Tough Going For Oil SPACs

The current oil and gas price slump may be causing hardship to many players in the industry, except perhaps one group – listed special-purpose acquisition companies or SPACs.

A SPAC is an investment structure which allows investors to put their money in a listed shell or blank-cheque company which has no operations but has an intention to acquire assets within three years of listing. Currently, the listed SPACs are Cliq Energy Bhd, Sona Petroleum Bhd and Reach Energy Bhd. The first listed SPAC was Hibiscus Petroleum Bhd which has since graduated into a junior oil and gas (O&G) company.

On April 2, Sona Petroleum and Reach Energy closed at 42.5 sen and 62 sen respectively, below their initial public offering (IPO) prices of 50 sen and 75 sen. However, Cliq Energy, which has entered into a conditional sale and purchase, saw its price closing at 65 sen on April 2, up 4% from its IPO price of 62.5 sen.

Given the current bearish sentiment in the O&G sector, SPACs should be able to snap up assets at bargain prices and grow them for the benefit of their shareholders. But in reality, such “sweet deals” aren’t easy to come by. 

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