HALO to Acquire 85% Stake in Duyung PSC in Natuna Sea from Singapore's WNEL
Hague and London Oil PLC (the Company or HALO) announced that it has entered into a conditional agreement to acquire a material interest in the Duyung Production Sharing Contract (Duyung or the PSC), located in the Natuna Sea, Indonesia:
- Duyung PSC contains the undeveloped Mako Natural Gas discovery and nearby infrastructure
- Estimated Gas Initially in Place (GIIP) of 902 billion cubic feet (Bcf) gross (150 million barrels of oil equivalent or MMboe)
- Material transaction in line with strategy to broaden portfolio in Southeast Asia, leveraging HALO expertise of the market, basin, geology and technology
- Operatorship of exploration and appraisal opportunity with high working interest of 85 percent and relatively low risk exposure
- Low pressure, shallow gas in jackup water depth
- Low cost entry: initial commitment limited to $0.5 million
- Healthy economics within current commodity prices under competitive fiscal terms and within a range of recovery factors
The proposed transaction will see HALO acquire 85 percent and the operatorship of Duyung from West Natuna Exploration Ltd (WNEL), a private Singapore-based entity, who will retain a 15 percent stake.
As part of the transaction, HALO has agreed to provide the partnership with $0.5 million of working capital and to acquire long-lead items and/or contract services for the drilling of an appraisal well on the license, Mako South-1X. If the Company proceeds with the transaction then HALO would carry WNEL for its net 15 percent working interest share of costs, capped at $10 million (gross) inclusive of the upfront $0.5 million working capital payment (i.e. a capped carry of $1.5 million net to WNEL). Any net costs incurred by WNEL beyond the $1.5 million will be paid in accordance with the Joint Operating Agreement on a net working interest basis.
The minimum remaining work program is expected to include the Mako South-1X appraisal well, and the partners may commit to more work as part of a wider appraisal and development program of the Mako Natural Gas discovery (the Mako Discovery) contained within the Duyung PSC.
The terms of the transaction grant HALO preferential recovery of all audited and approved costs expended on the Mako Discovery from WNEL's and HALO's share of hydrocarbons produced, including the historic cost pool (ca. $12 million gross). Following cost recovery from the Mako Discovery, all costs incurred and hydrocarbons produced from the license will be shared in accordance with the Joint Operating Agreement on a net working interest basis.
Situated in the major oil and gas producing and exporting Natuna Sea basin, Duyung covers an area of 646 square miles (1,673 square kilometers) in water depths ranging from 197 feet (60 meters) to 328 feet (100 meters). HALO believes that the PSC has significant shallow gas potential with multiple stacked reservoirs, as has been demonstrated in the Mako Discovery. According to an independent report by Panterra Geoconsultants B.V. dated April 24, GIIP is estimated to be up to 902 Bcf (150 MMboe); recovery factors for such gas accumulations may be in the range of 21-52 percent based on example fields elsewhere.
The Mako Discovery, which is currently undeveloped, is covered by legacy high-resolution 2D seismic plus log data from three previous wells and covers an area of 166 square miles (430 square kilometers). The Mako-1 exploration well was drilled in March 1999 by LASMO and targeted large scale channel seismic facies which were interpreted as incised valley fill. The well encountered 23 feet of net gas filled sand at the top of the seismic anomaly followed by 60 feet of mudstone above a further 12 feet of net water-wet sand at the base of the channel feature. Wireline logs confirmed gas-down-to and water-up-to values consistent with the pre-drill gas water contact modelling of 1,420-1,450 feet. HALO believes that the existing data is sufficient to enable it to identify the location of the potential appraisal well, Mako South-1X, to be drilled in 2016, the aim of which is to improve reservoir understanding and, more importantly, reservoir performance on a drill stem test in order to establish other properties, particularly permeability, saturation and ultimate recovery.
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