confident of handling this new venture if it comes through."

Apart from the acquisition cost of US$55 million, Chong said Protasco will invest an additional US$30 million to US$40 million for O&G exploration activities.

However, Chong explained that the additional capital expenditure are recoverable.

"Accept for the acquisition cost, these expenses spent on exploration are recoverable. Pertamina (Indonesia's national oil company) will reimburse us three years down the road," he said.

The acquisition of PT ASI comes with a consolidated profit before tax guarantee of US$50 million for four consecutive financial years.

Chong believes that the profit generated from the Indonesian concern would reflect in the group's books as early as next year.

Meanwhile, Chong said Protasco is set to return to Libya this year after fleeing the revolutionary torn country in 2011.

"Yes, we have met our local partner and we are going to start (infrastructure) works in Libya again. We have lost a bit of money there but there is still two packages that are 35% uncompleted and worth RM100 million," he said.

He expects work to start early next month and take a year to complete.

With RM20 million worth of machinery left in Libya, Chong said it makes sense to continue work there. Furthermore, the Libyan government has assured Protasco that it will be compensated for its losses.

"The (Libyan) government has promised to pay us back our claims the moment we start. This means that I'm not going to fork out a single dollar. We have still outstanding claims there and we will use it to complete the job. Hopefully, when we complete the work we can recover substantially what have we lost before," he said.

Protasco also plans to start producing and selling pre-mixed cement to local contractors in Libya soon.

Chong noted that the group has been asked to bid for bridge repair and maintenance jobs in Libya.

"There were a lot of bridges damaged during the revolution. We were asked to do the repairs. I must say the margins are very good and is too tempting for us to stay out. I hope to get the bridge repair works," he said.

However, Chong reiterated that Protasco will only decide on its long term plans in Libya when it has completed its outstanding jobs first.

Publish date: 02/09/13

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