Serica Sells Subsidiary
Serica has sold its wholly owned subsidiary, Serica Indonesia Holdings BV, to Kris Energy Limited. Serica Indonesia Holdings BV holds Serica's Indonesian operating subsidiaries and the following exploration properties:
- An operated 30% interest in the Kutai PSC onshore and offshore East Kalimantan
- An operated 100% interest in the East Seruway PSC offshore North-West Sumatra, and
- Rights relating to certain Indonesian Joint Study Areas
Serica's 25% interest in the producing Kambuna gas field is not included in the sale.
As a result of the transaction Kris Energy Limited has taken over all responsibility for Serica's operating team in Jakarta and has paid a consideration of US $3.14 million to Serica and reimbursed a further US $0.3 million in respect of expenditures relating to those properties since the effective date of September 1, 2011. A further deferred consideration of up to US $1.5 million becomes payable to Serica in the event of future awards of license interests in the Joint Study Areas to Kris Energy Limited.
Background to the transaction
In June 2011, the Company announced that it had reached conditional agreement with Pace Petroleum (Pace) to sell its entire interests in Indonesia to Pace, including its interest in the Kambuna field, for US $33 million (valued at January 1, 2011), as part of a strategic move by Serica to refocus the Company's resources on its exploration prospects in the UK, Ireland and Morocco and in new areas where it sees greater growth potential and opportunity. The transaction with Pace Petroleum was subject to funding to be provided by GEMS, an Asian Private Equity Group based in Hong Kong. At the time of the announcement in June, GEMS confirmed that they expected completion of their fund raising in July with the transaction completing expeditiously thereafter.
As at today's date GEMS have failed to advise the Company that they have completed their funding and the Company has therefore had to assume that GEMS and Pace will be unable to complete the transaction in a reasonable time-frame. Accordingly, the Company has reviewed alternative proposals to realise the value of its Indonesian properties. The sale of the Company's exploration properties to Kris Energy Limited will enable Serica to redirect expenditure which it would otherwise have incurred in those properties and substantially reduce its overhead costs.
The Company will continue to hold its interest in the producing Kambuna field for the time being. At an average daily gross production rate of approximately 10,900 boepd since the start of the year up to the end of August 2011 the field has produced at daily average rates of some 10 MMscfd of gas and 680 bpd of condensate to Serica's account during the period. Kambuna gas is currently sold at a price of US $6.17 per mcf and condensate sales prices since the start of the year have averaged US $116.42 per barrel.
Commenting on the sale, Tony Craven Walker, Chairman and Interim CEO, said, "The sale of Serica's Indonesian exploration interests and our operating subsidiary in Indonesia marks a positive change in strategy for the Company and allows us to begin to focus our resources on developing opportunities elsewhere which we believe offer far greater growth potential for shareholders. We shall be retaining our interest in the Kambuna field for the time being and will continue to benefit from the good prices that we are receiving for the production. We would like to thank our operating staff in Jakarta for the contribution they have made to the Company and wish them well within the Kris Energy group.
"Our attention is now focused on bringing forward development of the North Sea Columbus field which we operate, accelerating the drilling of prospects which we hold in the UK, offshore Ireland and offshore Morocco, expanding our UK 2012 drilling program, utilizing the full value of our UK tax losses and adding to our portfolio with the award of new license interests both in the UK and overseas.
"In parallel with these activities we shall continue to review the potential for value enhancement through acquisition or consolidation to achieve greater diversity, tax efficiency, cost efficiency and scale, all of which we believe are essential to balance risk and opportunity."
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