NuEnergy Inks LOI to Farm Out Stake in Rengat PSC in Sumatra

Australia-based gas and ancillary power generation development company NuEnergy Gas Limited (NuEnergy) announced Wednesday that it has signed a Letter of Intent (LOI) with a strategic Asian investor (the Farm-in Party) for the farm-in to the Rengat production sharing contract (PSC) in central Sumatra, Indonesia.

Under the terms of the proposed Farm-In transaction the Farm-in Party will:

• Invest in NuEnergy via a 10 percent share placement at a price equal to the higher of a 15 percent discount to the 14 day Volume Weighted Average Price (VWAP) or $0.036 (AUD 0.04) per share, raising a minimum of $1.16 million (AUD 1.3 million); and
• Pay NuEnergy $2.7 million in cash plus provide a full carry on 3 core and 3 pilot production wells, with the full value of the carry program being estimated at $10-12 million,

in return for being assigned a 49.9 percent participating interest in Rengat PSC located in central Sumatra, Indonesia. The proposed Farm-in Party has extensive experience in the Coal Bed Methane (CBM) service industry and with drilling and completion techniques that can significantly enhance the productivity of the CBM wells.

Other key terms of the agreement include the following rights for the Farm-In party:

• a first right of refusal to subscribe for a further 5 percent of the issued capital of NuEnergy upon the company achieving a minimum specified 2C resource upgrade; and
• the right to nominate one director to the Board of NuEnergy Gas Limited

Key deliverables and time frames for completion of the agreement, as set out in the LOI, are as follows:

• Due diligence completion: March 15
• Share placement agreement: Finalized by March 31
• Farm-in agreement: Subject to conditions precedent, finalized by March 31
• Conditions Precedent Satisfaction: July 31 (subject to necessary regulatory approvals)

The total cash contribution under the proposed transaction of  $3.58 million,or AUD 4 million, (minimum) will fund the drilling of additional pilot wells in NuEnergy’s South Sumatran PSCs to assist the ongoing work program to achieve commercial production.