GLOBALTEC FORMATION BERHAD ( GFB or Company ) Proposed Acquisition of Dart Energy (Indonesia) Holdings Pte Ltd ( DEIH ) ( Proposed Acquisition )

Transcription

1 GLOBALTEC FORMATION BERHAD ( GFB or Company ) Proposed Acquisition of Dart Energy (Indonesia) Holdings Pte Ltd ( DEIH ) ( Proposed Acquisition ) 1. INTRODUCTION On behalf of the Board of Directors of GFB ( Board ), we wish to announce that NuEnergy Gas Limited ( NGY ), a subsidiary listed on the Australian Securities Exchange ( ASX ), of GFB has on 20 May 2015, entered into a conditional share purchase agreement with Dart Energy International Limited ( the Vendor ) to acquire the entire equity interest in DEIH ( the SPA ). 2. DETAILS OF THE PROPOSED ACQUISITION On 20 May 2015, NGY had entered into the SPA with the Vendor to acquire the entire equity interest of USD1.00 comprising of 1 share in DEIH from the Vendor for a cash consideration of USD1 million ( Consideration ). NGY and the Vendor both acknowledge that DEIH shall upon execution of the SPA but before completion of the SPA, transfer its entire 100% equity interest in Dart Energy (Sangatta West) Pte Ltd ( Dart Sangatta ) to a company within the Vendor s group of companies but which is not part of DEIH group of companies ( Sangatta Disposal ). DEIH group of companies, excluding Dart Sangatta (hereinafter referred to as DEIH Group ) has interests in the following production sharing contracts ( PSCs ) and joint evaluation covering 1, and square kilometers, respectively: i) 45% participating interest in the Tanjung Enim coal bed methane ( CBM ) PSC ( Tanjung Enim PSC ), South Sumatra; ii) 50% participating interest in the Muralim CBM PSC ( Muralim PSC ), South Sumatra; iii) 100% participating interest in Bontang Bengalon CBM PSC ( BB PSC ), East Kalimantan; and iv) rights to the joint evaluation of Bungamas CBM, South Sumatra ( Joint Evaluation ) Further details of the PSCs are disclosed in Section 8 below. 3. INFORMATION ON DEIH DEIH was incorporated in Singapore on 9 April DEIH has an authorised share capital and issued share capital of USD1.00 comprising of 1 share. DEIH is wholly owned by the Vendor. DEIH has the following subsidiaries:- Name of subsidiary Country of incorporation Effective equity holding PT Dart Energy Indonesia Indonesia 95% Dart Energy (Tanjung Enim) Pte Ltd ( DETE ) Singapore 100% Dart Energy (Muralim) Pte Ltd ( DEM ) Singapore 100% Dart Energy (Bontang Bengalon) Pte Ltd Singapore 100% ( DEBB ) Dart Energy (CBM Power Indonesia) Pte Ltd Singapore 100% PT Coal Bed Methane Power Indonesia Indonesia 70% DEIH Group is principally involved in CBM exploration and production ( E&P ) in Indonesia since 2009.

2 The directors of DEIH are Andrew Philip Austin, Stephen David Bowler, John Malcolm Blaymires and Justin James Hilton Walta. Based on its latest audited financial statements for the financial year ended 30 June 2014, DEIH has an audited net liabilities and net loss of USD5.7 million and USD0.1 million respectively. DEIH is exempted from the preparation of audited consolidated financial statements as DEIH is a wholly owned indirect subsidiary of Dart Energy Limited, a former Australian public listed company. Based on the proforma consolidated financial statements as at 30 June 2014, which in turn is based on the audited financial statements of DEIH and its subsidiaries as at 30 June, 2014 but excluding Darts Sangatta and the amount owed by DEIH Group to the Vendor s group of companies which shall be settled before the Completion Date (as defined) pursuant to the SPA, DEIH Group has a proforma net assets ( NA ) of USD18.7 million ( Proforma NA of DEIH Group ) and net loss of USD6.4 million. 4. SALIENT TERMS OF THE SPA The salient terms of the SPA are as follows: i) The Consideration shall be paid in the following manner: (a) (b) the deposit of USD500,000 shall be paid by NGY to the Vendor on the date of the SPA ( Deposit ); and the balance of USD500,000 shall be paid by NGY to the Vendor on the SPA completion date, being 7 days after all the conditions precedent have been fulfilled in accordance with the terms of the SPA ( Completion Date ). ii) iii) iv) The Vendor shall procure DEIH to transfer its entire shareholding in Dart Sangatta, at any time after the date of the SPA but before the Completion Date, to an entity within the Vendor s group of companies but which is not part of DEIH Group. Subject to paragraph (iv) below, the management and operations of DEIH Group shall be handed over by the Vendor to NGY or a committee comprising 1 appointee nominated by the Vendor and 2 or more appointees nominated by NGY ( Operating Committee ) immediately upon the execution of the SPA. Save for all matters relating to health, safety and the environment, including but not limited to health and safety laws and environmental laws, the role of the appointee nominated by the Vendor in the Operating Committee shall be limited solely to providing/furnishing necessary advice pertaining to DEIH Group s business. Notwithstanding paragraph (iii) above, the Vendor shall retain full and absolute control over all matters or decisions in relation to or in any way affecting Dart Sangatta or the Sangatta Disposal. v) Upon NGY or the Operating Committee taking over control of the management and operations of DEIH Group following the execution of the SPA, NGY shall procure the performance and discharge DEIH Group s obligations in respect of all overheads, operation and administrative costs arising after the date of the SPA for an aggregate amount not exceeding US$500,000 ( Initial Expenses ). vi) Completion of the SPA and the obligations of the parties that are set out in the SPA shall be subject to the following conditions being obtained/fulfilled or waived (as the case may be) ( Conditions Precedent ) by the day falling 1 year from the date of the SPA, or such later date as the parties may mutually agree upon ( Cut-Off Date ):

3 a) The Vendor having obtained the required approval of Satuan Kerja Khusus Pelaksana Kegiatan Usaha Hulu Minyak dan Gas Bumi, an institution established by the government of Indonesia to implement the management of oil and gas upstream activities under co-operation contracts ( SKK Migas ) and the Indonesian Ministry of Energy and Mineral Resources in connection with the indirect change of control of DEIH Group that are party to the relevant PSCs or where such approval is granted subject to certain terms and conditions, such terms and conditions are acceptable by NGY; b) The Vendor having obtained an extension of the exploration period for the Tanjung Enim PSC from SKK Migas and the Indonesian Ministry of Energy and Mineral Resources for an additional period of at least 2 years from the expiration of the existing exploration period; c) DETE having given the other parties to the Tanjung Enim s Joint Operating Agreement ( JOA ) the notification required for the indirect change of control under the Tanjung Enim JOA; and d) the completion of the Sangatta Disposal. vii) viii) ix) The SPA shall be terminated if any of the Conditions Precedent is not fulfilled by the Cut-Off Date and upon such termination the Deposit and the Initial Expenses shall be retained by the Vendor, provided always that such failure of fulfilling the Conditions Precedent is not due to the default of the Vendor (which includes inter-alia the Vendor s warranties being found at any time to be materially untrue and inconsistent), and NGY shall thereafter not have any claim against the Vendor for any Works carried out. The Vendor shall, from the date of the SPA until the earlier of the date following 3 months after the date of the SPA or the Completion Date, extend all reasonable assistance to cooperate with and assist NGY in carrying out due diligence on DEIH Group; and Within 2 months from the Completion Date, NGY shall: a) procure the Vendor s release from all guarantees, indemnities, contractual obligations or security interests given by any of the Vendor s group of companies (other than DEIH Group) in respect of the liabilities or obligations of DEIH Group ( Guarantee ) and provide the replacement guarantees to the beneficiaries of such Guarantees. The value of the Guarantee is about USD3.5 million; b) procure that the Vendor s existing cash security deposited as security for the Guarantee(s) (together with any accrued interest) shall be repaid to the Vendor and, if the same has not been repaid by the date falling 2 months from the Completion Date, pay to the Vendor an amount equal to such the Vendor s cash security (together with any accrued interest); and c) indemnify and keep indemnified the Vendor fully at all times on demand from and against any and all losses and expenses which the Vendor may suffer or incur in respect of any obligations or liabilities arising out of, or in connection with, any of the Guarantees or otherwise in respect of any DEIH Group whether arising or occurring before or after Completion.

4 5. BASIS OF DETERMINING THE CONSIDERATION AND SOURCE OF FUNDING The Consideration was arrived at on willing buyer willing seller basis, after taking into account: i) the rationale mentioned in Section 9 below; ii) the risks and prospects in relation to gas E&P as detailed in Section 10 and 11 respectively; and iii) details of the PSCs described in Section 8 below. NGY will finance the Consideration from its internally generated funds. 6. INFORMATION ON THE VENDOR The Vendor was incorporated in Singapore on 18 March The Vendor has an authorised and issued share capital of USD195,795,372 comprising 102,289,088 shares. The directors of the Vendor are Andrew Philip Austin, Stephen David Bowler, John Malcolm Blaymires and Justin James Hilton Walta. The Vendor is principally an investment holding company whereas its subsidiaries are principally involved in operating and managing PSCs. The Vendor is a wholly owned subsidiary of Dart Energy Limited. 7. INFORMATION ON NGY NGY was incorporated in Western Australia on 26 March 1985 under the Australian Corporations Act, 2001 and has been listed on the ASX since 15 January NGY has an issued and paid up capital of AUD85,324,979 comprising of 751,687,364 shares. NGY group of companies are principally involved in the development of gas and ancillary power generation with an immediate focus on establishing unconventional gas exploration and production in Indonesia. Globaltec Energy Resources Sdn Bhd and New Century Energy Resources Limited, both subsidiaries of GFB have a total direct shareholding of 55% in NGY. The directors of NGY are Kong Kok Keong, Datuk Seri Panglima (Dr.) Goh Tian Chuan, Graeme Robertson, Alan Fraser, Kee Yong Wah and Chen Heng Mun. 8. INFORMATION ON THE PSCs AND JOINT EVALUATION DEIH through its subsidiaries has interest in 2 PSCs in South Sumatra and 1 PSC in East Kalimantan, Indonesia and have rights on one Joint Evaluation. DEIH Group s South Sumatra PSCs has independent resource estimations of 1,641 bcf of unrisked prospective gas resources and 256 billion cubic feet ( bcf ) of unrisked contingent resources (2C) from Netherland Sewell and Associates Inc. In respect of the PSC in East Kalimantan, no independent assessment has been carried out todate. Further details of the PSCs and Joint Evaluation are as below: South Sumatra PSCs Tanjung Enim PSC Tanjung Enim PSC is located in Muara Enim Regency, South Sumatra Province. This PSC was awarded by SKK Migas (formerly known as Badan Pelaksana Usaha Hulu Minyak dan Gas/Implementing Body of the Oil and Gas Upstream Activities) ( BP Migas ) on 4 August 2009 for 30 years. DETE, PT Bukit Asam Metana Enim and PT Pertamina Hulu Energi Metra Enim each has a participating interest of 45%, 27.5% and 27.5% respectively in the Tanjung Enim PSC. DETE is the operator of the Tanjung Enim PSC. The exploration period under the PSC is 6 years up to August 2015.

5 The contract area comprises a total of square kilometers containing an average of 65 meters to 70 meters net coal thickness, low rank coal seams ranging in depth from 300 meters to 700 meters with an average reported gas content of 120 standard cubic foot ( scf )/ton. With these geological and technical parameters, Tanjung Enim PSC is among the CBM PSCs in Indonesia which has high potential for commercial CBM development and is close to existing oil and gas infrastructure and markets. Muralim PSC The Muralim PSC was awarded on 3 December 2010 for 30 years. DEM and PT Medco CBM Pendopo each has a participating interest of 50% in the Muralim PSC. DEM is the operator of the Tanjung Enim PSC. The exploration period under the PSC is 6 years up to December The Muralim PSC is located in 3 regencies, namely Musi Rawas, Lahat and Muara Enim. The contract area comprises a total square kilometers. Wells drilled in mid 2012 have indicated average net coal thickness of around 29 meters to 30 meters, low rank coal seams ranging from depth of 500 meters to 700 meters with an average gas content of 105 scf/ton. Muralim PSC is located adjacent to Tanjung Enim PSC, which is also among the CBM PSCs in Indonesia which has high potential for commercial CBM development. East Kalimantan PSC Bontang Bengalon CBM PSC ( BB PSC ) The BB PSC was awarded on 9 October 2012 for 30 years. The BB PSC is located in East Kutai Regency and Bontang City, East Kalimantan Province. The contract covers an area of square kilometers. DEBB has a 100% participating interest in and is the operator of BB PSC. The exploration period under the PSC is 6 years up to October DEBB has not commenced any significant works as of to-date. Bungamas Joint Evaluation, South Sumatra In 2014, Bungamas Joint Evaluation was awarded by the Indonesian Government to a consortium of DEIH, Bungamas International Company, PT Bukit Asam (Persero) Tbk and PT Mantra Energy Services for application of a CBM PSC in the Bungamas area. The Bungamas area is located adjacent to Tanjung Enim PSC and Muralim PSC. The Bungamas Joint Evaluation covers an area of square kilometers. The joint evaluation was completed in February 2015 through a cooperation between the consortium and the University of Trisakti representing the Indonesian Government and is currently pending direct offer for a PSC by the Directorate General of Oil and Gas. (Source: DEIH) 9. RATIONALE FOR THE PROPOSED ACQUISITION NGY currently has three PSCs in South and Central Sumatra, Indonesia, covering 4,819 square kilometers. NGY is the operator of all three as follows: - Muara Enim (40% participating interest) - Muara Enim II (30% participating interest) - Rengat (100% participating interest) Muara Enim PSC is the highest priority with 3 wells already drilled, logged and cored to evaluate the potentiality of the gas production. These wells have been converted to pilot production wells.

6 NGY is expected to commence drilling in Rengat during the quarter and Muara Enim II in the next quarter. DEIH is one of the leading CBM explorer and developer in Indonesia. The activities of exploration in the Tanjung Enim PSC and Muralim PSC have been professionally planned and executed, from which the same set of reservoir parameters with NGY s PSCs in South Sumatra were revealed. The addition of the DEIH PSC assets, mainly Tanjung Enim PSC which is adjacent to the west of NGY s Muara Enim PSC and Muara Enim II PSC can be evaluated and developed as a whole and provide the necessary synergy and large scale CBM development to achieve commercialization in the shortest time. The Proposed Acquisition will enable GFB group of companies ( GFB Group ) to further expand the Group s foray into the oil and gas E&P industry at lower entry costs. 10. RISKS IN RELATION TO THE PROPOSED ACQUISITION The completion of the SPA will result in the GFB Group being exposed to the risks of DEIH Group, whose principal business of gas E&P is concentrated in Indonesia. Some of the salient risks are as below: i) Future Capital Needs Further funding will be required by DEIH Group to support its ongoing exploration and contemplated production activities and operations. There can be no assurance that funding will be available on satisfactory terms or at all. Any inability to obtain finance will adversely affect the business and financial condition of DEIH Group and its performance. ii) Resource Estimates Resource estimates are expressions of judgement based on knowledge, experience and industry practice. Estimates which were valid when originally calculated may alter significantly when new information or techniques become available. In addition, by their very nature, resource and reserve estimates are imprecise and depend to some extent on interpretations, which may prove to be inaccurate. As further information becomes available through additional drilling and analysis, the estimates are likely to change. This may result in alterations to development and production plans which may in turn, adversely affect DEIH Group and its operations. iii) Exploration and Development Risks The business of oil and gas and CBM exploration, project development and production, by its nature, contains elements of significant risk with no guarantee of success. Ultimate and continuous success of these activities is dependent on many factors such as: a) the discovery and/or acquisition of economically recoverable reserves; b) access to adequate capital for project development; c) design and construction of efficient development and production infrastructure within capital expenditure budgets; d) securing and maintaining title to interests; e) obtaining consents and approvals necessary for the conduct of oil and gas exploration, development and production; f) securing suitable plant and equipment; and g) access to competent operational management and prudent financial administration, including the availability and reliability of appropriately skilled and experienced employees, contractors and consultants.

7 Whether or not income will result from projects undergoing exploration and development programs depends on successful exploration and establishment of production facilities. Factors including costs, actual hydrocarbons and formations, flow consistency and reliability and commodity prices affect successful project development and operations. Drilling activities carry risk as such activities may be curtailed, delayed or cancelled as a result of weather conditions, mechanical difficulties, shortages or delays in the delivery of drill rigs or other equipment. Industry operating risks include fire, explosions, unanticipated reservoir problems which may affect field production performance, industrial disputes, unexpected shortages or increases in the costs of consumables, spare parts, plant and equipment, mechanical failure or breakdown, blow outs, pipe failures and environmental hazards such as accidental spills or leakage of liquids, gas leaks, ruptures, discharges of toxic gases or geological uncertainty (such as lack of sufficient sub-surface data from correlative well logs and/or formation core analyses). The occurrence of any of these risks could result in legal proceedings against DEIH Group and substantial losses due to injury or loss of life, damage to or destruction of property, natural resources or equipment, pollution or other environmental damage, cleanup responsibilities, regulatory investigation, and penalties or suspension of operations. Damage occurring to third parties as a result of such risks may give rise to claims against DEIH Group. There is no assurance that any exploration on current or future interests will result in the discovery of an economic deposit of gas. Even if an apparently viable deposit is identified, there is no guarantee that it can be economically developed. iv) Gas Price Volatility The demand for, and price of gas is highly dependent on a variety of factors, many of which are beyond the control of DEIH Group. Gas prices are to some extent set by the Indonesian Government and can fluctuate in Indonesia. Fluctuations in commodity prices and, in particular, a material decline in the gas, CBM gas price may have a material adverse effect on DEIH Group's business, financial condition and results of operations. v) Country Risk DEIH Group's operations are in Indonesia whose economy is subject to many global and internal forces beyond the control of DEIH Group. DEIH Group will be subject to jurisdictional compliance with governmental regulations in relation to licence conditions, the environment and operational conduct. vi) Changes in Government Policies and Legislation Industry in Indonesia is subject to the policies which are implemented by its Government. These policies may have a material impact on the business of DEIH Group. This Government may, for instance, amend or repeal legislation or regulations which DEIH Group relies upon to conduct its operations, tariff laws, withdraw subsidies or forms of preferential treatment such as tax benefits or favourable financing arrangements. DEIH Group is unable to predict the effect of additional or amended laws and regulations that may be adopted in the future, including whether any such laws or regulations would materially increase DEIH Group's cost of doing business or affect its operations in any area.

8 vii) Legal Considerations The legal systems of Indonesia differ from that of the legal system, where DEIH is predominantly subject to. Therefore, the ability of DEIH Group to enforce and protect its legal rights (with respect to enforcing rights and obligations under contract, for example) may differ according to the jurisdiction in which DEIH Group is seeking to enforce such remedies. This will especially be the case if Indonesia is not a signatory to any international treaties which seek to protect foreign companies and investors investment interests. There is accordingly a risk that DEIH Group will not be able to enforce or protect its legal rights against counterparties or third parties, particularly where such enforcement is sought against government bodies or bodies that are related to or associated with the government. There is also a risk that the Indonesian Government or appropriate judicial body will not recognise, or may seek to revoke at its absolute discretion, DEIH Group s ownership of or right to use assets, any title (proprietary or otherwise) or legal rights that it may have against counter-parties and third parties, including where such parties are government bodies or bodies are related to or associated with the government. There is also a risk that DEIH Group will be exposed to challenges against its ownership and right to use of such assets, title and rights. This may include the failure by government of those countries to enforce international treaties (if applicable) which otherwise might provide protection to DEIH Group s ownership or other rights with respect to the relevant assets. viii) Foreign Investment Requirements DEIH Group s PSCs are located in Indonesia. Indonesia has strict foreign exchange controls which need to be considered as far as repatriation of funds is concerned. These controls may have an adverse effect on the financial position, financial performance, cash flows and growth prospects of DEIH Group. ix) Foreign Exchange The external value of the SGD, USD and Indonesian Rupiah are affected by changes in policies of the respective governments and to international economic and political developments. Volatility in, and in particular, the devaluation of, the value of the Rupiah could have an adverse effect on DEIH Group s operations and accordingly, its profitability. x) Timing Considerations The gestation period to get from a discovery to commercial gas flow may be longer than planned. As such, there is a risk that the initial investment will not get to the production stage. Such uncertainties as to timing may affect DEIH Group s operations and accordingly, its profitability. xi) Joint Venture Parties, Contractors and Contractual Disputes DEIH Group is unable to predict the risk of: a) financial failure or default by a participant in any joint venture to which DEIH Group may become a party; or b) insolvency or other managerial failure by any of the operators and contractors used by DEIH Group in its exploration activities; or c) insolvency or other managerial failure by any of the other service providers used by DEIH Group or its operators for any activity.

9 If any contractual obligations are not complied with when due, in addition to any other remedies which may be available to other parties, this could result in dilution or forfeiture of interests held by DEIH Group. The operations of DEIH Group are in Indonesia and the costs of and revenues from operations will be in Indonesian rupiah and USD. As GFB Group s financial reports will be presented in RM, the GFB Group will be exposed to the volatility and fluctuations of the exchange rate between the Indonesian rupiah and the USD. The causes of such fluctuations are beyond the control of GFB Group. xii) Environmental Risks DEIH Group's activities will be subject to the environmental risks inherent in the oil and gas and CBM industry. DEIH Group will be subject to environmental laws and regulations in connection with operations it may pursue in the oil and gas industry. DEIH Group may be the subject of accidents or unforseen circumstances that could subject DEIH Group to extensive liability. xiii) Retention of Key Business Relationships There can be no assurance that DEIH Group's existing relationships (such as with contractors, joint venture and regulatory and governmental departments) will continue to be maintained or that new ones will be successfully formed and DEIH Group could be adversely affected by changes to such relationships or difficulties in forming new ones. Any circumstance, which causes the early termination or non-renewal of one or more of these key business alliances or contracts, could adversely impact DEIH Group, its business, operating results and prospects. xiv) Competition DEIH Group will compete with other companies, including major oil and gas and CBM companies. Some of these companies have greater financial and other resources than DEIH Group and, as a result, may be in a better position to compete for future business opportunities. In addition new entrants may commence CBM exploration and development in Indonesia. There can be no assurance that DEIH Group can compete effectively with these companies. xv) Economic Risks Factors such as inflation, currency fluctuations, interest rates, supply and demand of capital and industrial disruption have an impact on business costs, commodity prices and stock market prices. DEIH Group s operating costs, possible future revenues and future profitability can be affected by these factors, which are beyond the control of DEIH Group. No assurance can however be given that any adverse developments in such risks areas would not affect the business and/or financial performance of GFB Group and DEIH Group.

10 11. PROSPECTS Indonesia is the most populous country in SEA and the fourth most populous country in the world, behind China, India, and the USA. Formerly a net oil exporter in the Organisation of the Petroleum Exporting Countries, Indonesia struggles to attract sufficient investment to meet growing domestic energy consumption because of inadequate infrastructure and a complex regulatory environment. Despite their energy struggles, it was the world's largest exporter of coal by weight in 2012 and the fourth-largest exporter of liquid natural gas ( LNG ) in As Indonesia seeks to meet its energy export obligations and earn revenues through international market sales, the country is also trying to meet demand at home. Indonesia's total primary energy consumption grew by 44% between 2002 and The petroleum share, although decreasing, continues to account for the highest portion of Indonesia's energy mix at 36% in In the past decade, coal consumption nearly tripled and surpassed natural gas as the second most consumed fuel. Indonesia's total energy demand is closely linked to the country's economic expansion. According to the International Monetary Fund ( IMF ), Indonesia sustained relatively strong economic performance throughout the global recession, with an average gross domestic product ( GDP ) growth rate of just under 6% per year between 2008 and However, in 2013, GDP growth fell below 6%. Overall, the energy sector (including electricity) constituted 15.6% of Indonesia's GDP in 2012 and has held roughly constant at this level since Net foreign direct investment more than doubled between 2008 and 2012 but shrank by roughly 15% in The energy sector continues to influence the economy to a large degree. Oil and gas alone constituted one-fifth of merchandise exports in 2012, according to IHS Global Insight. In addition, revenues from the oil and gas sector accounted for 24% of total state revenues in A combination of healthy growth, market reforms, and a stable government has encouraged rapid investment, particularly in the commodity sector. Moody's Investors Service and Fitch Ratings both upgraded Indonesia's sovereign risk rating to an investment grade status between late 2011 and early On the other hand, investment in infrastructure was around 3% of GDP in 2011, well below most of Indonesia's neighbors, according to IMF data. The government signed land reform legislation in late-2011 to pave the way for more private sector infrastructure development. It also unveiled a new development strategy in 2011 (Master Plan for Economic Expansion and Acceleration ) that emphasised more private sector involvement in infrastructure expansion, such as wider use of public-private partnerships in the oil and gas sector. Despite these efforts, many infrastructure projects continue to be delayed, and regulatory challenges and uncertainties have reduced predictability for foreign investors. Indonesia possessed trillion cubic feet ( tcf ) of proven natural gas reserves in 2014, down from tcf in The country ranks as the 13th largest holder of proven natural gas reserves in the world, and the second-largest in the Asia-Pacific region, after China. The country continues to be a major exporter of pipeline and LNG. At the same time, domestic demand for natural gas has doubled since Natural gas shortages caused by production problems and rising consumption forced Indonesia to buy spot cargoes of LNG to meet export obligations in recent years. The government began constructing new LNG receiving terminals and gas transmission pipelines to address domestic gas needs, although this is likely to reduce the natural gas available for export.

11 Indonesia's Government promotes exploration of CBM and shale gas, alongside conventional crude oil and natural gas projects. The Indonesian Ministry of Energy and Mineral Resources estimates that the country has CBM reserves of 453 tcf based on preliminary studies. In 2008, the Indonesian Government started awarding CBM blocks in the South and Central Sumatra basins on Sumatra Island and the Kutei and Barito basins in East Kalimantan. DEIH Group and Ephindo- Ilthabi CBM Holding Inc, shareholders of the Sangatta West CBM Inc, began CBM exploration activities in East Kalimantan in 2009, with the goal of supplying both power plants and the Bontang LNG facility. The government originally anticipates CBM production to reach 183 Bcf per year by This is likely to be revised downward in consideration of the current CBM exploration progress in Indonesia. The current progress and experience of the CBM exploration activities in the past 6 years, however, have triggered the industries and the government to jointly work on improving the CBM contract terms, policies and regulations so that the Indonesia can be commercially developed. There is currently no shale gas production in Indonesia, but policy makers are interested in exploring the country's shale oil and shale gas potential. In April 2012, the Indonesian Government initiated 4 shale gas study projects and expects commercial shale gas production to begin by As of December 2013, Indonesia has awarded only 2 shale gas PSCs for the Sumbagut block in North Sumatra, both to Pertamina. The Sumbagut block is estimated to contain about 19 tcf of potential shale gas resources. EIA estimates that Indonesia possesses 46 tcf of total recoverable shale gas resources. A major challenge to the growth of the shale industry is the high cost of exploration in Indonesia because the deposits are far from demand centers and infrastructure needed to transport the gas. Indonesian natural gas production initially was exported, but the country's declining oil production led producers to shift increasing gas volumes toward domestic consumption. In 2012, Indonesia consumed 1,329 Bcf of natural gas, or slightly more than half of its total dry gas production. Although the industrial sector accounts for the largest portion of domestic consumption, industry analysts expect the power sector to be the most significant driver of future consumption growth. Indonesia's Ministry of Energy and Mineral Resources stipulates that gas supply be allocated to the needs of enhanced oil recovery, the fertiliser industry, and the power sector before any other sectors. State-owned PGN controls the midstream gas market and the transmission market, operating more than 3,600 miles of natural gas transmission and distribution pipelines. However, domestic distribution infrastructure is almost non-existent outside of Java and North Sumatra. PGN began operating the South Sumatra-West Java pipeline in 2008, providing an important link between the gas-producing region of South Sumatra and the densely populated market of West Java. The Grissik-Duri pipeline is another important domestic transmission pipeline, as it provides gas to Chevron's Duri oil field for its steam flooding and power generation activities. (Source: United States of America Energy Information Administration report dated 5 March 2014) 12. APPROVALS REQUIRED The Proposed Acquisition is subject to: i) The Vendor having obtained the required approval of SKK Migas and the Indonesian Ministry of Energy and Mineral Resources in connection with the indirect change of control of DEIH Group that are party to the PSCs in connection with the purchase of the share in DEIH by NGY; ii) The Vendor having obtained an extension of the exploration period for the Tanjung Enim PSC from SKK Migas and the Indonesian Ministry of Energy and Mineral Resources for an additional period of at least 2 years from the expiration of the existing exploration period; and

12 iii) DETE having given the other parties to the Tanjung Enim JOA the notification required under the Tanjung Enim JOA. The Proposed Acquisition is not subject to the approval of shareholders of the Company nor any other authorities (other than as stated above). 13. FINANCIAL EFFECTS OF THE PROPOSED ACQUISITION 13.1 Share Capital and Substantial Shareholding The Proposed Acquisition will not have any effect to the share capital and substantial shareholding of the Company NA and Gearing The proforma effects of the Proposed Acquisition on the consolidated NA and consolidated NA per GFB share and gearing of GFB Group based on the latest audited financial statements of the GFB Group for the FYE 30 June 2014 are shown below. Audited As at 30 June 2014 RM 000 After the Proposed Acquisition RM 000 Share capital 538, ,174 Share premium 105, ,473 Reserves (198,868) (198,868) Accumulated losses (96,029) (67,979) (1) NA 348, ,800 NA per share (RM) Total borrowings 56,022 56,022 Gearing (times) Note: (1) After taking into account GFB Group s share of the estimated expenses for the Proposed Acquisition of RM45,000 and the proforma negative goodwill arising from the Proposed Acquisition amounting to RM28.1 million, arrived at based on the excess of GFB Group s share of provisional fair values of net identifiable assets and liabilities of DEIH Group (based on the Proforma NA of DEIH Group as at 30 June 2014) over the GFB Group s share of the Consideration. Subject to the completion of a purchase price allocation exercise, where the fair values of the identifiable assets and liabilities will be determined, the negative goodwill may differ. The USD:RM exchange rate as at 19 May 2015, used to translate the Proforma NA of DEIH Group and the Consideration is 1: Earnings and Earnings per Share The Proposed Acquisition is not expected to have any material effect on the earnings and earnings per share of the Group for the financial year ending 30 June 2015, as the Proposed Acquisition is expected to be completed in the second quarter of the financial year ending 30 June 2015.

13 Nevertheless, the Proposed Acquisition is expected to contribute positively to the future earnings of the Group. 14. DIRECTORS AND MAJOR SHAREHOLDERS INTERESTS None of the Directors and/or major shareholders of GFB and/or persons connected with them have any interests, direct or indirect, in the Proposed Acquisition. 15. DIRECTORS STATEMENT Having considered all aspects of the Proposed Acquisition, the Directors of GFB are of the opinion that the Proposed Acquisition is in the best interest of GFB Group. 16. PERCENTAGE RATIOS UNDER THE LISTING REQUIREMENTS Pursuant to paragraph 10.02(g) of the Listing Requirements of Bursa Malaysia Securities Berhad, the highest percentage ratio applicable to the Proposed Acquisition is 13.4%, which is constituted by GFB Group s expected share of the proforma total assets of DEIH Group as at 30 June 2014 over the audited total assets of the Group as at 30 June OTHER MATTERS (i) (ii) Barring any unforeseen circumstances, the Proposed Acquisition is expected to be completed by the second quarter of the financial year ending 30 June The SPA may be inspected at the registered office of GFB at Wisma AIC, Lot 3 Persiaran Kemajuan, Section 16, Shah Alam, Selangor Darul Ehsan during normal business hours from Mondays to Fridays (except public holidays) for a period of 3 months from the date of this announcement. This announcement is dated 20 May 2015.