Continental Energy to Purchase 30% Interest in PSC Onshore Indonesia
Continental Energy Corporation has entered into an agreement to purchase a 30% working interest in the Tungkal Production Sharing Contract, located onshore in Sumatra, Indonesia.
Continental will pay total consideration of US$27,320,000. The deal is effective as of June 1, 2008 and will close subject to and after receipt of a waiver or expiry of a right of first offer, an Alberta court order approving the disposition by Ernst & Young as Receiver of Fuel-X International Ltd., and approval of the assignment of PSC interest by Indonesian authorities.
Continental paid a cash deposit of $1,500,000 on signature of the definitive sales and purchase agreement. At closing Continental shall pay an additional $13,500,000 cash, adjusted for production income since June 1, 2008, plus issue 12,320,000 newly created Series-A preferred shares each having face value $1.00.
The Series-A preferred shares are unlisted, restricted, non-voting, and do not bear interest. On the first trading day after the first anniversary of issue, the Series-A preferred shares will automatically be converted into Continental common shares at a conversion rate of the lesser of $1.00 or the weighted average trading price of Continental's common shares for the 30 calendar days prior to conversion.
Funding of the cash due at closing shall be led by Macquarie Bank Energy Group of London under its August 2007 financing mandate with Continental.
The Tungkal PSC encompasses an area of 2,285 square kilometers (approximately 565,500 acres) held by production until August 25, 2022. It is operated by Pearl Oil (Tungkal) Ltd., a subsidiary of Pearl Energy Ltd., an Abu Dhabi owned company, who holds the remaining 70% working interest.
The Tungkal PSC currently produces on average at a rate of about 1,000 BOPD from the Mengoepeh Field. The field was placed on production in December 2004 and a southern extension of the field was discovered in 2007. Pursuant to a plan of development filed with Indonesian authorities in early 2008, the operator plans to drill 16 new development wells on the southern extension, starting in last quarter 2008, with the objective of completing it by early 2010 and increasing production to 4,500 BOPD.
Continental's Exploration Manager, Andrew T. Eriksson, said, "We recognize the significant exploration upside in the Tungkal Block. Two prospects in particular will most likely be drilled at the close of the 16 well development drilling program. The availability of 3D seismic coverage over the Mengoepeh Field itself also bodes well for additional extensions of the field."
Continental's President & CEO, Richard L. McAdoo, added, "Our new year's resolution was to acquire two new properties before the end of 2008, one giving us oil and gas production income and one giving us a high potential exploration property. The Tungkal acquisition gives us the realization of the first half of that goal and we have negotiations in the works that should realize the second half on schedule."
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