Energi Mega Persada Sells Stake in Kangean PSC to Mitsubishi and Japex

PT Energi Mega Persada has entered in to a heads of agreement (HOA) with Mitsubishi and Japex to introduce them as strategic partners, via a proposed share subscription into EMP's subsidiary, Energi Mega Pratama, Inc. Through the agreement, Mitsubishi and Japex will assume, in aggregate, an indirect 50% working interest in the Kangean PSC as well as agree to carry a substantial portion of EMP's remaining development capex obligation for Kangean's major projects. The total subscription proceeds from the transaction is US $360 million.

EMPI, a subsidiary of EMP, currently owns 100% of the outstanding shares in EMP Kangean Limited and 100% of the outstanding shares in EMP Exploration (Kangean) Limited, which hold 60% and 40% working interests, respectively, in the Kangean PSC. The PSC area contains primarily large undeveloped proven and probable gas reserves.

Definitive agreements are expected to be signed between EMP and Mitsubishi and Japex in early March, an on completion Mitsubishi and Japex will each hold 25% of the outstanding shares in EMPI. The proposed transaction is a material transaction and is subject to the approval by majority of EMP shareholders at an extraordinary shareholders meeting.

The proposed transaction involves Mitsubishi and Japex subscribing for new shares in EMPI to dilute EMP's current 100% shareholding to 50%.

Under the deal, Japex will appoint the General Manager of the EMP Kangean Ltd. Japex is a leading Japanese E&P company active internationally holding operated interest in Indonesia, China, Philippines, Libya and Canada. In Indonesia, Japex currently operates the Buton PSC in southeast Sulawesi and holds a working interest in the Sanga Sanga and North Sumatra Block A PSCs. EMP's other new partner, Mitsubishi, is Japan's largest general trading company with over 200 bases of operation in approximately 80 countries worldwide.

The proposed transaction indirectly values at 100% stake in the Kangean PSC at US $720 million.

The proposed transaction will results in a significant strengthening of EMP's balance sheet while maintaining a significant level of exposure for EMP to a material oil and gas growth asset, with proceeds form the transaction being used to pay down the existing Credit Suisse Loan Facility and related costs and expenses, with the balance used for working capital for EMP and its subsidiaries. An integral part of the transaction involves Mitsubishi and Japex committing to fund part of EMP's portion of the Kangean PSC capital expenditure.

The President Director of EMP, Mr. Chris Newton, said "this is an excellent deal for EMP shareholders as it brings in a new investor with the financial and technical resources to help EMP fully develop the reserve and resource potential of the Kangean PSC and establishes a strategic relationship that can be leveraged by all parties to pursue growth opportunities within and outside of Indonesia."

Mr. Newton went on to say that "the transaction accelerates delivery to shareholders of a portion of the value created in the PSC since it was acquired from BP in August, 2004. The value creation is a product of EMP's strategic focus on gas commercialization, organic growth and operational excellence. The transaction demonstrates EMP's commitment to maximizing shareholder value through portfolio, funding and balance sheet optimization through the asset cycle."

While the transaction will reduce EMP's net reserves and production it is consistent with the strategy of portfolio monetization and diversification and provides funds for EMP to pursue further growth opportunities.

The transaction is the culmination of a competitive process designed to maximize value for shareholders. EMP was advised by its financial advisor, Credit Suisse.

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