About Us
Incorporated in 1983, Magnus Energy Group Ltd. (“Magnus” or the “Company”) began its humble roots as a sub-contractor undertaking electrical installations. In a span of 20 years, Magnus has built an established track record as a provider of quality and reliable mechanical and electrical engineering (“M&E”) services. With the stiff operating conditions & cyclical nature of the construction business, a strategic decision was made in 2003 to shift its business focus. Over the past 18 months, Magnus has taken significant strides in transforming from a M&E Company to become a major regional player in the oil, gas and energy industry. The main core business of Magnus and its subsidiaries (“Group”) today comprises oil and gas equipment distribution and coal mining; and it has established a presence in China, Indonesia and Australia. Read in the proper context of the progress we have made, the financial performance for the past year is, therefore, simply the prologue. The main story begins now. We are excited by what the present and the future holds and the challenge of what we envision our Group will become.
In the current state of the global economy, we believe that what creates winning companies will depend on how readily they can adapt and respond to the changing dynamics of energy supply and demand. While returns from the oil, gas and energy industry have in recent times yielded high rates of return-on-investment, the risks are also higher and greater. However, strategically planned and properly executed, we believe the returns and yield to shareholders will far outweigh the risks. Activity in the oil and gas industry continues to be positively impacted by growing demand for energy in the region and worldwide. According to the International Energy Agency, worldwide demand for crude oil will increase by about 8 million barrels per day (MBPD), to reach a total consumption of 90 MBPD, by the end of 2010. This rosy picture is consistent across the broad spectrum of the energy-related clients we serve, including refining, drilling, petrochemical, pipeline, power and renewable energy.
In general, we expect our clients’ capital and maintenance budgets for their facilities will continue to increase annually at double-digit rates, being driven by demand and positive project economics. We are well positioned to take advantage of these trends through our oil and gas equipment division operating mainly through our main operating entity in this business division – the Mid-Continent Equipment Group Pte Ltd which we acquired in 2004. That was the first phase of what can be considered to be the putative “turnaround” of the Group.
The second phase of our restructuring and “turnaround” is our executed and planned investments in the coal, oil and gas industry in Indonesia and China. In June 2006, the Group has successfully completed the acquisition of a 72% interest in PT Deefu Chemical Indonesia which holds 95% interest in PT Batubara Selaras Sapta, which owns and operates the rights to mine and extract coal from the Kuaro coal formation located at Kabupaten Pasir, East Kalimantan, Indonesia. The concession owned is for 30 years commencing from 1997. In coal mining, Magnus will be incurring capital expenditure in the second half of 2006 in the newly acquired coal concessions in East Kalimantan, Indonesia. Within 6 months of commencing production, capacity is targeted to reach 40,000 tons of coal per month. This will increase periodically within the shortest time possible. Demand for energy in developing Asia Pacific countries is projected to grow at 3.2% annually. Oil, gas and coal will continue to dominate as the sources of energy, accounting for about 80% share of the total energy demand from now until 2030.
In October 2006, we completed the acquisition of 75% interest in Songyuan Yongda Oilfields Exploration and Technology Co Ltd – oil and gas company with producing oilfields having proven reserves of 43 million barrels of crude oil. The oilfields are in the Jilin Province and 3 oilfields covering about 17 sq km are already in operations, producing more than 300 barrels/day under revenue sharing contract with China National Petroleum Corp. Based on geological surveys, it is expected that production can increase in a relatively short time requiring minimum capital expenditure. Indeed, in this area, we have achieved a record as the first Singapore Exchange listed company to own crude oil producing concession in China.
In a nutshell, we expect that the majority of our future growth will be provided by our new investments in Indonesia and China. They will complement our existing upstream oil and gas activities in Australia as well as provide synergistic value to each other. We have reason to be confident, given the quality of our business development teams, the experience and capability of our technical staff, as well as the large amount of potential resource mining activity. We are optimistic that the development of Magnus as a regional energy platform will reap dividends for the Group beginning as early as FY2007.
Our focus in the past financial year was on our internal growth initiatives, largely based on our oil and gas equipment supply business in the first phase of our restructuring exercise. In the current financial year, however, we plan to continue to seriously consider strategic and accretive merger and acquisition opportunities that become available. Generally, we expect that any future acquisitions could be larger in scope and will provide either additional competencies, or growth into new geographical regions. We aim to expand the capabilities already in place and expect to remain primarily involved with energy-related projects and services over the next several years. We will also look to expand in other new sectors of the energy industry if opportunities arise.
