West Perth-based drilling products company Imdex Ltd will acquire a 75 per cent stake in Kazakhstan-based Suay Energy Services for around $480,000, the company announced today.
West Perth-based drilling products company Imdex Ltd will acquire a 75 per cent stake in Kazakhstan-based Suay Energy Services for around $480,000, the company announced today.
Imdex, which last month finalised its acquisition of Swedish borehole survey systems supplier Flexit AB, said in an announcement the oilfield service provider was complementary to its current businesses and was consistent with its global expansion strategy.
The full text of a company announcement is pasted below
Imdex Limited (Imdex) has executed a Heads of Agreement to acquire a 75% interest in Suay Energy Services (Suay) for A$393,000 cash. Suay provides services to the Kazakhstan oilfields in the Caspian Sea region. Settlement is expected to occur on 1
July 2007.
Background
Berik Zhubaniyazov, who established Suay is a Kazakh national who speaks and writes fluent English, Kazakh and Russian. He has 14 years experience in the oilfield, mostly with Baroid (now Halliburton). In 2004, he established Suay to service the oilfield in the
Caspian region, predominantly in Kazakhstan.
The Suay business is very similar to the oilfield business undertaken by AMC. However, the company is only in its infancy and lacks the financial backing to expand.
Suay is complimentary to the existing Drilling Products and Services business of Imdex and the acquisition will facilitate the global expansion of Imdex's business. The aim is to become the major drilling fluids and chemicals and engineering supplier to the Caspian
Sea region.
Kazakhstan is of similar size to Europe and there are approximately 100 largely land based oil and gas rigs currently working in country. The onshore market is estimated at around US$100m per annum and the major suppliers are M-I, Halliburton and Baker
Hughes. However, the industry is being encouraged to localise and local suppliers have a 20% price advantage over international companies in the tendering process.
Focus will be on both the National Oil Company (Kazmunay Gas) and the international oil and gas companies operating in Kazakhstan. The National Oil Company accounts for approximately 50% of the market with the remainder being taken by the independent international oil and gas companies. The national drilling companies account for the majority of the work and are also being encouraged to use local content. They also have a preference in working with local contractors and suppliers.
The business in Aktau will offer advantages in servicing markets in Turkmenistan, Kurdistan, Russia (border regions), Azerbaijan and Uzbekistan. Isolated geographically, these countries must import through Kazakhstan, Iran or China. Local supply will offer a
competitive advantage. Increasing exploration activity in Kazakhstan and the region provides for a robust market going forward.
Financials
The business of Suay is not mature, however, it is profitable. In 2005, the pre-tax profit was US$116,977 and, in 2006, it was US$109,325.
Forecast EBIT for FY08 is approximately US$302,000 on revenue of US$1.8 million.
Acquisition Cost
The total cost of the transaction is US$393,000 and Imdex has the right to acquire the remaining 25% at fair value.
Summary
The reasons for the acquisition of a 75% interest in Suay can be summarised as follows:
1. It is complementary to the current Imdex drilling fluids & chemicals business;
2. It provides good growth opportunities and is consistent with our global expansion strategy;
3. It specialises in the oil and gas industry and establishes a base for the Caspian Sea region;
4. It provides local content which is favoured by the National Oil Company as well as other industry participants; and
5. It is reasonably priced in relation to earnings.
