The penny stock faced heavy downward pressure, opening 2.5 sen or 33.33% lower at five sen from its last closing price of 7.5 sen.
At 11am, the oil and gas exploration and production company had declined further by three sen or 40% to 4.5 sen, before making a recovery before lunch break.
Reach Energy was a hotly traded stock with around 51.3 million shares changing hands by noon.
This is more than eight times its 200-day average volume of 7.7 million shares.
The selling pressure follows a filing with Bursa yesterday (April 3) whereby the company announced it had fallen into the Practice Note (PN17) category.
“The company (Reach Energy Bhd) has triggered Paragraph 2.1(e) of PN17 of the Bursa Malaysia Securities Bhd in respect of the company’s unaudited financial statements for the financial year ended Dec 31, 2022 (FY2022),” it said.
Additionally, the company’s shareholders’ equity on a consolidated basis is 50% or less of its share capital as announced on Feb 28, 2023.
Deep in the red
Reach Energy’s troubles are long standing, as the company has been in the red since FY2018.
In FY2022, the group posted a net loss of RM227.65 million or 0.21 sen per share, driven by higher taxes, finance cost, and impairments.
Year-on-year, their loss increased by 436% from RM53.41 million or 0.05 sen per share for FY2021. In FY2020, the group posted a net loss of RM128 million.
Reach Energy owns a variety of assets, including a 60% equity interest in Paleontol B.B, which is the sole interest holder of Emir Oil LLP.
Emir Oil holds the entire subsoil use rights to a concession block in Mangystau Oblast, the southwestern region of the Republic of Kazakhstan.
Reach Energy is the operator of the Emir-Oil Concession Block having been awarded with exploration and production contracts up to the year 2036.
In a filing on Feb 28, the group was optimistic that “(Reach Energy) will generate an improved performance and growth moving forward”.
This improvement would be generated through drilling in more development wells, performing well workovers, production enhancement initiatives and implementing cost optimisation efforts.
“Emir-Oil had obtained a loan from Kazakhstan Bank amounting to US$9.3 million (RM40.99 million) in January 2021 to finance its capital expenditure (capex) investment,” it said.
The group and Emir-Oil announced intentions to obtain an additional loan between US$25 million to US$30 million (RM110.20 million to RM132.24 million) in the next few years to finance capex and their expansion plans.
Nonetheless, the group is working towards their regularisation plan in the more immediate term.
“The company is in the midst of formulating a plan to regularise its financial condition and the announcement on the same will be made in due course in accordance with the (Bursa’s) Listing Requirements,” it said.
At noon, Reach Energy’s share price was down 33.33% or 2.5 sen to five sen, giving it a market capitalisation of RM106.45 million.