Graphene Nanochem Regulatory News (GRPH)

Graphene NanoChem plc

("Graphene NanoChem" or the "Group")

Joint Venture with Scomi

Graphene NanoChem (AIM: GRPH), the performance nanochemicals and advanced materials company, is pleased to announce that Platinum NanoChem Sdn Bhd, its wholly-owned subsidiary has entered into a joint venture ("JV") with Scomi Oiltools Sdn Bhd ("Scomi Oiltools") to produce and supply a range of speciality chemicals, including PlatDrill and other graphene-enhanced green chemicals, exclusively for the oilfield chemicals market. 

Scomi Oiltools is a subsidiary of Scomi Energy Services Bhd ("Scomi"), a company listed on the main board of the Malaysian stock exchange, one of the world's leading oilfield chemicals solution providers.

Highlights

· Graphene NanoChem is licensing its technology to the JV in accordance with its licensing strategy detailed at IPO

· The licensing agreement to be entered into with the JV will allow the production of a range of high value, speciality chemicals, including graphene-enhanced drilling fluids and additives, as well as base chemicals produced using the Group's proprietary nanotechnology

· The 50/50 joint venture will service the growing US$21 billion global oilfield chemicals market

· The first phase of the JV is the construction of a 45,000 MT per annum of multi-function production chemical plant and a 30 MT per annum graphene nanomaterial plant - to be completed by the beginning of 2016

· The second phase of the JV includes the production of high value proppants and enhanced oil recovery products to target Scomi's captive chemical market space

· The JV will have access to Scomi's existing customer base which today has an order book of RM4.6 billion (£844 million)

· Capital expenditure for the JV will be RM80 million (£14.7 million) to be funded 70% by debt

· Graphene NanoChem's equity component of capital expenditure is RM12 million (£2.2 million) to be funded from internally generated sources.

Jespal Deol, Chief Executive Officer of Graphene NanoChem, commented: "We are delighted to announce this JV agreement with Scomi Oiltools. This is the outcome of two years of joint development with Scomi Oiltools, which has expanded far beyond the scope of the initial collaboration on graphene-enhanced drilling fluid. It is a credit to the Company's ground-breaking nanotechnology that we have been able to enter into a joint venture, with assured supply and procurement arrangements agreed. As well as revenue from the JV resulting in a material uplift to the Group's results from 2016, we will also be targeting new opportunities within Scomi's operations. We expect this JV to be a model that we can replicate in a number of other applications.

"The addition of Graphene Nanochem's proprietary know-how, chemicals expertise and nanomaterial production capability will uniquely position the JV to benefit from the regulatory drive to utilise green, safe-to-use chemicals and the need for better performance additives for the oil and gas industry."

Wan Ruzlan Iskandar Wan Salaidin, President - Market Units of Scomi Oiltools, commented: "Collaboration with companies such as Graphene NanoChem allows Scomi to offer cutting-edge value propositions that enable our customers to benefit from efficient drilling, using enhanced products in a safe manner, whilst protecting the environment. We are well positioned now to capitalise on the growing global oil and gas chemicals and formulation market. The JV aims to capture market share and is positioned at the higher end of the formulation market in an industry that has recently seen an increasing level of backward integration into the chemicals and formulation space.

"Scomi and Graphene Nanochem will bring together their complementary skills to lead innovation in this area. Along with the production of a wide range of drilling fluids and production chemicals, over time, we hope to expand the collaborative innovation to other product areas and geographic markets."

For further information:

Introduction

Graphene NanoChem (AIM: GRPH), the performance nanochemicals and advanced materials company, is pleased to announce that Platinum NanoChem Sdn Bhd, its wholly-owned subsidiary has entered into a 50/50 venture (the "JV") with Scomi Oiltools Sdn Bhd ("Scomi Oiltools"), one of the world's leading oilfield chemicals solution providers, to produce and supply a range of speciality chemicals, including PlatDrill and other graphene-enhanced green chemicals, exclusively for the steadily growing RM21 billion oilfield chemicals market. 

Details of the Joint Venture Agreement

The JV, to be incorporated in Malaysia, shall be funded equally by the Group and by Scomi Oiltools, with each company providing two directors to the Board of the JV. The JV will operate and manage an independent high value specialty oilfield chemicals business including:

· The construction of:

o 30,000 MT per annum base oil plant;

o 15,000 MT per annum multi-functional production chemicals plant;

o 30 MT per annum graphene nanomaterials plant; and

o Blending plant

· The manufacture, production and supply of, inter alia:

o Hydrogenated base oil;

o Graphene nanomaterials;

o Imidazoline;

o Ester Quat; and

o Crude Oil Flow Improver

· Continuous research and development

Financing

The projected capital expenditure for Phase 1 of the JV is expected to be in the range of RM80 million (£14.7 million). This is expected to be funded on a 70/30 debt/equity basis. Graphene NanoChem's equity component of RM12 million (£2.2 million) is anticipated to be funded from internally generated sources. As at 31 December 2013 the Company had cash balances of approximately £7.3 million.

Existing Product Suite

The existing collaboration with Scomi Oiltools has made substantial progress over the last year, particularly since the acquisition of technology relating to the production of chemicals additives for the oilfield chemicals market, which was announced by the Group in November 2013. The Group's products now being marketed by Scomi Oiltools include the Group's PlatDrill™ graphene-enhanced drilling fluid, corrosion inhibitors, biocides, stimulation fluids and EOR fluids which are all formulated using the Group's proprietary technology.

R&D Spending

Wan Ruzlan Iskandar Wan Salaidin, President - Market Units of Scomi Oiltools commented:

"By leveraging on R&D done by other sectors, Scomi has managed to develop a few innovative products that have proven to be useful in offshore operations, thus enhancing the company's efficiency. With marginal R&D spend, we have developed a bio-based nanographene product to help in our offshore operations. We combined the ideas from people who have done nanographene, with ideas from the bio and palm oil side, to develop the green product. We have started using it for our clients and it has been quite successful".

In order to accelerate the development of the products listed above and progress collaboration towards entry into the JV, Graphene NanoChem has brought forward its R&D programme in relation to oilfield chemicals. This has materially increased the projected R&D costs for the year ended 31 December 2013, with a commensurate effect on the year's loss before tax.

Timing of Annual Results

The Company anticipates announcing its preliminary results for the financial year ended 31 December 2013 by the end of May 2014.

About Graphene NanoChem

Graphene Nanochem is an advanced chemicals and materials company and is structured into two operating divisions.

The chemical division manufactures and markets a range of speciality esters from palm waste and has obtained a leading market position in industry with a range of blue chip customers including a number of top tier oil and gas companies.

The advanced materials division produces graphene nanomaterials on a commercial scale to enable the development of a graphene-enhanced products portfolio, targeting high performance industry applications. The graphene nanomaterials division operates through three business models:

· The integrator model

The Company owns and manages the entire innovation process shouldering the bulk of the risks and also reaping the highest payback, primarily through wholly-owned or joint venture models 

· The orchestrator model

The Company coordinates significant aspects of innovation but executes only part of the process through collaborations with strategic partners driving a clear path to revenue generation and commercialisation

· The licensor model

The Company is the primary owner of the ideal or the intellectual property but is not directly involved in its realisation or implementation. This model, whilst may result in less cash, enables the Company to generate higher margins with minimal risks

Headquartered in Malaysia, Graphene Nanochem was admitted to the AIM of the London Stock Exchange on 26 March 2013, following the reverse acquisition of Biofutures International plc, and trades under the symbol GRPH.L.

To find out more, please visit www.graphenenanochem.com.

About Scomi

Scomi Energy Services Bhd, which is listed on the Bursa Malaysia Securities Berhad, and its Group of companies are involved in Energy Services comprising the Oilfield Services and Marine Services. The Group offers drilling fluids & related engineering services, drilling waste management solutions, supply of industrial and production chemicals and marine vessel services. With offices in 26 countries, the Scomi Energy Services Bhd group derives most of its business from its international operations, which are backed by over 60 years of experience in the industry, servicing numerous local and multinational companies.