Business

Friday September 4, 2009

Analysts say UBG’s foray into oil and gas risky

By ELAINE ANG


PETALING JAYA: UBG Bhd’s foray into oil and gas business via the acquisition of Pearl Thailand (Holdings) Ltd is viewed as a high risk and uncertain investment by analysts.

Pearl Thailand, via its subsidiaries, hold a 20% participating interest in four of six offshore petroleum concessions and 25% stake in the two remaining concessions in the Gulf of Thailand.

An analyst with Inter-Pacific Securities Sdn Bhd noted that the concessions were only in the first exploration stage.

“Going forward, we do not know how this venture will impact earnings as there is no certainty of returns. This leads to the question of how the company is expected to cover its investment costs,” he said.

The construction group announced on Wednesday that it would buy Pearl Thailand from Pearl Energy Ltd, a firm owned by Abu Dhabi investment group Mubadala Development Co, for US$19.2mil cash.

UBG will also pay back another US$16.1mil in costs spent by Pearl Energy so far.

Another analyst with a local stockbroking firm said UBG had undergone a lot of restructuring and was still on the lookout for more investments.

“There seems to be some uncertainty in its investment decisions as it does not know what it wants.

“For example, its purchase of Putrajaya Perdana Bhd and Loh & Loh Corp Bhd could have been delayed for a better price,” he said.

A source close to UBG said the management had done its homework in terms of its due diligence process and was confident that prospects were positive for its new venture.

“It is a calculated risk. UBG had appointed consultants from Australia to undertake technical and financial due diligence and it is satisfied with its acquisition,” he said.

On UBG assuming the historical costs borne by the Pearl group in relation to the concessions amounting to US$16.1mil, in addition to the US$19.2mil purchase price, the source said it was agreed upon for tax management purposes.

“The historical costs are basically just costs that had been incurred by Pearl Energy’s subsidiaries for exploration activities which UBG has agreed to reimburse,” he said.

Singapore-based Pearl Energy’s portfolio comprises a broad range of exploration, development and production assets in 21 licences and production-sharing contracts.


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