The acquisition of Jaya was a strategic decision made having regard to prevailing market and operating conditions at the time. With exploration and development expenditure tailing off in Australia, MMA Offshore sought to expand its international footprint. The Jaya acquisition provided that global expansion.
The sudden collapse in the oil price was not foreseeable at the time of the Jaya acquisition, and this had an adverse impact on the asset values and earnings.
Importantly, the majority use of equity to fund the purchase has provided some measure of balance sheet protection.
As the graph demonstrates below, MMA’s debt to equity post the Jaya acquisition was still considerably healthier than the majority of the Peer Group (as at June 30, 2014).
* As of 30 June 2014 (except MMA-Pre-Jaya, which is as of December 2013). Gearing ratio = Net debt/Shareholders' Equity.