RH Petrogas Provides Update on 4Q Profit Guidance, Writes-Off $29M

RH Petrogas Limited (the Company), an Indonesia-focused oil and gas exploration and production firm, provided Monday a further update to the profit warning issued Nov. 8, 2013 (SGXNET Announcement No. 149) in respect of latest development relating to the financial statements of the Company and its subsidiaries (the Group) for the fourth quarter of the financial year ended Dec. 31, 2013.

1. Write-off of approximately $13.8 million for two unsuccessful exploration wells, being:

• Klagalo-1 well drilled in the Kepala Burung Production Sharing Contract (Basin PSC) as previously announced in the SGXNET Announcement No. 186 dated Jan. 29; and
• Zircon-1 well drilled in the Salawati Kepala Burung Production Sharing Contract (“Island PSC”) as previously announced in the SGXNET Announcement No. 129 dated Nov. 15, 2013

Under the Production Sharing Contract (PSC) regime, a substantial portion of such exploration expenditures have been recovered from oil and gas production.

2. Following an annual audit review, the Group has decided to write-off approximately $2.6 million for other exploration and evaluation expenditures incurred in the Basin PSC and Island PSC.

3. Following a review in November 2013 of the further studies on the results of the Gitar-1 exploration well drilled in the West Belida PSC, the Group has concluded that no further work will be carried out on this structure. As such, the Group will write-off the drilling cost of approximately $3.7 million as well as the costs of the seismic survey, geochemical survey and other geological and geophysical works incurred in the West Belida PSC, amounting to approximately $3.5 million.

4. In view of the drilling results of the Klagalo-1 and Zircon-1 wells as mentioned in paragraph (1) above, the Group carried out a reassessment of the goodwill which arose from the Group’s acquisition of the working interests in the Basin PSC and Island PSC. As a result, the Group will write-off goodwill of approximately $29.0 million.

The Group is in the business of exploration, development and production of oil and natural gas. To build and grow the Group’s oil and gas portfolio, the Group will from time to time explore for and drill exploration wells with a view to adding to the Group’s existing reserves and resources. Exploration success will contribute to the Group’s organic growth and add value to stakeholders.