SPC Reinstates its Rights in the Jeruk Oil Discovery
Singapore Petroleum Company has exercised its rights to reinstate its 40% participating interest in the Jeruk oil discovery, located offshore East Java, Indonesia, and to participate in the proposed appraisal drilling program to further evaluate the Discovery.
The Discovery was made by the Jeruk-1 exploration well drilled by the operator of the Sampang Production Sharing Contract, Santos Sampang Pty Ltd in late 2003. The Jeruk-2 appraisal well was subsequently drilled in July 2004 and tested 7,488 barrels of 33 degree API oil and 2.21 million cubic feet of gas per day. Both the wells were drilled by Santos on a sole risk basis.
On March 30, 2005, Santos issued a notice to SPC, proposing an appraisal drilling program to further assess the Discovery. The notice gives SPC an option to reinstate its 40% participating interest in the Discovery.
Under the proposed appraisal program, several wells will be drilled from 2005 to 2006 to further evaluate the Discovery. SPC's 40% share of the proposed appraisal program, to be paid as the appraisal program progresses, is estimated to be US$37 million and will be funded through internal resources.
According to Santos, the Discovery is likely to contain recoverable reserves in excess of 170 million barrels of oil. A 3D seismic survey is also currently being acquired over the Discovery area. SPC had previously elected to participate in the survey.
Upon the reinstatement, SPC is committed to pay:
1. its 40% share of the past costs incurred, estimated to be US$23 million, to be paid as a lump sum upon reinstatement and funded through internal resources; and
2. a premium of 10 times its 40% share of the cost of the discovery well and five times its 40% share of the cost of the appraisal well, estimated to be US$142 million, payable in kind out of its share of future production from a Jeruk development.
The reinstatement is not expected to have any material impact on the earnings per share and the net tangible asset per share of the SPC group of companies for the current financial year.
SPC holds its interest in the Sampang PSC through its wholly owned subsidiary, Singapore Petroleum Sampang Ltd (formerly known as Coastal Indonesia Sampang Ltd).
Participants in the Sampang PSC are:
Santos (Sampang) Pty Ltd 45%
Singapore Petroleum Sampang Ltd 40%
Cue Sampang Pty Ltd 15%
Besides the Jeruk discovery, the Sampang PSC encompasses the discovered Oyong oil and gas field. On April 14, 2005, SPC announced that the Indonesian authority has approved the revised plan of development for the Oyong Field. Oil development will commence with the planned first oil production targeted for the last quarter of 2005.
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