HPCL's Unit Acquires Stakes in 2 Bass Basin Permits from AWE for $74M

Australia's AWE Limited announced Tuesday that it has agreed to sell an 11.25 percent interest in T/L1 (BassGas infrastructure & Yolla field) and a 9.75 percent interest in T/18P (Trefoil field) in the Bass Basin, Australia to Prize Petroleum Company Limited, a wholly owned subsidiary of Hindustan Petroleum Corporation Limited, for a total cash consideration of $74.48 million (AUD 85 million).

AWE will receive $70.1 million (AUD 80 million) upon completion of the sale with a further $4.38 million (AUD 5 million) deferred payment payable upon meeting the following conditions:

• $2.19 million (AUD 2.5 million) on completion of the BassGas Mid Life Enhancement (MLE) project (drilling of two development wells and installation of gas compression)
• $2.19 million (AUD2.5 million) if the MLE project costs do not exceed an agreed threshold

The sale is subject to standard joint venture and government approvals for a transaction of this nature including the Australian Foreign Investment Review Board and the Reserve Bank of India.

The effective date for the sale is July 1, 2013 and is subject to completion adjustments. At completion, AWE will hold 35 percent in T/L1 (BassGas/Yolla) and 35 percent in T/18P (Trefoil).

Upon completion, the sale is expected to generate an estimated unaudited after tax loss of approximately $8.76 million (AUD 10 million), subject to the completion date and subsequent adjustments.

AWE’s Managing Director, Bruce Clement, said, “The sale of an 11.25 percent  interest in BassGas is another successful strategic initiative for the company and is an excellent outcome for AWE.

“Whilst recording a non-cash loss on the sale, the release of capital from the BassGas asset will further strengthen our financial position and reduce AWE’s exposure to capital commitments for the final stages of the MLE project. Our remaining 35 percent interest in BassGas is an appropriate holding in this nonoperated asset and, importantly, maintains our voting rights at a level that provides control over major investment decisions.

“AWE remains well positioned to take advantage of rising east coast gas prices where we note that a number of gas supply contracts were renegotiated towards the end of 2013 with oil linked pricing mechanisms and at higher base rates.

“The majority of AWE’s existing east coast gas supply contracts expire in 2017 and 2018 and we expect to commence marketing our uncontracted gas in the near future,” Clement said.

“AWE holds a valuable portfolio of production, exploration and development assets across the Otway and Bass Basins with direct access to the east coast gas market.

“With strong cash flows and a substantial net cash position, backed by a recently renegotiated $262.89 million (AUD 300 million) syndicated loan facility, AWE’s financial position is the strongest it has been for some years. Upon completion of the sale, the company will be in an excellent position to fund its significant planned growth activity and consider new acquisitions.

“Over the next few years, we look forward to the successful delivery of the Ande Ande Lumut oil project in Indonesia, the Sugarloaf unconventional gas and oil project in the USA and the remainder of the BassGas MLE project, all of which will substantially increase our production and cash flow, and deliver value to our shareholders.

“Also moving towards commercialization are the undeveloped Lengo gas field in Indonesia, our unconventional gas fields in Western Australia, and the Trefoil and La Bella gas fields offshore Victoria.

“AWE’s growth outlook is excellent and this sale helps to ensure our future is well funded,” Clement said.