KUALA LUMPUR: 2022 – Reach Energy Bhd has obtained shareholders approval for the settlement of debt amounting to RM206.51 million.

In a statement, the company said the debt settlement entailed the offset of RM206.51 million debt or 76 per cent from a total of RM279.36 million owing to Super Racer Ltd (SRL) via the issuance of 1.03 billion settlement shares to SRL at an issue price of RM0.20 per share.

Upon completion, SRL will hold 1.03 billion Reach Energy's shares, representing approximately 48.5 per cent of the enlarged issued share capital of the company.

Reach Energy chief executive officer Tan Siew Chaing said the settlement will not only partially address the company's debt obligations without incurring any immediate cash outflows but it will also allow it to preserve cash for immediate operational needs.

"At the same time, it will also significantly reduce the financial strain of the debt repayments on our company's cashflow.

"There are a few other benefits to the proposed debt settlement with one being the saving in interest payments of approximately RM21.17 million per annum for the company on the remaining debt of RM72.85 million owed to SRL.

"This is due to the significant reduction in interest rate to 5 pr cent per annum from the current 14 per cent per annum.

"Our gearing ratio will also be reduced to more than half from 2.52 times to 1.08 times," said Tan.

Moving forward, Tan added the company's near-term goal is to steer the company back to profitability by focusing on rebuilding, transformation, growth and expansion.

"We will continue to undertake measures such as workover, reperforation, increase acid stimulation program and installing and replacing more electrical submersible pumps to mitigate against falling reservoir pressure and increase production levels.

"More capital-intensive measures such as gas injection and drilling of additional wells are essential to allow the company to operate the assets to its full potential," said Tan.

Reach Energy expects the issuance of settlement shares and the proposals to be completed in the first quarter of 2023.