Description

Everyone who has traded warrants knows that volatility is the name of the game - from esoteric tech deals, biotech, and most importantly O&G. With no investor site and limited information, $120M in follow-on capital that still needs to be raised, this SPAC deal has a significant amount of risk with commensurate skew. The presentation slides have not been released but the deal is slated to be finalized by Sept 15.

Liberty Resources Acquisition is spearheaded by a Malaysian duo that made it clear in the prospectus that they were searching for an upstream deal in Central Asia. They are one of only 5 O&G SPACs now that ERES has pivoted industries to meet their deadline. They raised $100M in November of last year and announced a deal on Aug 10.

Caspi energy (owned by Markmore Energy) was acquired at a $430M enterprise value. Caspi is owned by Malaysian corporate figure Tan Sri Halim Saad via its investment vehicle Markmore Energy (Labuan) Ltd. Caspi is the concession owner of the Rakushechnoye oilfield in West Kazakhstan. 

Markmore will receive $50M and 32.7 million shares in the combined company’s common stock. Additionally they receive a revenue on (revenue - production costs + capex) of 50% on gas and 40% on LNG. If this amount is <$15M, they will receive $15M. This is once a central processing complex starts producing and selling. Note that the bulk of the value seems to be from the oil side, so this impact should be minimal. 

https://www.nst.com.my/business/2022/02/775668/cn-asia-build-operate-og-facilities-kazakhstan-halim-saad

"A 25-year oil and gas concession was awarded to CaspiOilGas (COG) by the Ministry of Energy and Mineral Resources (now known as Ministry of Oil and Gas Kazakhstan) in August 2000, following which further well re-entry and research works, including the construction of field facilities, personnel camp and service facilities were carried out starting from 2004 and the field was recommissioned in 2007."

The biggest risk with the transaction is a $120M PIPE not being finalized in time, however given the incentives involved and quick timeframe this is mitigated. Additionally, the concession may need to be renewed in 3 years on August 2025.

In terms of framing the valuation an article brought up an important point in the paragraph below. Markmore is the sole owner of Caspi. - 

https://www.thestar.com.my/business/business-news/2017/10/27/sumatec-to-acquire-markmore-for-rm155bil

However, in October 2017, Sumatec proposed to acquire Markmore Energy (Labuan) - sole owner of CaspiOilGas - for US$370 million or RM1.55 billion in a cash and share deal from Markmore, and announced several corporate exercises. This came as a surprise as the oil price had fallen from a high of US$146 per barrel in July 2008 to a low of just below US$28 per barrel in January 2016.

This deal gives me some comfort, though it seems that Sumatec was quite desperate and raised warrants and rights to try to fund the deal. It ultimately fell through.

An important catalyst to note is the minimum $0.50 dividend in the press release. It is not clear if this is annually or quarterly, but quarterly would represent a 20% yield on de-SPAC. I would be surprised if this did not cause the stock to move to $15 or a potential 35 bagger on the warrants. $20 is an 85 bagger. It's difficult to find public information about Caspi, but I posted all of the links I discovered below.

Transaction details - 

https://www.sec.gov/Archives/edgar/data/0001880151/000110465922088316/tm2222852d1_ex99-1.htm

https://www.theedgemarkets.com/article/halim-saadowned-caspi-oil-gas-list-nasdaq-%E2%80%94-report

https://www.thesundaily.my/archive/sumatec-resources-shares-price-unchanged-increased-output-expectation-kazakh-oilfie-KUARCH518072

http://www.insage.com.my/Upload/MediaNews/SUMATEC/SUMATEC-KAZAKHSTAN%202013.pdf

https://www.linkedin.com/company/caspioilgas/about/

http://www.caspioilgas.kz/ (likely blocked outside of Kazak)

https://www.hydrocarbons-technology.com/projects/rakushechnoye-shelly-oil-and-gas-field/

https://www.rogtecmagazine.com/sumatecs-kazakhstan-oil-field-project-is-terminated/

https://www.theedgemarkets.com/article/halim-saads-caspioilgas-facing-legal-issues-kazakhstan 

https://www.theedgemarkets.com/article/btm-resources-partners-halim-saads-markmore-energy-diversify-lpg-business

Catalyst

Dividend upon deal closure moving stock higher 

Investor presentation release on deal finalization 

Exposure to Brent prices which can push the warrants in the money