Dart Energy Limited, a global coal bed methane (CBM) company, today announced that it had exercised its option to increase its equity stake in Fortune Liulin Gas Ltd (FLG) to 45%.
In December 2009, Arrow Energy International (AEI) acquired a 35% stake in FLG. At the same time, AEI was granted an option to increase its stake in FLG to 45% prior to 31 December 2010 (and then to 50% prior to 30 June 2011, and ultimately to 75% prior to 30 June 2013). This asset was transferred to Dart as part of the demerger from Arrow Energy.
FLG is the operator of the Liulin CBM PSC in China, and has a 50% equity stake in that project, with CUCBM holding the remaining 50%. The other shareholder and Dart's partner in FLG is Fortune Oil Plc (LON:FTO), a UK listed company with extensive oil and gas operations in China.
The Liulin CBM project is one of the most advanced CBM projects in China, and is a designated State Special Pilot Project.
In order to exercise the option, the total consideration payable by Dart into FLG is US$8.7m, in two tranches - one tranche of US$4.35m which has been paid on exercise of the option, and the second tranche of US$4.35m which will be paid by end March 2011. Dart has been issued additional shares in FLG such that Dart's shareholding in FLG has increased from 35% to 45%.In addition, Dart will also pay into FLG a reserve bonus calculated by reference to the 2P reserve position of FLG as at 30 June 2011.
All funds paid into FLG by Dart in respect of exercise of the option will be used to fund the ongoing work program on Liulin during 2011, which is currently being finalised.
The decision to exercise the option and to increase Dart's equity position in Liulin has been made in the context of encouraging results - both technical and commercial - from work over the past 12 months, since Dart originally acquired its stake in FLG. This includes:
Completion of drilling of 4 horizontal in-seam wells on Liulin:
- All horizontal in-seam wells were executed on budget and to technically very high standards, providing Dart with a greater level of assurance that complex wells can be executed at acceptable cost at Liulin
- 2 wells in the 3/4/5 seam, completed in March 2010, have successfully dewatered and are now collectively producing gas in excess of 660,000 cfd per day, with the bottom hole pressures not yet fully drawn down. At this level, Dart considers the wells to be commercially viable, and Dart believes the production rates could be increased materially as the wells are optimised
- An additional well in the 3/4/5 seam and a single well in the 8/9 seam are still in the dewatering phase
Dart Energy Limited (ASX:DTE) is a publicly listed Australian company focused on the development of coal bed methane in eastern Australia and Asia. The company has established offices in Singapore, Australia, China, India, Indonesia and Vietnam servicing a diverse portfolio of quality projects, assets and opportunities. Our projects are predominantly located in energy constrained markets with large populations and high forecast demand growth resulting in high values for gas.
Dart's assets include 90 percent ownership of Arrow Energy's former international business as well as stakes in listed ASX companies Bow Energy (1.4%), Apollo Gas (21.04%), and Liquefied Natural Gas (7.5%). The company also holds farm-in rights to two Apollo Gas exploration tenements located in New South Wales, Australia. Shell holds a 10 percent interest in Dart's international business.
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