Business Overview

5. INFORMATION ON OUR BUSINESS 5. INFORMATION ON OUR BUSINESS 5.1 BACKGROUND INFORMATION 5.1.1 Background Our Company was incorporated in Malaysia under the Act as a private limited company on 7 February 2013 under the name of Reach Energy Sdn Bhd. On 2 August 2013, our Company converted into· a public company under the name of Reach Energy Berhad. The principal activity of Reach Energy is investment holding. Our Company has yet to commence business operations as at the LPD. We intend to list on the Main Market of Bursa Securities as a SPAC. SPACs are companies which have no operations or income generating business at the point of IPO but undertake an IPO for the purposes of raising funds to acquire operating companies or businesses, otherwise known as Qualifying Acquisition.
5.1.2 Key criteria of a SPAC The key criteria of a SPAC, as provided for under the SC Guidelines which our Company has met, are as follows: Key Criteria Requirements Our Company’s Proposition Minimum funds A SPAC must raise at least The amount to be raised under our raised RM150,OOO,000 through its IPO. IPO is RM750,000,OOO. Interest of  Members of the management team  Our  Management Team  will  own  management team  of the SPAC  must,  in  aggregate,  20.00% of the enlarged issued and  own at least 10% of the SPAC upon  paid-up ordinary  share  capital  of  IPO.  Reach Energy upon IPO.  Management of  A SPAC must place at least 90%  We will be placing 94.75% of the  IPO proceeds  of the gross proceeds from its IPO  gross  proceeds  raised  by  our  in  a  Trust  Account  immediately  Company  from  the  IPO  in  an  upon receipt of all proceeds.  The  Islamic Trust Account immediately  monies in the Trust Account may  upon  receipt  of  all  the  IPO  only be released by the Custodian  Proceeds.  The  monies  in  the  upon  termination  of  the  Trust  Islamic Trust Account may only be  Account.  released  by  the  Custodian  upon  termination  of  the  Islamic  Trust  Account  and  dealt  with  in  the  manner as set out in Section 5.1.5  of this Prospectus.
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5. INFORMATION ON OUR BUSINESS (Cont’d) Key Criteria Management of IPO proceeds (cont’d) Qualifying Acquisition Timeframe for completion of a Qualifying Acquisition
Requirements The proceeds in the Trust Account may be invested in Permitted Investments. Any interest generated by the funds held in the Trust Account including interesUdividend income derived from the Permitted Investments, must accrue to the Trust Account. The balance of the proceeds from the IPO, being 10% of the proceeds, may be utilised to defray expenses related to the IPO and for working capital purposes including but not limited to operating costs, fund the search for a target company or asset and completing the Qualifying Acquisition. An initial acquisition of target company or asset which has an aggregate fair market value of at least 80% of the aggregate amount in the Trust Account (net of any taxes payable). Within three years from the date of listing of the SPAC. In the event the SPAC fails to complete the Qualifying Acquisition within the Permitted Timeframe, it will be delisted from the Main Market of Bursa Securities. Our Company’s Proposition The proceeds in the Islamic Trust Account may be invested in Permitted Investments all of which are Shariah compliant and any profits generated from the Permitted Investments will be accrued to the Islamic Trust Account. We will use the balance of the IPO proceeds, being 5.25% of the total gross proceeds raised by our Company from the IPO, for working capital purposes and to defray listing expenses as set out in Section 3.6.2 of this Prospectus. The Audit Committee will review reports from the management, on a half-yearly basis, in respect of the utilisation of the 5.25% of the proceeds from the Public Issue. Further, the Audit Committee will also be approving the annual bUdget for identifying potential target assets for the Qualifying Acquisition. For avoidance of doubt, the proceeds from the Subscription by Reach Energy Holdings and SUbscription by the Initial Investor will not be included in the Islamic Trust Account. Our Qualifying Acquisition will have an aggregate fair market value of at least 80% of the aggregate amount in the Islamic Trust Account (net of any taxes payable). Our Company targets to complete a Qualifying Acquisition within the Permitted Timeframe. In the event that we are unable to complete a Qualifying Acquisition within the Permitted Timeframe, we will be delisted from the Main Market of Bursa Securities.
5. INFORMATION ON OUR BUSINESS (Cont’d) Key Criteria Requirements Our Company’s Proposition Shareholders’ approval for a Qualifying Acquisition Refund to dissenting shareholders Custodian The resolution on the Qualifying Acquisition must be approved by a majority in number of shareholders representing at least 75% of the total value of shares held by all shareholders present and voting either in person or by proxy at an EGM. Where the Qualifying Acquisition comprises more than one acquisition, each acquisition must be approved by the shareholders of the SPAC in the same manner. The management team and persons connected to the management team must abstain from voting. Shareholders (other than the management team and persons connected to them) who vote against a Qualifying Acquisition at the EGM will be entitled to receive, in exchange for their shares, a sum equivalent to a pro rata portion of the amount then held in the Trust Account (net of any taxes payable and expenses related to the facilitation of the exchange), provided that such Qualifying Acquisition is completed within the Permitted Timeframe. The Shares tendered in exchange for cash must be cancelled. The SPAC will secure and maintain custodial arrangements at all times over the monies in the Trust Account until the termination of the Trust Account. The resolution on our Qualifying Acquisition must be approved by a majority in number of shareholders representing at least 75% of the total value of shares held by all shareholders present and voting either in person or by proxy at the EGM. Where our Qualifying Acquisition comprises more than one acquisition, we will subject each acquisition to the approval of our shareholders in the same manner. Reach Energy Holdings, our Management Team and persons connected to them are subject to the Non-Voting Obligations and will abstain from voting at the EGM to be convened for the approval of our Qualifying Acquisition. Our Articles of Association (as set out in Section 12.2(vii)(6) of this Prospectus) provide for the Qualifying Acquisition Share Repurchase to be made within seven days after the Qualifying Acquisition has been fully and duly completed. We will cancel the Shares tendered under the Qualifying Acquisition Share Repurchase. Please refer to Section 5.1.3 of this Prospectus for the basis of computation for the Qualifying Acquisition Share Repurchase. We have appointed AmanahRaya Trustees Berhad to hold in trust, the IPO Trust Proceeds and (if applicable) the Subsequent Rights Issue Trust Proceeds.

 

 

5. INFORMATION ON OUR BUSINESS (Cont’d) Key Criteria Requirements Our Company’s Proposition Custodian (cont’d) The roles and responsibilities of the Custodian are as follows: (i) the Custodian must hold in trust, the proceeds from an issuance of securities by the SPAC, in accordance with the Custodian Agreement, the SC Guidelines and applicable laws;
(ii) the Custodian must take appropriate measures to ensure the safekeeping of the monies held in the Trust Account. In particular, the Custodian must ensure that:
(a) proper accounting records and other records as are necessary are kept in relation to the Trust Account; and
(b) custody and control of monies held in the Trust Account is in accordance with the provisions of the Custodian Agreement;

 

(iii) the Custodian may be provided a mandate by the management team to invest the amounts held in the Trust Account in Permitted Investments; and (iv) the Custodian may only distribute and/or liqUidate the funds held in the Trust Account in accordance with the provisions in the Custodian Agreement. Please refer to Section 5.1.5 of this Prospectus for the salient terms of the Custodian Agreement, inclUding the roles and responsibilities of the Custodian.
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5. INFORMATION ON OUR BUSINESS (Cont’d) Key Criteria Requirements Our Company’s Proposition Liquidation In the event the SPAC fails to complete a Qualifying Acquisition within the Permitted Timeframe, it must be liquidated. The amount then held in the Trust Account (net of any taxes payable and direct expenses related to the Liquidation Distribution), must be distributed to the respective shareholders on a pro rata basis as soon as practicable, as permissible by the relevant laws and regulations. Any interest earned from the Permitted Investments accruing to the Trust Account will form part of the Liquidation Distribution. The management team and persons connected to them may not participate in the Liquidation Distribution, except for securities purchased by them after the date of listing of the SPAC on the Main Market of Bursa Securities. If we are unable to complete a Qualifying Acquisition within the Permitted Timeframe, we will be forced to liquidate. In accordance with our Articles of Association, in such event, the amount then held in the Islamic Trust Account (net of any taxes payable and direct expenses related to the Liquidation Distribution) shall be distributed to the holders of the ordinary shares on a pro-rata basis as soon as practicable in accordance with the provisions of the Act and other applicable laws and regulations. Reach Energy Holdings, our Management Team, persons connected to our Management Team and the Initial Investor are subject to Non-Entitlement Obligations and shall not be entitled to (and shall not participate in) the Liquidation Distribution, except in relation to Shares purchased by them after the Listing and the Shares purchased by the persons connected to the Management Team and the Initial Investor pursuant to the Public Issue. Please refer to Section 5.1.3 of this Prospectus for the basis of computation for the Liquidation Distribution. In addition, the monies raised from the Public Issue which are not held under the Islamic Trust Account and the monies raised from the Subscription by Reach Energy Holdings and Subscription by the Initial Investor, if any remaining, will also be distributed to the IPO Investors on a pro-rata basis.
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5. INFORMATION ON OUR BUSINESS (Cont’d) 5.1.3 Basis of computation for the Qualifying Acquisition Share Repurchase and the Liquidation Distribution The basis of computation for the Qualifying Acquisition Share Repurchase (provided that such Qualifying Acquisition is dUly approved and completed within the Permitted Timeframe) is as follows: y x= z Where: X = Amount per Share payable to the Dissenting Shareholder Y = Amount then held in Islamic Trust Account (net of any taxes payable and expenses related to the Qualifying Acquisition Share Repurchase) Z = Total number of Shares eXcluding Shares held by the Mana~ement Team, persons connected to the Management Team and the Initial Investor 1) Note: (1) Except in relation to Shares purchased by the Initial Investor after the Listing or pursuant to the Public Issue. In order to exercise the right to require our Company to purchase Shares under the Qualifying Acquisition Share Repurchase, a shareholder shall be required to send a notice in writing to our Company (in such format and within such timeframe as may be prescribed by our Company from time to time). All Shares repurchased by our Company pursuant to the Qualifying Acquisition Share Repurchase shall be cancelled by our Company. The satisfaction of the purchase consideration for the Qualifying Acquisition Share Repurchase shall be effected by our Company in favour of each Dissenting Shareholder within seven Market Days after the Qualifying Acquisition has been fully and duly completed. Such payment to the Dissenting Shareholders shall be effected in the same manner as provided in our Articles of Association in relation to dividends. Please refer to Section 12.2 of this Prospectus for the relevant extracts from our Articles of Association. In the event that the Qualifying Acquisition cannot be completed, the Dissenting Shareholders shall not be paid and we shall search for another Qualifying Acquisition so long as it is within the Permitted Timeframe. However, if our Company does not complete a Qualifying Acquisition within the Permitted Timeframe, our Company shall be dissolved, wound up and liquidated under the Act in accordance with all applicable laws and regulations. Upon liquidation, the amount then held in the Islamic Trust Account (net of any taxes payable and direct expenses related to the Liquidation Distribution) shall be distributed to the shareholders on a pro-rata basis as soon as practicable in accordance with the provisions of the Act and other applicable laws and regulations provided always that the members of the Management Team and persons connected to them and the Initial Investor shall not be entitled to (and shall not participate in) the Liquidation Distribution, except in relation to Shares purchased by them after the Listing and the Shares purchased by the persons connected to the Management Team and the Initial Investor pursuant to the Public Issue. 5. INFORMATION ON OUR BUSINESS (Cont’d) The basis of computation for the Liquidation Distribution is as follows: B A = C Where: A = Amount per Share payable to the Shareholder B = Liquidation Amount C = Total number of Shares excluding Shares held by the Management Team, persons connected to the Management Team and the Initial Investor (1) Note: (1) Except in relation to Shares purchased by them after the Listing and Shares purchased by the persons connected to the Management Team and the Initial Investorpursuant to the Public Issue. 5.1.4 Share capital and changes in share capital Our present authorised share capital is RM50,000,000 comprising 5,000,000,000 Shares, of which 277,822,425 Shares have been issued and fully paid-up. The changes in our issued and paid-up share capital since incorporation until the date of this Prospectus are as follows: Date of No of Shares Cumulative issued allotment! allottedl Par and paid-up ordinary subdivision subdivided value Consideration share capital RM RM 07.02.2013 2 1.00 Cash 2 22.052013 200 0.01 Subdivision of Shares 2 10.07.2013 113,600,000 0.01 Cash 1,136,002 20.06.2014 142,000,000 0.01 Cash 2,556,002 04.07.2014 15,555,555 0.01 Cash 2,711,557 08.07.2014 6,666,670 0.01 Conversion of RCPS 2,778,224 There were no discounts, special term or instalment payment plan in relation to the payment for the abovementioned Shares. In addition to the above, our Company has and will be issuing 1,277,822,225 Warrants comprising the following: (i) 113,600,000 Warrants and 142,000,000 Warrants pursuant to the Subscription by Reach Energy Holdings which were allotted and issued on 10 July 2013 and 20 June 2014 respectively;
(ii) 22,222,225 Warrants to the Initial Investor pursuant to the SUbscription by the Initial Investor and Conversion of RCPS that will be allotted and issued on the date of allotment of the Public Issue Shares, simultaneously with the Warrants to be issued under the Public Issue; and

(iii) 1,000,000,000 Warrants pursuant to the Public Issue. I Company No.: 1034400-0 I

5. INFORMATION ON OUR BUSINESS (Cont’d) The Warrants will be listed simultaneously on the Official List of Bursa Securities. Details in relation to the terms and conditions of the Warrants have been set out in Section 3.3.2 of this Prospectus. Save as disclosed above, there are no other outstanding warrants, options, convertible securities and uncalled capital in our Company. 5.1.5 Salient terms of the Custodian Agreement The following are extracts of the salient terms contained in the Custodian Agreement: (i) Appointment (a) The Company appoints the Custodian and the Custodian agrees to act, as the SPAC Custodian for the Company in accordance with the terms and conditions set forth in the Custodian Agreement, the SC Guidelines and other applicable laws.
(b) The Custodian hereby confirms, represents and warrants to the Company that it is:

(aa) a trust company registered under the Trust Companies Act 1949; (bb) in the list of “Registered Trustees in Relation to Unit Trust Funds” issued by the SC; and (cc) duly qualified to act as a SPAC Custodian under the SC Guidelines and under the Custodian Agreement. (c) The Custodian’s appointment shall commence on the date of the Custodian Agreement and shall continue until terminated pursuant to the provisions of clause (vi) below. (ii) Trust and covenants (a) The Custodian declares, acknowledges and confirms that it shall hold the Trust Property in trust for the Company subject to the proVisions of the Custodian Agreement.
(b) Other than the right to require the Custodian to comply with the terms of the Custodian Agreement, the Company shall not be otherwise entitled to compel the transfer or distribution or any other dealing or application of the Trust Property or have any other entitlement or interest in relation to the Trust Property or any part thereof, except in accordance with the SC Guidelines.
(c) The Custodian covenants that it shall duly perform all its obligations and covenants and all terms, conditions and provisions on its part to be performed solely and exclusively in accordance with the Custodian Agreement and warrants that:

(aa) it has the power to enter into and perform the obligations on its part to be performed under, the Custodian Agreement; and (bb) its obligations under the Custodian Agreement are valid, binding and enforceable.

5. INFORMATION ON OUR BUSINESS (Cont’d) (d) Except in accordance with the Custodian Agreement or as directed by a competent court or authority, the Custodian agrees, covenants and undertakes not to assign, transfer, sell, charge, surrender, encumber or otherwise howsoever alienate or deal with the Trust Property or any part thereof or make the same subject to any burden, charge, encumbrance, liability or lien whatsoever, or agree or enter or execute any form of agreement or instrument to assign, transfer, sell, charge, surrender or otherwise howsoever deal with the Trust Property or any part thereof or to make the same subject to any burden, charge, encumbrance, liability or lien whatsoever. (iii) Responsibilities of Custodian (a) The Custodian shall be responsible for the following: (aa) Opening and maintaining the Islamic Trust Account; (bb) Depositing the IPO Trust Proceeds, the Subsequent Rights Issue Trust Proceeds and the Cash Trust Assets into the Islamic Trust Account immediately upon the Custodian’s receipt of the same; (cc) Undertaking such Permitted Investments as may be instructed in writing by the authorised person of the Company (“Authorised Person”), in accordance with the Custodian Agreement, on behalf of the Company; (dd) Ensuring the prompt deposit of all profit, dividend and other income derived from (or attributable to) the Permitted Investments into the Islamic Trust Account, unless otherwise instructed in writing by the Authorised Person, in accordance with the Custodian Agreement, to invest the same in the Permitted Investments; (ee) Other than for purposes of (cc) above, not withdrawing, transferring, distributing, liquidating or releasing any of the funds or monies deposited into (or held in) the Islamic Trust Account, except in accordance with the Custodian Agreement; (ff) Ensuring that proper and complete books, statements and accounting records (including such other records as may be necessary or relevant) are duly kept and maintained in relation to all Trust Property and the Islamic Trust Account (including the transactions and dealings carried out by the Custodian in relation thereto); (gg) Ensuring that custody and control of the monies held in the Islamic Trust Account is in accordance with the provisions of the Custodian Agreement and the SC Guidelines at all times; (hh) Not exercising any voting or other rights in relation to the Permitted Investments constituting the Trust Property, except in accordance with the written instructions of the Authorised Person; and (ii) Duly releasing such funds or make such payments out of the Trust Property in accordance with the Custodian Agreement. (b) Except in accordance with the Custodian Agreement, the Custodian shall not deal as beneficial owner on the sale or purchase of any Trust Property to or from the Company, or, without the consent of the Board, deal with the Company otherwise than as principal. 5. INFORMATION ON OUR BUSINESS (Cont’d) (c) The Custodian’s books and records pertaining to the services provided under the Custodian Agreement shall be opened for inspection and audit at all reasonable times by the auditors of the Company and/or such other duly authorised representatives of the Company, upon reasonable written notice thereof being given to the Custodian.
(d) The Custodian shall deliver to the Authorised Person the periodic and other reports listed in Schedule 2 of the Custodian Agreement, such reports to contain the relevant information as agreed by the parties.

(iv) Powers of the Custodian (a) The Custodian shall have the following powers: (aa) To do or omit all such acts or things as the Custodian reasonably considers to be necessary or relevant in order to perform its duties under the Custodian Agreement or to comply with any law, order, regulation or direction of any governmental or regUlatory authority, without further reference to the Company; and (bb) To invest the IPa Trust Proceeds, the Subsequent Rights Issue Trust Proceeds and Cash Trust Assets and other monies held in the Islamic Trust Account in such Permitted Investments as may be authorised or instructed in writing by the Authorised Person on behalf of the Company from time to time. (b) Unless mutually agreed by the parties, the Custodian shall not delegate its duties, responsibilities or powers under the Custodian Agreement to any other party.
(c) Notwithstanding any provisions (whether expressed or implied) contained in the Trustee Act, 1949, it is expressly declared that the Custodian shall not, to the fullest extent permitted by law, have any other rights or powers over the Trust Property or any interest, title or benefit in relation thereto save as may be expressly proVided in the Custodian Agreement.

(v) Fees
In consideration of the Custodian acting in accordance with the Custodian Agreement, the Custodian shall be entitled to charge and be paid its agreed fees and charges and such fees and charges shall be borne or paid by the Company in accordance with Schedule 3 of the Custodian Agreement once the Custodian Agreement is executed, provided that when the Custodian retires or cases to be the Custodian for any reason whatsoever the remuneration that may have been received prior thereto by the Custodian in excess of what the Custodian is entitled as provided in the Custodian Agreement on a proportionate basis shall be refunded by the Custodian to the Company after such retirement or cessation. The Company shall reimburse the Custodian for all reasonable out-of-pocket expenses incurred by the Custodian in the administration of the Islamic Trust Account.
(vi) Termination and duration

(a) Subject to earlier termination in accordance with the Custodian Agreement, the Custodian Agreement shall continue in force until the expiry of the Permitted Timeframe and all Trust Property has been duly transferred or released by the Custodian to the relevant parties. Company No.: 1034400-D I 5. INFORMATION ON OUR BUSINESS (Cont’d) (b) The Custodian Agreement may be terminated by either party with a minimum of three months prior written notice to the other party and the SC, such notice to also set out the reasons for such termination/resignation by the first-mentioned party in accordance with the SC Guidelines. Without limiting the generality of the above, either party may give notice to terminate the Custodian Agreement if any of the following events (other than a Relevant Event or as may be otherwise contemplated in the Custodian Agreement) occur: (aa) the other party is in breach of any material term of the Custodian Agreement and such breach shall not have been remedied within 30 days after service of notice by the first-mentioned party requiring the same to be remedied; (bb) the other party shall go into liquidation, a resolution is passed for its winding up, or a receiver or official administrator or similar officer is appointed over any assets of that party (except as contemplated in the Custodian Agreement, including, without limitation, as referred to in the Custodian Agreement, or a voluntary liquidation for the purpose of reconstruction or amalgamation on terms previously approved in writing by the other party); (cc) if the other party ceases or threatens to cease to carry on the whole or a substantial part of its business; or (dd) if the other party becomes insolvent or is unable to pay its debts as they fall due or enters into any composition or arrangement with its creditors. (c) The Company shall ensure that: (aa) a replacement SPAC Custodian is identified and duly appointed (in accordance with, and for purposes of, the SC Guidelines) within the notice period referred to in the Custodian Agreement; and (bb) the newly appointed SPAC Custodian immediately notifies the SC in writing of its appointment. The termination referred to in the Custodian Agreement shall only become effective when the appointment of the new SPAC Custodian by the Company becomes effective. (vii) Release / payment of Trust Property (a) Subject to the instructions of the Company in this regard and compliance with the applicable provisions of the Articles of Association and the SC Guidelines, the Custodian shall liquidate all the Permitted Investments and all Non-Cash Trust Assets into cash, and deposit all the monies into the Islamic Trust Account within five business days or such other timeline as may be agreed between the parties after receiving a notice in writing from the Company (together with an appropriate supporting statutory declaration from the Authorised Person) confirming the occurrence of a Relevant Event.
(b) After the liquidation of Permitted Investments and the deposit of monies into the Islamic Trust Account pursuant to clause (vii)(a) above:

(aa) where the Relevant Event relates to the relevant Articles 47C(4) of the Articles of Association, the Custodian shall first apply the relevant amount of monies (as calculated in accordance with Article 47C(6) of the Articles of Association and net of any taxes payable and expenses related to the Qualifying Acquisition Share Repurchase) from the Islamic Trust Account 5. INFORMATION ON OUR BUSINESS (Cont’d) for purposes of the Qualifying Acquisition Share Repurchase (and shall thereafter release the balance of the monies to the Company (conditional upon the receipt of the relevant supporting documents deemed necessary by the Custodian from the Company for the Custodian’s sole purpose of exercising its duties under this clause) for purposes of completion of the Qualifying Acquisition in accordance with the Articles of Association and the SC Guidelines; or (bb) where the Relevant Event relates to Article 47C(7) of the Articles of Association, the Custodian shall release all the monies standing from the balance of the Islamic Trust Account (net of any taxes payable and direct expenses related to the Liquidation Distribution) in accordance with the provisions of Article 47C(7); and thereafter, the trust referred to in clause (ii) above (including the holding of the Islamic Trust Account by the Custodian) and the Custodian Agreement will terminate accordingly. (c) Upon its receipt or issue (as may be applicable) of any termination notice pursuant to clause (vi)(b), the Custodian shall liquidate all the Permitted Investments and all Non-Cash Trust Assets into cash, and deposit all the monies into the Islamic Trust Account within five business days thereafter. All the monies standing to the balance of the Islamic Trust Account (net of any taxes payable) shall then be released as soon as possible to the new SPAC Custodian appointed pursuant to clause (vi)(c) above (and in any event within five business days after the appointment of the new SPAC Custodian), after which the Custodian Agreement will terminate accordingly.
(d) In respect of a provision of the Custodian Agreement, the Company hereby warrants that all supporting documents to be submitted to the Custodian as copy or specimen documents are genuine, complete and conform to their originals.

(viii) Liability and indemnity (a) In consideration of the Custodian agreeing to hold the Trust Property on trust under, and acting in accordance with the terms and conditions of the Custodian Agreement but subject always to the provisions of the Custodian Agreement, the Company agrees to indemnify and keep the Custodian fully indemnified on a continuing basis for all monies, claims, actions, demands, costs, charges, losses, expenses and other liabilities of whatsoever nature and howsoever, including without limitation the fees, costs and expenses of legal advisors and other experts (hereinafter collectively referred to as “Liabilities”) arising that are or may be properly and reasonably sustained or incurred by the Custodian in the performance of its duties and obligations under the Custodian Agreement or the SC Guidelines or in the due exercise, preservation or enforcement, or the attempted exercise, preservation or enforcement, of any of its duties, rights, powers, authorities or discretions vested in it under the Custodian Agreement or the SC Guidelines (save and except where such Liabilities are sustained or incurred as a result of gross negligence, fraud, breach of trust or wilful default on the part of the Custodian). The parties hereto acknowledge that the foregoing indemnities shall survive the resignation or removal of the Custodian or the termination of the Custodian Agreement, to the relevant extent. 5. INFORMATION ON OUR BUSINESS (Cont’d) (b) Pursuant to provisions of the Custodian Agreement, as the Custodian is authorised to act on instruction(s) received by way of facsimile from the Company, the Company hereby agrees to indemnify the Custodian against any claims, losses and liability actions, proceeding, demand, damages, reasonable costs and reasonable expenses incurred or sustained by the Custodian or on its behalf, out of or in consequence of acting upon such fax directives and/or instructions or other communications, notwithstanding any error or misunderstanding or lack of clarity in the terms of such notice or instruction or other communication(s).
(c) For the avoidance of doubt and notwithstanding any other provision in the Custodian Agreement, the Custodian shall not be relieved, exempted or indemnified from any liability for breach of trust or for failure to show the degree of care and diligence required of it as a SPAC Custodian or a custodian / trustee generally and no provision or covenant contained in the Custodian Agreement should be construed as so releasing, exempting or indemnifying the Custodian.
(d) SUbject to clause (viii)(b) above but notwithstanding any other term or provision of the Custodian Agreement to the contrary, neither party shall be liable under any circumstances for special, punitive, indirect or consequential loss or damage of any kind whatsoever including but not limited to loss of profits, whether or not foreseeable, even if that party is actually aware of or has been advised of the likelihood of such loss or damage and regardless of whether the claim for such loss or damage is made in negligence, for breach of contract, breach of trust or otherwise. The provisions of this clause shall survive the termination or expiry of the Custodian Agreement or the resignation or removal of the Custodian, to the relevant extent.
(e) Subject to clause (viii)(b) above but notwithstanding any other provision to the contrary in the Custodian Agreement, each party shall not in any event be liable for any failure or delay in the performance of its obligations hereunder if it is prevented from so performing its obligations by any existing or future law or regulation, any existing or future act of governmental authority, Act of God, flood, war whether declared or undeclared, terrorism, riot, rebellion, civil commotion, strike, lockout, other industrial action, general failure of electricity or other supply, aircraft collision, technical failure, accidental or mechanical or electrical breakdown, computer failure or failure of any money transmission system or any reason which is beyond its control.

(ix) Other provisions relating to the Custodian (a) The Custodian shall not be responsible for recitals, statements, warranties or representations of the Company as contained in the Custodian Agreement or other documents entered into in connection herewith and shall assume the accuracy and correctness thereof or shall not be responsible for the execution, legality, effectiveness, adequacy, genuineness, validity or enforceability or admissibility in evidence of the Custodian Agreement or such other documents.
(b) For purposes of the proper performance of its duties under the Custodian Agreement, the Custodian shall be entitled to engage and consult, at the expense of the Company, with any qualified legal adviser and professional adviser selected by it and rely upon any advice so obtained and shall be protected and shall not be liable in respect of any action properly taken, or omitted to be done or suffered to be taken, in accordance with such advice.

 

5. INFORMATION ON OUR BUSINESS (Cont’d) (c) To the extent provided by law (but subject to the prior written approval of the Company, where applicable), any corporation into which the Custodian may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Custodian shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Custodian shall be the successor to the Custodian hereunder without the execution or filing of any papers or any further act on the part of any of the parties hereto.
(d) The Custodian shall payor cause to be paid, from the Cash Trust Account all taxes and levies in the nature of taxes imposed on the Cash Trust Account thereof by any governmental authority or under any applicable law or enactment and shall notify the Company of all such payments made or to be made accordingly.

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5.2 OUR BUSINESS APPROACH We shall commence business as a SPAC that will be listed on the Main Market of Bursa Securities. Our near term objective is to establish a solid operational base by completing a Qualifying Acquisition. Upon completion of the IPO, we intend to acquire oil and gas Brownfields in the production phase and fields in the proximity of existing producing areas under the development and/or production phases, in our Region of Focus. In the longer term, post Qualifying Acquisition, we intend to establish our Company as an independent Malaysia­based E&P company with domestic and global operations. For the Qualifying Acquisition, we will focus on Brownfields in the production phase and fields in the proximity of existing producing areas in the development and/or production phases with the aim of generating early revenue. As these are development and/or production assets, there is more certainty to the level of oil and gas Reserves and remaining upside potential which are of relatively lower risk as compared to exploration assets. In addition, we shall complete a Qualifying AcqUisition by acquiring target company and/or asset. If we acquire a target asset, we will have Working Interest of more than 33% in the target asset and if we acquire a target company, we will have a majority ownership of more than 50% in the target company. In addition, we will be the operator, where we will have management control. We shall achieve the above objectives by leveraging on the technical expertise, knOWledge, network and experience of our Management Team and Board. They comprise both local and international experts with proven track record and global networks in the oil and gas industry. Our Management Team members have an average of over 30 years of experience in the oil and gas industry worldwide, especially in the Asia Pacific region, holding senior management roles with laCs and NOCs. They are technical specialists with many years of practical experiences, encompassing the entire upstream segment of the oil and gas industry. We are of the view that the opportunity to invest in the assets which we intend to focus on has emerged more markedly in recent years due to: (i) the liberalisation of the oil and gas industry over the last decade resulting in the release of development and/or production assets by NOCs and governments for independent development;
(ii) the improved financial Viability of development and/or production assets as a result of sustained high oil and gas prices, rapid technological advancements and the completion of major oil and gas transportation infrastructures such as established gas pipeline/evacuation systems and established offshore platform complexes/pipeline networks with ullage in oil and gas terminals;

(iii) the economic viability to the incumbent larger laCs and NOCs to exploit these opportunities because of their high cost base; , (iv) the drive to develop huge unconventional oil and gas resources, namely shale oil and/or gas, CBM, etc. is attracting the attention of larger laCs. This is opening up more opportunities for smaller independent oil companies; and
(v) the availability of new techniques to improve oil recovery, enhance oil production, reactivation of idle wells and field wide facility rejuvenation for production assets.

The opportunity to acquire development and/or production assets is especially attractive in the Asia Pacific region. For instance, Malaysia has in recent years started the liberalisation process by releasing undeveloped small fields and matured fields for independent operatorship. Indonesia and Australia have reached a point where their landscape is dominated by independent operators that are operating many oil and gas fields. The governments of Philippines, Myanmar, Thailand and Vietnam are also encouraging E&P activities after easing regulatory and bureaucratic difficulties.

The E&P activities can be further segmented into three main phases as illustrated below:
5. INFORMATION ON OUR BUSINESS (Cont’d) On the other hand, a greenfield area is one where you start with completely undeveloped oil and gas accumulations. Oil and/or gas discoveries would have been made through exploration efforts, however, further reservoir, appraisals and development planning may be necessary to decide if exploitation of the area is economically feasible. Generally, greenfield requires an average of five years to be developed and produced whereas, Brownfields and fields in the proximity of existing producing areas can generate early production within a period of one to two years depending on the economic phase and state of the infrastructure of the oil and gas assets. Early production is done through various techniques and approaches such as producing from appraisal wells, installing quick-connect facilities to tie into existing production infrastructure in the surrounding area or leveraging on facilities and capacities of other operators in the area through tolling arrangements to use their facilities. Exploration phase The exploration of oil and gas by companies begins with the acquisition of acreage that is believed to hold hydrocarbon reserves that may be commercially developed. Acreage can be obtained via acquisitions, mergers, bidding on blocks at licence rounds, or grants from resource holders. Exploration of this acreage begins with geophysical surveys and seismic studies which are then examined by geologists and petroleum engineers to determine if drilling exploration wells is likely to result in a hydrocarbon discovery. The success rates for exploration drilling vary greatly, but the global average over the last twenty years has fluctuated in a range of 10-30%. When an exploration well fails to encounter hydrocarbons or does not discover hydrocarbons sufficient to justify commercial development, the well will be plugged and abandoned. When an exploration well is deemed to have encountered hydrocarbons sufficient to support commercial exploitation, an appropriate plan for development of the field or project will be determined.
Development phase Once a prospect has been shown to be technically and commercially viable, an FDP is submitted to the relevant authorities for approval. This includes planning for technical (subsurface and surface engineering), operational (services and management teams) and commercial (contracts and marketing) aspects, evacuation network and considerations for risks specific to a field. Thereafter, a project enters the stage of procurement (including all the necessary people, equipment and facilities) where company resources and finances are committed.
Production phase Production of oil and gas is the operational and technical objective of an FDP. Production of a field can go through numerous phases depending on the reservoir, hydrocarbon type and commerciality of remaining Reserves. Once the development is on-line, production is gradually increased until it reaches peak production. This is maintained for a number of years before production starts to decline. The technical, operational and commercial teams will implement or consider investments in enhanced recovery methods that can increase production or slow the rate of natural decline.
I Company No.: 103440~

 

5. INFORMATION ON OUR BUSINESS (Cont’d) A summary of our key criteria in selecting an asset for our Qualifying Acquisition is set out below: Type of asset I Type of target resourcesl Area of focus Risk profile Key selection criteria Development • Fields containing Contingent I Moderate • Onshore and offshore (for our purpose, the focus is on shallow Resources! Reserves including: water depth not exceeding 120 metres) fields ~ fields requiring further appraisal to • At least Proved plus Probable Reserves confirm the commercial viability of • A preference for oil accumulation assets with opportunities for the resources; or the introduction of enhanced oil recovery techniques ~ fields in advance stage of appraisal • Good fiscal terms and development planning; or • Politically stable host country! region ~ fields with an FDP in progress or • Fields with early production potential that will generateapproved but where production has immediate cash flows not commenced. • Fields requiring further appraisal or development planning to enhance production and add to existing Reserves Production • Fields with known and commercially I Low • Onshore and offshore (for our purpose, the focus is on shallow recoverable resources (Reserves) water depth not exceeding 120 metres) fields inclUding: • A preference for oil accumulation assets with opportunities for ~ oil and gas fields already in the introduction of enhanced oil recovery techniques production phase that may have • Good fiscal terms potential for further development • Politically stable host country! region such as increase in production • Fields currently in productionand!or cost efficiency. 70

Notes: Our focus Our priority 5. INFORMATION ON OUR BUSINESS (Cont’d) The estimation of petroleum resource quantities involves the interpretation of volumes and values that have an inherent degree of uncertainty. These quantities are associated with development projects at various stages of design and implementation. Use of a consistent classification system enhances comparisons between projects, groups of projects, and total company portfolios according to forecast production profiles and recoveries. Such a system must consider both technical and commercial factors that impact the project’s economic feasibility, its productive life, and its related cash flows. Petroleum Resources Classification Petroleum is defined as a naturally occurring mixture consisting of hydrocarbons in the gaseous, liquid, or solid phase. The term “resources” encompass all quantities of petroleum naturally occurring on or within the Earth’s crust, discovered and undiscovered (recoverable and unrecoverable), plus those quantities already produced. Further, it includes all types of petroleum whether currently considered “conventional” or “unconventional.” The major recoverable resources classes are: Production, Reserves, Contingent Resources, and Prospective Resources, as well as Unrecoverable petroleum. The “Range of Uncertainty” reflects a range of estimated quantities potentially recoverable from an accumulation by a project, while the vertical axis represents the “Chance of Commercia/ity”, that is, the chance that the project that will be developed and reach commercial producing status. The following definitions apply to the major subdivisions within the resources classification: TOTAL PETROLEUM INITIALLY-IN-PLACE is that quantity of petroleum that is estimated to exist originally in naturally occurring accumulations. It includes that quantity of petroleum that is estimated, as ofa given date, to be contained in known accumulations prior to production plus those estimated quantities in accumulations yet to be discovered (equivalent to “total resources’? DISCOVERED PETROLEUM INITIALLY-IN-PLACE is that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations prior to production. PRODUCTION is the cumulative quantity of petroleum that has been recovered at a given date. While all recoverable resources are estimated and production is measured in terms of the sales product specifications, raw production (sales plus non-sales) quantities are also measured and required to support engineering analyses based on reservoir voidage. Multiple development projects may be applied to each known accumulation, and each project will recover an estimated portion of the initially-in-place quantities. The projects shall be subdivided into Commercial and Sub-Commercial, with the estimated recoverable quantities being classified as Reserves and Contingent Resources respectively, as defined below. RESERVES are those quantities of petroleum anticipated to be commercially recoverable by application of development projects to known accumulations from a given date forward under defined conditions. Reserves must further satisfy four criteria: they must be discovered, recoverable, commercial, and remaining (as of the evaluation date) based on the development project(s) applied. Reserves are further categorised in accordance with the level of certainty associated with the estimates and may be sub­classified based on project maturity and/or characterised by development and production status. 5. INFORMATION ON OUR BUSINESS (Cont’d) CONTINGENT RESOURCES are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations, but the applied project(s) are not yet considered mature enough for commercial development due to one or more contingencies. Contingent Resources may include, for example, projects for which there are currently no viable markets, or where commercial recovery is dependent on technology under development, or where evaluation of the accumulation is insufficient to clearly assess commerciality. Contingent Resources are further categorised in accordance with the level of certainty associated with the estimates and may be subclassified based on project maturity and/or characterised by their economic status. UNDISCOVERED PETROLEUM INITIALL Y-IN-PLACE is that quantity of petroleum estimated, as of a given date, to be contained within accumulations yet to be discovered. PROSPECTIVE RESOURCES are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective Resources have both an associated chance of discovery and a chance of development. Prospective Resources are further subdivided in accordance with the level of certainty associated with recoverable estimates assuming their discovery and development and may be sub­classified based on project maturity. UNRECOVERABLE is that portion of Discovered or Undiscovered Petroleum Initially in-Place quantities which is estimated, as of a given date, not to be recoverable by future development projects. A portion of these quantities may become recoverable in the future as commercial circumstances change or technological developments occur; the remaining portion may never be recovered due to physicallchemical constraints represented by subsurface interaction of fluids and reservoir rocks. Estimated Ultimate Recovery (“EUR’J is not a resources category, but a term that may be applied to any accumulation or group of accumulations (discovered or undiscovered) to define those quantities of petroleum estimated, as of a given date, to be potentially recoverable under defined technical and commercial conditions plus those quantities already produced (total of recoverable resources). Total recoverable or EUR may be termed Basin Potential. The sum of Reserves, Contingent Resources, and Prospective Resources may be referred to as “remaining recoverable resources”. When such terms are used, it is important that each classification component of the summation also be provided. Moreover, these quantities should not be aggregated without due consideration of the varying degrees of technical and commercial risk involved with their classification. (Source: SPE, November 2011) THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK 5. INFORMATION ON OUR BUSINESS (Cont’d) In evaluating the prospects, our Company will leverage on the leadership, experience, technical expertise and strength of our Management Team, guided by the stewardship of our Board to consider amongst others, the following selection criteria for the Qualifying Acquisition: (i) Type of assets The type of oil and gas assets which include onshore and offshore (for our purpose, the focus is on shallow water depth not exceeding 120 metres) fields to be acquired will be prioritised by the following characteristics: • Mature producing fields.
• Commercially viable with upside technical production and Reserves potential which will allow us to enhance production and add Reserves to the field through further appraisal and re-development activities.
• Low to moderate risk with a preference for assets with early production potential that will generate quicker cash flows. These may include oil or gas fields in advanced stages of appraisal or development planning, or with an FOP in progress or approved but where production has not commenced.

(ii) Ownership/Operatorship role For the purpose of our Qualifying Acquisition, we will acquire company and/or asset. For clarity, company refers to corporate which owns a portfolio of oil and gas blocks and/or fields while asset refers to a specific oil and gas block or field. As it is our VISion to establish our Company as an independent E&P company, we will acquire a company and/or asset where our Management Team can add value by having management control to drive the growth and development of the company and/or asset given that our Management Team members have an average of over 30 years of operating experience in the oil and gas industry within the Region of Focus. If we acquire a target asset, we will have Working Interest of more than 33% in the target asset and if we acquire a target company, we will have a majority ownership of more than 50% in the target company. In addition, we will be the operator of the asset. Operator serves as the overall manager of an E&P asset and is responsible for managing the operations and making strategic and financial decisions. Generally, but not always, the operator will have the largest equity stake or Working Interest in the asset. As an operator, we will have management control over the target asset. (iii) Focus on Asia Pacific region We will focus on assets in the hydrocarbon basins in the Region of Focus due to the following factors: • the liberalisation of the oil and gas industry has resulted in good opportunities in the region as set out in Section 5.2.1.3(i) of this Prospectus; I Company No.: 1034400-0 I 5. INFORMATION ON OUR BUSINESS (Cont’d) • the acceptable sovereign risk in the region which includes the considerations such as government supports, fiscal policies and political stability; and • our Management Team’s vast experience in the region. opportunities in geographic areas outside of our Region of Focus will only be pursued on a selective basis provided the returns are attractive and the target assets meet our selection criteria. Our selection criteria for such areas will be the same as for our Region of Focus save for that wewould require a minimum IRR of 20% with established oil and gas infrastructure in the area and acceptable sovereign risk to enable field production within a maximum period of two years from the Qualifying Acquisition. We shall only consider PSC or Concession fiscal regimes in such areas. (iv) Petroleum fiscal terms and/or regimes We place priority on E&P assets on the two most common petroleum fiscal regimes, namely the Concession and PSC arrangements. These arrangements enable our Company to attain the best value out of the oil and gas Reserves as we are able to realise the full benefit of the commercialisation of hydrocarbon production. However, we will also consider other petroleum fiscal regimes such as RSC provided the returns and risks are acceptable. When evaluating the Concession or PSC arrangements, we will evaluate the fiscal terms including, amongst others, the expiry of the PSC terms, the amount of royalty and tax payable to the government of the host country, cost recovery and profit sharing ratio. (v) Attractive valuation and other financial terms (a) Valuation of the assets The valuation of the potential assets relative to comparable assets and required returns, which include among others, the following considerations: • the minimum project IRR of 15% (which does not take into account the associated costs of the acquisition);
• Proved plus Probable Reserves (2P Reserves) in excess of 10 MMboe and 20 MMboe for target asset and target company respectively;
• the conditions and state of the assets; and
• the production volume of the assets.

For assets located in geographic areas outside of our Region of Focus, we would require a minimum IRR of 20% (which does not take into account the associated costs of the acquisition) given that the potential risks and uncertainties to operate in such regions are generally expected to be higher. 5. INFORMATION ON OUR BUSINESS (Cont’d) (b) Financial commitments The level of financial commitments required to acquire and develop the oil and gas fields. (vi) Technical and operational aspects We will consider and evaluate the extent of operational, technical and geological risks in respect of the oil and gas assets. (vii) Environmental and social considerations We will be conscious of the environmental and social concerns regarding the oil and gas industry and will take into account local regulations regarding emission restrictions, hydrological impacts, local health and safety requirements as well as socio-economic obligations. For avoidance of doubt, if we acquire a company, the following criteria3 are taken into consideration: (a) we will have a majority ownership of more than 50% in the target company which owns a portfolio of assets (with 2P Reserves in excess of 20 MMboe);
(b) the asset(s) held by the target company, which contribute to at least 50% of the 2P Reserves of the target company must fulfill the following criteria: • operatorship; and

• Working Interest of at least 33%; (referred to as “Operated Asset(s)”). For avoidance of doubt, we may not be an operator in all the assets held by
the target company;
(c) the 2P Reserves attributable to our Company4 from the Operated Asset(s) must comprise at least 33% of the total 2P Reserves of the target company;
(d) a minimum project IRR of 15%;

The diagrammatical structure is as shown below: (0) Reserves attributable to Reach Energy from Asset 1 is at least 33% of the 2P Reserves of the target company

The Reserves attributable to our Company is computed based on the percentage of our ownership in the target company.
I Company No.: 1034400-0 I 5. INFORMATION ON OUR BUSINESS (Cont’d) (i) Access to assets Our Management Team’s experience in senior positions in the oil and gas industry worldwide and especially in Asia Pacific with IOCs and NOCs have equipped them with a wide network of contacts. This not only provides them with access to assets that are open for sale but also allows them to proactively seek acquisition opportunities, farm-ins and partnerships. (ii) Identify and evaluate the assets The oil and gas industry requires technical professionals and industry professionals in identifying good value assets. Our Board and Management Team have the required knowledge and experience in identifying target assets. We will identify, evaluate and select target company and/or asset that meet our selection criteria as set out in Section 5.2.1.1 of this Prospectus, having low to moderate risk and meet other considerations deemed appropriate by our Board and Management Team. Upon identification or selection of the potential target assets, we will leverage on our Board and lVIanagement Team’s skills, experience and networks to enter into negotiations with vendor and successfully complete the acquisition of oil and gas resources. Our Board and Management Team will also identify technologies and additional skilled personnel with the expertise to assist in identifying the target company and/or asset. (iii) Operate the assets The production operations phase is where most of the value is created by maximising Reserves extraction in the most efficient manner with best operating practices and prudent reservoir management. This involves the following: • uninterrupted production to maximise recovery during the contract period;
• low operating unit cost per barrel;
• best practices in maintenance of oil and gas facilities;
• HSE excellence;
• recruiting, nurturing and retaining a highly skilled workforce; and
• continued surveillance of the reservoirs to ensure proper reservoir management.

THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK I Company No.: 1034400-0 I 5. INFORMATION ON OUR BUSINESS (Cont’d) (iv) Grow the assets We expect to create value by: • growing our Reserves organically by exploiting any upside potential such as deeper reservoirs, Reserves behind casing, infill drilling, stranded gas, etc; and
• conducting studies to devise efficient methods to increase production of oil and gas at commercially viable levels.

5.2.1.3 Rationale for our Qualifying Acquisition strategy We believe that there are favourable environment and market conditions in the oil and gas industry for our Qualifying Acquisition, particularly in the Region of Focus for the following reasons: (i) Liberalisation of the oil and gas industry Over the last decade, there has been a trend of liberalisation of the oil and gas industry in the Asia Pacific region. This is largely spurred by declining oil production in the region which has resulted in an increasing reliance on development and/or production assets to mitigate the decline. NaGs and governments in the region have been releasing oil and gas assets to independent operators for their ability to maximise production and recovery in a cost effective manner. Some examples are as follows: ~ Malaysia Oil production has been declining over the last decade while gas production rose significantly in the early 2000s, but has shown signs of declining more recently. Due to the importance of the oil and gas industry to the country, the Malaysian government and PETRONAS have taken steps to increase investment and activity. New fields, new fiscal terms and enhanced recovery techniques are encouraging greater investment in the country. PETRONAS’ specific objectives include rejuvenating existing fields through EaR, developing small fields and intensifying exploration activities. This will include: • reviewing PSG terms and introducing new petroleum contract agreements;
• attracting companies with specialised skills and abilities; and
• using its role as industry regulator to ensure the most economic and efficient technologies are deployed as well as see to infrastructure being cooperatively utilised.

Improved fiscal terms, ease of entry and ease of doing business should open new areas for investment as well as make previously marginal or non-commercial fields now economically attractive. (Source: PFC Energy) 5. INFORMATION ON OUR BUSINESS (Cont’d) Since 2010, PETRONAS has made sustainable oil production its priority amid declining hydrocarbon Reserves locally and abroad. Generally, the blueprint is a three-pronged strategy: (a) maximise oil recovery factor through EOR in existing mature oilfields;
(b) development of marginal/small oil and gas fields; and
(c) rationalisation of international operations.

The area that is most relevant to our Company is the development of marginal and small fields. Malaysia has numerous small oil and gas fields (defined as fields having Reserves of less than 30 MMboe). PETRONAS has formulated a plan to develop around a quarter of these fields by entering into various commercial arrangements with independent oil companies. Developing these fields in an economically attractive manner is often challenging, as they need the same expensive infrastructure as large fields, while the expected revenue streams are smaller due to the smaller Reserves sizes. As part of PETRONAS’ strategy to accelerate production and add new Reserves, several full field reviews and production enhancement effort activities are being conducted. PETRONAS intends to work with the industry on three fronts to make the most of these fields: • Review the PSC terms and introduce new petroleum agreements to ensure that operators of these small fields receive enough economic incentives so that they find sanctioning investments in small field developments attractive versus their cost of capital and versus other opportunities available to them in Malaysia and abroad.
• Attract E&P operators that specialise in small fields. These operators typically have a development and operating approach that is specifically adapted to the challenges of these types of field. This provides an opportunity that aligns with the business objectives of our Company.
• Facilitate collaboration between players to allow sharing of facilities and other synergistic measures to improve the economics of small field development.

Thus far, PETRONAS has awarded a number of contracts for such small field development and has identified several other small fields for development in the near term. In addition, as basins mature there is also a growing number of development and/or production assets that are being left by the IOCs and similarly, PETRONAS has made available such assets to independent operators through various commercial arrangements. 5. INFORIVIATION ON OUR BUSINESS (Cont’d) ~ Indonesia Oil production has been rapidly declining over the last decade while gas production has increased slightly. Much of that increase is going to higher domestic gas consumption which is less lucrative for the Indonesian government and NOG (Pertamina) than LNG exports. Pertamina’s focus is on growing production from its domestic E&P portfolio, through EOR and infill projects at mature domestic fields and developing its major projects such as Gepu. The Indonesian government is also developing a GBM strategy for Indonesia as the country possesses a significant potential resource (-450 trillion cubic feet) of GBM. There is also potential for shale production towards the end of the decade. The Indonesian government has also indicated a willingness to adjust fiscal terms to attract more investment, particularly in new or underexplored/underinvested areas. These adjustments can include general improvements of the equity split of production to reductions in VAT and import duties on eqUipment and facilities. A reorganisation of the relationship between the regulator, NOG and government is ongoing in Indonesia which may cause delays in the short-term. (Source: PFC Energy) With the production declines there has been a shift with small Brownfields accounting for the majority of Indonesia’s production. The Indonesian government recognises that significant investments are required to reverse this trend. Indonesia has introduced permanent tax breaks on the import of equipment for oil and gas exploration as part of its efforts to stem declining production and minimise crude import requirements. The tax breaks will also apply to eqUipment associated with geothermal drilling activities. It also unveiled a new development strategy in 2011 (Master Plan for Economic Expansion and Acceleration 2011-2025) that emphasised more private sector involvement in infrastructure expansion, such as wider use of public-private partnerships in the oil and gas sector. The Indonesian government further steps up its efforts to encourage investments by introducing various measures to attract independent E&P players. For example, the Indonesian government has plans for a petroleum fund, aimed at promoting research and investment into the country and is also looking to ‘provide a better portion’ gained from output for companies in its production sharing contracts. It will take time before these reforms are implemented given the country’s cumbersome bureaucratic tradition and for investment to show results. Nevertheless, there has been some success in recent development. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK 5. INFORMATION ON OUR BUSINESS (Cont’d) ~ Australia Oil production has been declining over the last decade while gas production, with a significant boost via LNG exports, has been steadily rising over the same time period. Australia has one of the most open oil and gas business environments in the world, similar to the US, Canada and Norway. This attracted a large number of major laCs pursuing oil production first and later pursuing large offshore gas deposits via LNG exports. There continues to be a variety of business opportunities ranging from enhanced recovery in mature/brownfield areas, underexplored frontier areas, CBIVI and emerging shale plays. Australia’s government has shown sensitivity to the financial needs of the oil and gas industry to continue high levels of investment in the country, but it also continues to implement strict environmental and regulatory controls. (Source: PFC Energy) Australia’s situation is similar to Indonesia. Maturing basins have resulted in a decline in production. However, unlike Indonesia, the absence of a NOC has accelerated the shift towards greater involvement of independents. The Concession fiscal regime is also more favorable for the independents. Given the vast landscape of the Australian continent, there are still many underexplored sedimentary basins that may have substantial oil and gas resources. For the majority of these areas, the potential extraction levels are ambiguous. Over time, the location of industry production has changed, reflecting the discovery of new Reserves across Australia. For instance, earlier oil and gas discoveries in the Cooper, Eromanga and Gippsland Basins have reduced in their production profile while the contribution of newer discoveries in the Bonaparte, Browse and Carnarvon Basins has grown industry revenues substantially. Importantly, these newer basins are yet to be fully exploited and represent a key source of future capacity for the sector. The oil and gas exploration and extraction industry is subject to a substantial amount of legislation and regulation from both state and federal bodies in Australia. These regulations surround amongst others, occupational health and safety, structural integrity, resource management and land access, taxation and environmental issues. There has been significant regulatory reform in the upstream petroleum market in the last decade, aimed at increasing transparency and decreasing regulatory burdens and associated costs. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK I Company No.: 1034400-0 I 5. INFORMATION ON OUR BUSINESS (Cont’d) ~ ~ Myanmar Myanmar’s oil and gas industry was under restrictive investment sanctions until recently. Due to this lack of investment and activity, there is a significant amount of underexplored or untapped resource potentially available. Myanmar’s gas production has been slowly increasing, but the industry and infrastructure is in need of investment, technology and modernisation. Many large laCs have expressed interest in entering Myanmar, but as with any frontier (geologic or economic) there is uncertainty surrounding the eventual results. Myanmar recently concluded its onshore and offshore bid rounds in October 2013 and March 2014, respectively. The bid rounds attracted a range of bidders including NOCs (Oil & Natural Gas Corp Ltd (ONGC), Brunei National Petroleum Co (PetroleumBRUNEI), PETRONAS, PTT Exploration and Production Pic (“PTTEP”)), laCs (Eni SpA, Statoil ASA, Shell, TOTAL SA, ConocoPhillips Company, BG Group Pic) and smaller independents (Pacific Hunt Energy Corp, IVIPRL E&P Pte Ltd) with the laCs dominating in the deepwater offshore blocks. (Source: PFC Energy) The recent easing of Western sanctions on Myanmar since its efforts at reform and the opening up in 2012 has brightened the prospects for greater involvement in the country’s oil and gas industry. While the large offshore blocks are likely to be dominated by the laCs and NOCs, there are opportunities for independents to participate in some of the smaller onshore and shallow water fields. Thailand Both oil and gas production have increased steadily over the last decade, but proved Reserves are rapidly dwindling. The country’s production has long been dominated by a handful of companies, but smaller companies have been pursuing resources and brownfield opportunities left behind in shallow waters or onshore. The Thai government is hoping to attract increased investment to maintain production as well as add proved Reserves. The Department of Mineral Fuels (DMF) has announced plans to launch the 21 s licensing round which will comprise of onshore and shallow waters blocks that will include opportunities for EaR and brownfield activity. (Source: PFC Energy) Thailand holds large proven Reserves of natural gas and production has increased substantially over the last few years. However, the country still remains dependent on imports to meet growing domestic demand since it is the second largest consumer of natural gas in Southeast Asia. Several projects are ongoing in an attempt to increase Thailand’s natural gas supplies over the next few years. The largest of these is PTTEP’s Arthit project, off the coast of Songkhla. 5. INFORMATION ON OUR BUSINESS (Cont’d) ~ ~ Petroleum exploration and production grants to private investors are in the form of concessionary contracts where the concessionaire pays the government royalties, special remuneration benefits and tax in consideration for the concession granted. Petroleum concession agreements are modeled on a draft contained in a ministerial regulation and contain two periods, an exploration period and a production period. There are no foreign ownership restrictions imposed on the petroleum industry. Nevertheless, most foreign companies often work in joint ventures with PTTEP, PTT Public Company Limited’s upstream subsidiary. PTTEP and various foreign companies continue to aggressively explore for oil Reserves throughout Thailand. Vietnam Oil production over the last ten years has been relatively steady but is expected to decline over the coming decade. Gas production has steadily risen over the last ten years and there are significant volumes remaining to exploit. Some of these volumes are in areas lacking infrastructure or are not currently supported by market prices in Vietnam. The Vietnamese government and NOC are looking at options for improving fiscal terms to attract new and renewed investment. These could include tax incentives, reduced bureaucracy and higher domestic gas and product prices. (Source: PFC Energy) Vietnam remains an important oil and gas producer in Asia Pacific. With the growing energy demand and fast declining domestic oil production, there is a big push for greater E&P activities especially in Vietnam’s vast continental shelf and also in the territorial disputed area with China. The state-owned Vietnam Oil and Gas Corporation (PetroVietnam) is actively involved through partnership and/or joint ventures with many laCs, NOCs and other smaller independent energy companies in undertaking exploration, development and production activities. To increase the Reserves base, Vietnam has intensified exploration and development efforts, mainly offshore, as most of this area remains relatively unexplored. Generally, with high proven Reserves and the push by the Vietnamese government to increase oil output, this can become an attractive opportunity for new players to participate in upstream ventures. Philippines Unlike most countries in Asia, oil and gas production in the Philippines has historically not seen a significant amount of exploitation and development. Country production has thus far peaked at 33 kbd of oil (2010) and 305 IVIMcfd of natural gas (2009). In terms of Reserves, both oil and gas have been relatively steady over the last ten years at 139 MMboe and 3,480 bcf of gas. There has been renewed interest in the Philippines due to its relatively unexplored acreage, steady GDP growth and steady population growth; all being drivers of a potentially robust energy market. (Source: PFC Energy) 84 I Company No.: 1034400-0 I 5. INFORMATION ON OUR BUSINESS (Cont’d) Global energy firms have initiated numerous proposals for projects for the exploration and development of oil and gas in the Philippines. Existing energy players have also revived once stalled projects to support the government of Philippines’ objective to diversify the country’s energy sources and to ensure long-term energy security. Among the more notable projects was the Malampaya gas field project off Palawan, where latent hydrocarbon basins have been showing good leads in seismic data. There is also a more aggressive push to develop oil and gas projects in potential hydrocarbon prolific areas which spread over 10.3 million hectares within the basins of Northwest Palawan, East Palawan, Sulu Sea, Mindoro-Cuyo, Cagayan, Central Luzon and Cotabato. Opportunities in other geographic areas will only be pursued on a selective basis provided the return on investment is deemed attractive and fall within our selection criteria as set out in Section 5.2.1.1 of this Prospectus. (ii) Improved financial and project viability The financial and project viability of development and/or production assets, particularly small fields, has improved in recent years. This is driven by sustainable high oil and gas prices and cost effective technologies for Reserves replacement and reviving problematic producing wells and hence, mitigating production decline in matured fields. Improvements in gas transportation infrastructure and the wide spread of existing oil and gas facilities, have also made more oil and gas field developments viable by providing cost effective means of processing, evacuation and transportation. ~ Sustainable high oil and gas prices and demand Based on the IMR Report, oil prices began to surge in 2006 due to a rise in world demand and lack of surplus spare capacity. During the global economic downturn from 2007 to 2009, although the demand for oil decreased and supply pressures on oil prices began to abate, oil prices were still on an upward trend. Oil prices have risen from an average of USD35.30 per barrel during the 2000 to 2005 period to an average of USD72.69 per barrel for WTI from 2005 to 2010. In early 2011, unrest in the Middle East and North Africa raised the fear that physical oil supplies would be affected which kept oil prices high at above USD100 per barrel and prices have remained at those levels. The cost of producing oil has risen significantly over the years and this rise in costs has also prOVided a “cost push” factor to oil prices. Nevertheless, the emergence of significant production from shale oil and gas resources in North America has affected global supply and demand. Notwithstanding, given the demand for oil and natural gas and the market conditions, it is expected that the oil price environment will be volatile but sustained at levels which are significantly higher than prices experienced a decade ago. Brent prices going forward are expected to continue a slow rise through the end of 2013 and taper off during 2014.
Annual Average Price -Brent Crude Oil US$/bbl

Brent Crude Price
Global Energy Consumption -By Region

Asia Pacific (exc. China) China Africa Middle East Former Soviet Union Europe South America North America mmtoe 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0
5. INFORMATION ON OUR BUSINESS (Cont’d) >-Reserves evaluation and maximising oil recovery The process of quantifying Reserves is governed by scientific, political and economic considerations. Reserves evaluation is an interpretive process and its uncertainty is inversely proportional to the understanding of the producing hydrocarbon accumulation. Most oil producing regions have mature fields and there is a need to look for new technologies and methodologies to enhance the production and maximisation of oil recovery. There has been an abundance of research and development, notably in: • seismic acquisition and processing and more advanced utilisation resulting in enhanced interpretation capabilities;
• new and improved drilling technologies (reservoir management);
• well completion practices, as well as in equipment design, analytics, etc.;
• reservoir management practices in terms of production control, water management and inhibition, gas utilisation, etc.; and
• Improved Oil Recovery and EOR technologies and techniques.

Furthermore, new mobile offshore production units designs enable effective and commercially viable drilling of a cluster of small fields. Drilling of horizontal and lateral wells has enabled more cost efficient field development and the use of Inflow Control Valve (ICV) in horizontal well completion has proven effective in controlling fluid flow from the reservoirs into the wellbore. (iii) Opportunities for independents 10Cs like ExxonMobil, Shell, BP Pic, etc. have left many smaller oil and gas discoveries undeveloped and relinquished these fields back to the governments due to Reserves uncertainties and their own high unit development costs. In addition, these large oil companies may also discontinue production and relinquish older oil and gas fields should production drop to a level where the high cost base of the 10Cs may no longer economically justify their involvement or continued interest in such fields. Instead the 10Cs are now more focused on large greenfield sites. As such, there is much room and opportunity for a new breed of small and medium but more agile independent E&P companies to emerge and participate in oil and gas development, including the older oil and gas fields which have been relinquished by the 10Cs. Typically, the cost base of such independents is conducive for this purpose. There is also a general rush amongst the larger 10Cs and governments around the world to invest and develop unconventional oil and gas resources. As the unconventional resource accumulations are extensive, some of the larger IOCs are consolidating their assets to focus on unconventional hydrocarbon ventures. This trend is expected to open up more opportunities for smaller independent oil companies in the arena of conventional hydrocarbon ventures around the globe. Within the Asia Pacific region, new exploration projects for unconventional oil and gas are underway or being targeted in Indonesia, Australia and New Zealand. 87

5. INFORMATION ON OUR BUSINESS (Cont’d) >-We will then conduct studies and detailed evaluation of the shortlisted target assets. We will further proceed with the preliminary due diligence process on the shortlisted target assets which encompasses legal, financial, operational and technical verifications. Our Management Team will also conduct a risk management assessment on the shortlisted target assets. In addition to the expertise of our Management Team and our Board, we will engage external professionals and industry experts to assist in the business and financial assessment and due diligence of potential assets, if necessary. We would also engage recognised professionals to assist in the regulatory approvals. Upon satisfactory preliminary due diligence outcome, our Management Team will propose/present the findings on the shortlisted target assets to our Risk Management Committee prior to seeking our Board’s endorsement for further negotiation with the owner of the selected target assets on the commercially acceptable terms and conditions of the sale and purchase agreement which are subject to the final approval by our Board. Our Board’s approval will enable us to enter into the requisite conditional sale and purchase agreements for the target asset, of which we will then seek the relevant authorities and our shareholders’ approval for the proposed acquisition of the target asset as our Qualifying Acquisition. The selection process above will enable us to effectively and expediently identify assets that meet our selection criteria as set out in Section 5.2.1.1 of this Prospectus and ultimately undertake the Qualifying Acquisition subject to a comprehensive due diligence process which will continue until the completion of our Qualifying Acquisition as well as evaluation by our Management Team and our Board. 5.2.1.5 Comprehensive due diligence process on target asset for our Qualifying Acquisition As at the date of this Prospectus, we have not identified any target asset for our Qualifying Acquisition nor have we entered into any agreement whether oral or written, binding or non-binding with any parties. Additionally, we have not signed any non-disclosure agreements with any potential parties to evaluate oil and gas assets. Even though we have yet to identify any candidates for our Qualifying Acquisition, we believe in the capability of our Management Team to propose the target asset for our Qualifying Acquisition within the Permitted Timeframe. In addition, our Management Team has access to independent consultants and advisors who can provide additional insights to assist us in the identification and evaluation of suitable acquisitions. Our Management Team will conduct the necessary legal, financial, operational and technical due diligence on the target asset which includes information on level of resources and its range of estimates, availability of past and current data, terms of services agreement, experience and/or skill of operators/partners, contractual obligations and liabilities and the condition of physical assets that will fulfill the selection criteria described in Section 5.2.1.1 of this Prospectus. 5. INFORMATION ON OUR BUSINESS (Cont’d) In addition, the evaluation may include regular meetings with the incumbent operator and their joint-venture partner (if any), their management team, their business partners, host country regulators and site inspection of the facilities. An independent industry expert will be engaged to provide an independent valuation of our Qualifying Acquisition. Any evaluation relating to the merits of a particular acquisition will be based on the selection criteria described in Section 5.2.1.1 of this Prospectus as well as other information or factors deemed important by our Management Team.
5.2.1.6 Early identified strengths Our strength is the wide experience and relevant expertise of our Management Team members who have an average of over 30 years of experience in the oil and gas industry and they comprise technical specialists with many years of practical experiences in E&P, encompassing the entire value chain of upstream segment of the oil and gas industry. They have the expertise and experience to: (i) source, evaluate and execute a Qualifying Acquisition; and
(ii) operate the assets,

particularly in the Region of Focus. Hence, their wealth of knowledge and contacts in the Region of Focus would be vital to sourcing the suitable target assets, developing and operating the assets effectively to deliver shareholder value. The key strengths of each member of our Management Team are as follows: (a) Our Managing Director, Ir. Shahul Hamid bin Mohd Ismail, had spent a total of 25 years working for ExxonMobil and Shell, which are the top two oil and gas majors in the world. He has been intimately involved in many greenfield and brownfield developments which include sourcing, evaluating, developing and operationalising oil and gas fields in Malaysia, Australia, Brunei, the Philippines, Indonesia, Myanmar, Sri Lanka, the Persian Gulf and the interior of Sultanate of Oman. His work exposure, working many years in ExxonMobil and Shell, in both offshore and onshore oil and gas assets globally and in wider and diverse areas of the E&P sector has ideally equipped him to lead our Company. As the General Manager of Shell’s Sarawak Oil Business Unit, he managed the oilfields in the Balingian and Baram Delta areas contracted under Shell Malaysia, along with Shell Malaysia’s Bintulu Crude Oil Terminal and the Bintulu Integrated Facilities, which handled 2,800 MMcfd of gas sales, 50 kbd of crude export and 70 kbd of condensate export. He also managed several brownfield development projects from conceptual stage to EPCC and operations. He has also held the role of Operations Director of Sarawak Shell Berhad and Sabah Shell Petroleum Co. Ltd. during a crucial organisational transition period where the companies underwent a business re-engineering exercise to increase profitability, optimise cost-base and redeploy staff. During this period, the challenge was to manage the business re-engineering exercise including attending to staff redeployment matters whilst ensuring the daily business operations was uninterrupted. He managed the operations function of Shell Malaysia’s entire E&P assets in Sabah and Sarawak. He was subsequently appointed as the Managing Director of Shell Refining Company (Federation of Malaya) Berhad, which is listed on the Main Market of Bursa Securities (“Shell Refining Company”) and Lutong Refining Company Sdn Bhd and was responsible for the overall operations of a 156 kbd complex refinery and a 45 kbd simple refinery. 91 5. INFORMATION ON OUR BUSINESS (Cont’d) In PDO, as Technical Services Manager, he was responsible for all the operations, engineering and technical services of PD~ and also managed several brownfield development projects from conceptual stage to EPCC and operations. During his long career in the E&P sector, he personally led and handled many projects from start to finish, including commercial negotiations, economic analyses and technical evaluations. He dealt with top level governmental, society and oil industry personnel and international consultants in several countries in leading these efforts. (b) Our CFO, Azmi bin Tan Sri Arshad, started his career in the finance sector and later held senior positions in financial management, corporate finance and operations related roles in the oil and gas industry. At SapuraCrest Petroleum Berhad (“SapuraCrest”), he played a key role in the acquisitions of Sapura Energy Sdn Bhd and Total Marine Technology Pte. Ltd, which include the financial evaluation and funding of the acquisitions. He was also involved in the joint venture arrangements with foreign partners for offshore installation and construction activities which include the construction of offshore support vessels and rigs for a combined value of over USD600 million.
He has been involved in the oil and gas industry in financial management since 2003 and subsequently in additional senior managerial roles including supply chain management, risk management and HSE. He also has experiences in funds raising from both the debt and capital markets, mergers and acquisitions as well as syndicated financing for capital expenditure, project financing and working capital, which are vital for business growth and expansion in the oil and gas industry. He was also on the board of operating subsidiary companies as well as being a management representative of SapuraCrest in overseeing the performance of local and overseas subsidiaries and joint ventures in Malaysia, Vietnam, Thailand, Myanmar, Indonesia, India and Australia.
(c) Our Vice President of Petroleum Engineering, Abd Rahim bin Shamsudin, has over 30 years of experience in E&P activities with PETRONAS, actively involved in oil and gas field development and production operations. He led the development team in the successful evaluation and redevelopment of the Baronia field in Sarawak, realising increased field production. He was personally involved in the successful planning and implementation of horizontal well drilling, various new well completion technologies and water and gas wells injection scheme. As a Technical Manager for the Sabah operations, he provided technical support to PETRONAS Carigali’s oil and gas production operations in Sabah, keeping high facilities uptime and effective well performance management. As Asset Manager of Tembungo­Erb West and Angsi fields (the then main oil and gas producing field for PETRONAS Carigali), he implemented a number of key initiatives to enhance the oil and gas production.

During his assignment as the Head of Petroleum Engineering in Turkmenistan, he was instrumental in evaluating PETROI’JAS’ Block 1 oil and gas Reserves potential based on new drilling results and provided update to Block 1 master development plan. His notable achievement was the successful completion of phase 1 gas development project delivering gas supply capacity to meet PETRONAS’ gas sales commitments. 92 5. INFORMATION ON OUR BUSINESS (Cont’d) (d) Our Vice President of Geosciences, Dr Robert King Park, has almost 40 years of experience in the oil and gas industry with experiences in sourcing and evaluating oil and gas assets. He was a Specialist Advisor to Phillips Petroleum global operations before moving to Schlumberger Wireline Services (Indonesia) Ltd in Jakarta, Indonesia as Unit Geologist. While he was in YPF (Yacimientos Petrollferos Fiscales)-Kodeco Energy Co. Ltd (UKodeco”), he was involved in planning and implementing a successful exploration and development-drilling programme. He was contracted to Kodeco as its Senior Specialist Advisor mainly in geological capacity. He was part of Kodeco’s multidisciplinary operations team charged with implementing revitalised exploration and development programmes from concept to operation. He has expertise in carbonate reservoirs which were the backbone of Kodeco’s Reserves base in Indonesia. During his tenure in Kodeco, Dr Robert King Park together with his team successfully added 240 MMbo of new Reserves, resulting in more than 1,000% increase in both production and net revenue to Kodeco.
In recent years, he has evaluated potential sites and geological issues across the Asia Pacific region. He has vast experience in the Asia Pacific region (Indonesia, Malaysia, Australia, New Zealand and Philippines), especially Indonesia.
(e) Our Vice President of Operations, Ir. Syed Salim bin Syed Abu Bakar, has 28 years of working experience in the PETRONAS group of companies in upstream E&P, petrochemical, refining, oil business and research and technology. He was involved in developing new PSC arrangements for the expired PSCs in Peninsular Malaysia. He led a team for the development and execution of the master plan for the handover of existing production facilities from the outgoing PSC operators to PETRONAS Carigali. He also led the team for the Dulang Oilfield development, offshore Terengganu and successfully completed the start-up and operations of its production facilities and floating storage and offloading vessel (UFSO”), which was the first FSO operated by PETRONAS Carigali in 1990. He was involved in the feasibility study for the LNG Tiga offshore gas supply project.

He has been active in engineering and operations activities such as Asset Life Study, Asset Integrity Assessment, operations and maintenance management of offshore and onshore production facilities and performance improvement initiatives leading to operational excellence. He developed and led initiatives for the improvement of facilities reliability and uptime while ensuring HSE Management System compliance. He developed guidelines to perform benchmarking for production facilities uptime for PSC operators to ensure best-in-class production operations facilities efficiency. In addition, as a Production Manager with Greater Nile Production Operating Company in Sudan, he was responsible for continuous crude oil production from onshore field production facilities despite the adverse environmental and political challenges. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK 5. INFORMATION ON OUR BUSINESS (Cont’d) (f) Our Vice President of Business Development, Ronald Lee Schakosky, has spent over 30 years working for various major and international oil and gas companies such as CONOCO Inc, ExxonMobil, Atlantic Richfield Company, PETRONAS, Union Oil Company of California (“UNOCAL”), Kodeco and Pearl Energy Limited and EPCC companies such as Swiber Holdings Limited, Singapore and Leighton Offshore Pte Ltd. He has been involved in greenfield and brownfield projects for onshore and offshore in both shallow and deepwater developments. He has also been involved in the full life cycle of projects from conceptual design, front end engineering and design (FEED), fabrication, installation, commissioning, operations, maintenance, abandonment and decommissioning. He has experience in the initial sourcing and identification of potential acquisitions of brownfield blocks and development opportunities in Malaysia, Indonesia, Myanmar, Thailand and Vietnam. He successfully delivered the West Seno deep-water development floating production unit -producing oil at 40 kbd (Total Contract Value of USD750 miJlion) during his time at UNOCAL in Indonesia. He was responsible for the development and delivery of the West Seno Field facilities. In addition, he was also responsible for the efficient operation and maintenance of the MODEC Venture 1 floating production storage and offloading (FPSO) vessel including development of a maintenance management system. While at PETRONAS, he was responsible for construction, installation, commissioning and operation of the Dulang Platform, a 32 slot Wellhead Platform prodUcing 50 kbd (Total Contract Value of USD400 million). From investors’ standpoint, this is an opportunity to participate in a new phase in the oil and gas industry, particularly in the Region of Focus and benefit from the growth of independent E&P companies. In Reach Energy, you have a Management Team with the expertise, experience, proven track record and global contacts. Our ManClgement Team members used to be at the helm of major IOCs and associated business entities in the region. In addition, upon the Listing, we will have ready access to cash funding in the form of IPO proceeds of RM750 million to finance our Qualifying AcqUisition. Additionally, as a listed company, we have flexibility to finance the Qualifying AcqUisition and operations via a combination of readily available cash from the proceeds of the IPO as well as access to additional financing from debt and/or capital markets. 5.2.1.7 Investment in new technologies The high demand for oil and gas has long provided the stimulus for past and ongoing research and development programmes. Our Management Team is cognisant of established current and new technologies relevant to reservoir engineering, geophysical, geological studies/simulations, field development and production, which can be beneficial to our Company’s operations. We will evaluate and apply these technologies deemed suitable and effective, taking into consideration the track record and cost benefits throughout their life-cycle of use to achieve commerciality from a given E&P project. A commercial project is one in which oil and gas would exist and such accumulation can be developed and brought to production. 5. INFORMATION ON OUR BUSINESS (Cont’d) Recovery factors in oil and gas reservoirs vary widely depending on a range of parameters and reservoir properties from viscosity and gas ratio, to porosity type and permeability and depth, all of which will impact the commerciality of a given project. New well design and completion technologies continue to evolve to enhance recovery factors. EOR and secondary recovery technologies are of critical importance to Brownfields. These technologies are primarily developed by and available through various oil and gas service companies. Smaller E&P companies like Reach Energy can readily access these technologies through these service companies and sometimes gain an edge by prOViding the service company a test platform for a new technology. In this respect, we are currently studying new reservoir modelling technologies to better evaluate and more quickly quantify oil and gas Reserves. The industry will increasingly rely on better technologies to deliver more accurate and timely information. We intend to work closely with selected technology vendors for oil and gas development and extraction. Our Management Team comprises technical specialists with many years of practical experience encompassing the entire value chain of the oil and gas upstream activities, who possesses the necessary technical knOWledge to apply such technologies into our Company’s operations in achieVing the maximum commercial benefit from a given asset. Our Management Team is also committed to keeping abreast of the latest technologies in the oil and gas industry. 5.2.1.8 Prospective Target Companies or Assets As at the date of this Prospectus, our Company has not identified any target company and/or asset for our Qualifying Acquisition nor have we entered into any agreement whether oral or written, binding or non-binding with any parties. Additionally, we have not signed any non-disclosure agreements with any potential parties for information to evaluate the target company and/or asset for the Qualifying Acquisition. For the purpose of our Qualifying Acquisition, we will deploy the selection criteria as set out in Section 5.2.1.1 of this Prospectus to acquire a target company and/or asset with operatorship. An operator serves as the overall manager of an E&P asset and is responsible for managing the operations and making strategic and financial decisions. If we acquire a target asset, we will have Working Interest of more than 33% in the target asset and if we acquire a target company, we will have a majority ownership of more than 50% in the target company. For clarity, company refers to corporate which owns a portfolio of oil and gas blocks and/or fields while asset refers to a specific oil and gas block or field. Based on the amount which we intend to raise from the IPO Le. RM750 million, our Company will place RM710.625 million in an Islamic Trust Account and such amount is allocated for the purpose of the Qualifying AcqUisition. For an optimal asset portfolio and in order to achieve an optimal capital structure, we may potentially acquire a company and/or an asset size which is larger than the amount held in the Islamic Trust Account. In such event, we will raise additional financing from debt and/or capital markets to part-finance such acquisition. The acquisition size of the company and/or asset will depend on, amongst others, the negotiation between Reach Energy and the potential asset owner(s) and our ability to raise additional financing. 5. INFORMATION ON OUR BUSINESS (Cont’d) We will focus on Brownfields in the production phase and fields in the proximity of existing producing areas under the development and/or production phases for our Qualifying Acquisition. Such assets are already generating cashflow or close to generating cashflow and generally do not require substantial capital expenditure. If we acquire a target company, we will likely acquire the equity stake of an existing shareholder or partner which owns shares in a company that holds concession right/Working Interest in a portfolio of oil and gas asset. If we acquire a target asset, we will likely acquire part or whole of the interest of a party which has the concession right/Working Interest of an existing oil and gas block or field. The relationship among the parties are formalised via holding company or operating agreement, depending on the parties’ requirements. Such acquisition may also entail us entering into a separate supplemental operating agreement with other Working Interest party or parties to formalise our Working Interest in such asset. Even though we have yet to identify any target company and/or asset for our Qualifying Acquisition, we believe in the capability of our Management Team to propose target company and/or assets within the Permitted Timeframe. In addition, we have access to independent consultants and advisors to complement us in the identification and evaluation of the said target company and/or assets, where required. Our Management Team will conduct comprehensive due diligence on the target company and/or asset for our Qualifying Acquisition. Please refer to Section 5.2.1.4 of this Prospectus on the selection process. 5.2.2 Our Post Qualifying Acquisition Strategies 5.2.2.1 Business strategies adopted to ensure growth After the initial Qualifying Acquisition, our Company will implement various initiatives and strategies to achieve the following long term goals set by our Management Team: (i) to build a strong base in the upstream oil and gas value chain globally and continue to generate revenue streams organically by adding value to our assets;
(ii) to have a balanced portfolio of E&P assets for sustainable growth;

(iii) to further develop our position as a regional operator of oil and gas assets; and (iv) to proactively participate in the growing E&P opportunities in Malaysia. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK 5. INFORMATION ON OUR BUSINESS (Cont’d) Our Company is committed to ensure business continuity, enhanced profitability and continuous growth to maximise our shareholders’ value. To achieve the above goals, our Company intends to adopt the following initiatives and strategies: (i) Develop a balanced portfolio of E&P assets With an established base of development and/or production assets, our Company will be in a better position to pursue a more balanced and sustainable portfolio that could include exploration assets. We wish to achieve a balanced portfolio of exploration and production assets with the following indicative ratio: Type of assets Percentage of total investment costs (approximation) (%) Exploration 30 Production 70
The rationale for having a balanced and sustainable portfolio of assets is as follows: (a) Exploration assets Exploration requires a deep understanding of geology, risks and commercial options for discoveries and the financial strength and flexibility to undertake major programmes. The exploration objectives are to add and replace our Reserves at a lower cost as compared to the acquisition of production assets. (b) Production assets Production assets are an important part of a well-balanced oil and gas portfolio as they will enable our Company to realise asset value and generate cash flow to fund our operations and exploration programmes. (ii) Increase our Reserves Replacement Ratio Maintenance and growth of our future Reserves will ensure business sustainability and growth as well as enhance shareholders’ value in the long term. Hence, we need to ensure that our Reserves are being replaced faster than they are being depleted. We will continuously assess our Company’s Reserves Replacement Ratio and ensure timely actions are taken to maintain an acceptable ratio and ensure that the risk of depletion of oil and gas Reserves base is mitigated. Such strategic actions could inVOlve, but are not limited to, a combination of the following steps: ~ conduct geological and geophysical studies to search within the vicinity of our oil and gas fields for additional Reserves; explore additional opportunities within our existing assets such as enhanced oil and gas recovery and rejuvenation; and acquire new oil and gas assets.

 

5. INFORMATION ON OUR BUSINESS (Cont’d) (iii) Continue to focus on assets in the development and production phase We would continue to pursue assets that are in the development, production or near production phases. The strength of our Company is also the operating expertise and experience of our lVIanagement Team. By focusing on producing assets, we would keep our Company’s risk levels low and add value through our operatorship role. (iv) Participate in E&P opportunities in Malaysia Apart from the other Asia Pacific countries, as a Malaysian company with a majority of Malaysian management, we believe that we have an advantage and duty to participate in the evolving Malaysian oil and gas industry, particularly, the future opportunity to acquire and operate domestic oil and gas assets that are under PSC arrangements. This is in line with the ETP initiated by the Government to promote local companies in this arena. Under the ETP, the Government has identified 12 Entry Point Projects (EPPs) as well as other business opportunities within the oil, gas and energy sector which is expected to contribute approximately RM 131.4 billion to gross national income. The 12 EPPs are categorised under four main thrusts in the oil, gas and energy industry as follows: ~ Sustaining oil and gas production. This involves extending the Iifecycle of existing resources by optimising exploration, development and production activities. The three EPPs under this thrust which our Company may participate and benefit from include rejuvenating existing fields through enhanced oil recovery, developing small fields through innovative solutions and intensifying exploration activities. ~ Enhancing downstream growth. The two EPPs under this thrust involve bUilding a regional oil storage and trading hub and unlocking gas demand in Peninsular Malaysia by providing better access to gas (through LNG imports and Peninsular Gas Utilisation (PGU) infrastructure), thus encouraging industrial users to switch from diesel to competitively priced natural gas. ~ Making Malaysia the number one Asian hub for oilfield services. This thrust leverages on the economy’s strategic location, to attract global operations and to build strategic partnerships and joint ventures for developing engineering, procurement and installation capabilities. ~ Building a sustainable energy platform for growth. The three EPPs under this thrust are designed to ensure energy security by improving energy efficiency and diversifying energy resources. This includes bUilding up solar power capacity and tapping into Malaysia’s hydroelectricity potential. 5. INFORMATION ON OUR BUSINESS (Cont’d) (v) Access to quality resources
Human capital is a valuable resource which provides the energy, skills and innovation to make oil and gas an efficient, dynamic and sustainable industry. As set out in Section 4.2.4.5 of this Prospectus, the oil and gas industry is facing challenges in recruiting and retaining skilled workforce due to the rapid growth in the industry. In order to remain competitive and ensure continuous business growth, we will continue to recruit experienced and skilled workforce and develop and train these personnel to enhance our Management Team and also as part of our succession planning as further set out in Section 7.7 of this Prospectus. Furthermore, we will also continue to source for other resources in the oil and gas industry such as oil and gas related technologies for enhanced E&P activities.
(vi) Establish strategic alliances with other oil and gas industry players

The establishment of strategic alliances may expedite our business growth. Through strategic alliances, we will be able to tap into new markets or Reserves, enhance our distribution networks, access to new technologies and technical knowledge, diversify and share of production and business risks, achieve economies of scale and enhance our productivity and profits. (vii) Strengthening relationship with our stakeholders It is essential to develop and maintain good relationships with our stakeholders, including our shareholders, joint venture and strategic partners, suppliers, customers, regulatory authorities, employees, technical consultants and professionals by having frequent communication and understanding to ensure smooth operations and uninterrupted business. (Viii) Operational excellence in HSE It is mandatory that our Company executes its operations with industry accepted HSE best practices. There are many international standards for good HSE practices in the oil and gas industry and these are governed by national regulations, developed internally and/or benchmarked against major IOCs. Our Management Team has hands-on experience in HSE matters. We will tap into this strength to develop, implement and monitor comprehensive HSE policies and procedures for our operations post-Qualifying AcqUisition. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK 5. INFORMATION ON OUR BUSINESS (Cont’d) (ix) Optimising operating expenditure Our aim is to be a cost efficient E&P operator. We plan to undertake on-going efforts to study and implement cost optimisation and reduction measures in the operations of our oil and gas assets. Operating expenditure typically includes costs incurred for operating and maintaining fixed facilities and equipment, rentals, third party support, logistics and manpower. In line with these measures, our focus will be on reducing unit operating cost (i.e. USD per bbl). To achieve this, we intend to: ~ continuously benchmark our unit operating cost with other operators in the region to learn best practices and implement the same. The target would be to increase production and reduce operating expenditure to achieve lower unit operating cost; undertake actions to maximise production from existing wells through reservoir studies, intervention programmes for idle wells, problem wells and locked-in Reserves and avoid any unplanned facilities shutdowns; and develop and implement an effective inspection and maintenance programme to manage costs of maintenance, repairs and replacement of equipment. 5.3 OUR VALUE PROPOSITION In essence, our value proposition as an oil and gas SPAC is as follows: (i) Focus on relatively low-risk development and/or production assets with a primary objective to produce oil and gas and generate early revenue within two years from the date of completion of the Qualifying Acquisition Our focus for the Qualifying Acquisition is in Brownfields in the production phase and fields in the proximity of existing producing areas in the development and production phases and not exploration assets. We will not enter into exploration activities for the Qualifying Acquisition due to the inherent uncertainties associated with higher risk and longer gestation period from acquisition to generating revenue. The focus on development and/or production assets is aligned with our main aim of early revenue i.e. within two years from date of completion of the Qualifying Acquisition. Post Qualifying Acquisition, we intend to own a balanced portfolio of exploration and production assets with the objective of growing our Reserves to further enhance our shareholders’ value. (ii) Strength of our Management Team We have a balanced Management Team comprising E&P veterans with practical and technical field experiences. Our Management Team also has the track record encompassing the entire value chain of the E&P sector from identification of assets up to decommissioning/abandonment of fields. Given the familiarity and the networks of our Management Team in the Region of Focus throughout the years, from holding senior management roles with IOCs and NOCs, we believe our Management Team is capable of sourcing, evaluating, operating and growing potential oil and gas assets especially in countries such as Malaysia, Indonesia, Australia, Myanmar, Thailand, the Philippines and Vietnam.
5. INFORMATION ON OUR BUSINESS (Cant’d) Our Company riding on the experience, expertise and leadership of our Management Team who are entrusted with clear roles and responsibilities, would acquire and exploit the development and/or production assets specifically in the Region of Focus at lower cost base to benefit our shareholders. The critical success factor in this venture is the proven ability of our Management Team to carefully source, screen, analyse, secure and activate those assets that would deliver the expected returns. (iii) More competitive financial position to acquire sizeable target company and/or assets for the purpose of Qualifying Acquisition Given the quantum of proceeds we intend to raise i.e. RIV1750 million, we are well­positioned and have a more competitive financial position to acquire sizeable target assets for our Qualifying Acquisition. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK

 

 

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