Ramba’s with three energy assets

Ramba Energy

Background: Ramba Energy has diversified its business from the provision of logistics services into the exploration and production of oil and gas. It has stakes in three oilfield assets in Indonesia. For logistics, it is a leading inland service provider in the air cargo community in Singapore.

Recent development:
Ramba announced last month that it has decided to
sell its shares in PT Sugih Energy Tbk, which is listed on the Jakarta Stock Exchange, in order to raise $3.18m to finance the development of its Lemang block in South Sumatra. In April last year, it also raised $22.8m from a placement of new shares and in the following month, it roped in Australia-based Verona Capital to invest US$8.1m to co-develop its West Jambi block.

Focused on oil and gas development.
Ramba’s three energy assets are
(1) a 41% interest in a Production Sharing Contract for the greenfield Lemang Block in South Sumatra,
(2) a 70% stake in the producing Jatirarangon gas field in Cikarang, West Java, and
(3) a 100% interest in its undeveloped West Jambi block.
A July 2011 independent evaluation estimates Lemang to have the potential for some 511m barrels of oil and 468b cu ft of gas, worth US$193m to Ramba. The company recently disclosed that it is negotiating to sell its interest in Jatirarangon, but discussions are preliminary at this point.

Divestment of Sugih is ongoing.
To date, Ramba has divested 30% of its interest in Sugih in the open market. It bought into Sugih in 2010 with a view to use it as a vehicle to raise funds in Indonesia. However, due to adverse investment conditions in Indonesia and increased operating costs, this plan is deemed no longer viable. While the net gain on its carrying value is just $0.3m, the overall funds raised of $3.18m will be handy in developing its Lemang block.

New developments, high-risk business.
The changes in development agreements, financing and ownership appear to have dented investor confidence in the stock, with the share price down 37% since its high last July. Despite some progress in its oilfield development, Ramba remains loss-making. Given the high-risk nature of oil and gas exploration and the high level of capex required, we believe that the market will continue to be averse to this stock until a clearer picture emerges on its revenue and profitability.