TIDMADL
RNS Number : 9589C
Andalas Energy And Power PLC
21 June 2019
21 June 2019
Andalas Energy and Power Plc
('Andalas' or the 'Company')
Services Agreement to Indonesian KSO: Betun-Selo KSO
Andalas Energy and Power Plc (AIM: ADL) is pleased to announce
that it has entered into an operating services and option agreement
("Services Agreement") in respect of the producing Betun-Selo KSO
in Sumatra, Indonesia and has also issued a GBP2 million unsecured,
interest-free convertible loan note facility ("Convertible Note")
arranged by Optiva Securities. The Betun-Selo KSO comprises the
producing Betun field and the non-producing Selo field.
Highlights
-- Under the Services Agreement, Andalas is to undertake a
4-well workover programme (the "Work Programme") on the producing
Betun field that will allow it to earn 90% of the proceeds of the
sales of cost hydrocarbons and profit hydrocarbons derived from
incremental production at the KSO until such time as the funds and
services provided by the Company have been repaid in full.
-- Betun currently produces 70 bopd. The Work Programme targets
increasing production by an incremental 80 bopd to a total of 150
bopd
-- Selo is currently non-producing but has the resources set out
below and up to 5 drilling locations
-- Andalas has an option to acquire a participating interest in
the Betun-Selo KSO (excluding any right to existing production), as
further detailed below, which has scope for further development
-- Work Programme expected to cost up to USD$650,000 to be
financed by an immediate GBP500,000 (net of fees) drawdown from the
Convertible Note
-- The Betun-Selo KSO is estimated to contain the following gross resources:
Remaining Reserves
Field Zone 1P 2P 3P
------------------------ ----- ----- ----- -----
Betun
(1) TAF (3) (oil) - mmbbls 0.7 1.6 2.1
------------------------ ----- ----- ----- -----
Contingent Resources (2)
Field Zone Low Mid High COGS
------------------------ ----- ----- ----- -----
TAF (3) Shallow (oil)
Selo - mmbbls 1.3 2.6 4.3 70%
------------------------ ----- ----- ----- -----
Prospective Resources (2)
Field Zone Low Mid High COGS
------------------------ ----- ----- ----- -----
Lahat Deep (oil) -
Selo mmbbls 0.9 1.3 1.7 60%
------------------------ ----- ----- ----- -----
Lahat Deep (gas) -
Selo bcf 21.3 33.0 46.7 60%
------------------------ ----- ----- ----- -----
1. Reserves volumes extracted from 2013 ITB GG&R Report provided by operator
2. Reserves and resource volumes estimated using guidance
provided by the SPE. Refer to the March 2007 SPE/WPC/AAPG/SPEE
Petroleum Resources Management System ("PRMS") and the 2011 SPE
Guidelines for the Application of the PRMS.
3. TAF: Talang Akar Formation
-- In addition, Andalas has issued the Convertible Note to
provide up to GBP2 million of Group funding subject to draw-down
conditions, which may be converted into Ordinary Shares on the
election of the Company or Noteholder at an issue price being equal
to the higher of 0.15 pence and a 5% discount to the closing bid
price on the day immediately prior to draw down
Simon Gorringe, CEO of Andalas Energy and Power PLC said: "We
are very excited by the Betun Selo KSO opportunity in Indonesia.
This provides Andalas with the potential to earn direct access to
oil production and revenues, which has always been one of our key
objectives. Under the terms of our agreement, ADL may earn into the
KSO by committing to workover the four existing Betun wells to
increase production. This opportunity plays directly to our
strengths in rejuvenating and optimising late life fields and
highlights the skills that exist in our team based in Indonesia. In
addition, we believe the Selo field offers substantial upside with
a number of highly productive formations that can be accessed by
one well. We are very pleased to be working with PT Celebes Artha
Ventura (CAV), the major shareholder in PT Petroenim Betun Selo
(PBS), the Betun Selo KSO Contractor and are very positive about
the opportunity to enter into more oil and gas development and
production opportunities with CAV over the longer term."
Hendrik Kolonas, President Commissioner and CEO of PT Celebes
Artha Ventura said: "We are very pleased to invite Andalas Energy
& Power to support us in the development of the Betun-Selo KSO.
For some time we have been looking for a strategic partner
experienced in oil and gas in Indonesia to work and coinvest with
us in optimising production from Betun and developing the Selo
field. We are also excited by the possibility of working with a
strategic partner on other similar projects in Indonesia."
Services Agreement
Andalas has agreed to undertake a work programme and provide
operating services and personnel (Services) to PT Petroenim
Betun-Selo (PBS), the operator of the Betun-Selo field, on the
terms of the Services Agreement. PBS has agreed to pay for the
Services by paying Andalas 90% of the proceeds of sales of cost
hydrocarbons and profit hydrocarbons derived from incremental
production at the KSO.
The work programme will comprise the workover of four (4)
existing wells located on the Betun field which will include
perforating of untapped zones, scale squeeze of low productive
zones, installation of casing gas compressors and pumps with
increased capacity for an expected cost of US$650,000.
Furthermore, PBS has granted Andalas an option to acquire a
participating interest in the Betun-Selo KSO. This participating
interest will provide Andalas with an interest only in any future
incremental production from the Betun-Selo KSO (excluding the
existing production from Betun-Selo). The amount of the interest
will be determined in accordance with the following formula:
PI = WP/(WP+V) x 100%
Where:
PI is the Participating Interest to be transferred;
WP is the total expenditure incurred by Andalas in undertaking
the work programme in accordance with Services Agreement; and
V is USD 3,600,000 (three million six hundred thousand United
States Dollars) plus the cumulative cash contributions made by CAV
to PBS from the effective date until the date of the exercise of
the Option minus the cumulative cash distributions made by PBS to
CAV from the Effective Date until the date of the exercise of the
Option.
The option may be exercised by Andalas at any time up to 6
months after completion of the 4 well workovers included in the
Services. On exercise of the option, any amount owing to Andalas
shall cease to be repayable. Andalas will be granted security by
CAV in respect of sums advanced in respect of the Services
Agreement.
Betun-Selo KSO
The Betun-Selo KSO was awarded to PBS by Pertamina in June 2012
and has 8 years remaining in the 15-year term.
The Betun-Selo KSO is made up of two fields - the Betun field
and the Selo field. Both fields are located in South Sumatra. The
Betun field is approximately 30 km NNW of Prabumulih, and the Selo
field is some 60 km WNW of Prabumulih.
The Betun Field was discovered in 1949. Field development
started in 1950 with the last well (BTN-18) being drilled in 1986.
The field was abandoned by Pertamina and picked up as a KSO in 2012
by PBS. The principal producing targets are the Talang Akar
formation and the Batu Raja formation at depths of between 1800 -
2000m. There are 4 producing wells (BTN 01, 03, 04, and 14); one
suspended well BTN 17 (a possible gas producer for fuel gas); and,
one water disposal well, BTN 5 (with a second possible injector BTN
18). Currently, BTN 03 is shut in pending workover by ADL. The Work
Programme is anticipated to consist of work over of wells BTN 01,
03, 04 and 14. The KSO operator performed a 3D seismic over Betun
in 2015. While further drilling on Betun in the near future is not
anticipated, recent analysis of the 3D data suggests additional
drilling may be possible at some future point in time.
The Betun wells are all on artificial lift - sucker rod tubing
pumps with beam pumping units. Oil production is currently in the
order of 70 bopd. The wells produce to a basic production facility
consisting of: an inlet manifold, a 5000 bfpd three phase
separator; a tank farm with one 500 bbl vertical storage tank, one
300 bbl horizontal storage tank, and one 500 bbl shipping tank);
water treatment/injection pumps; and an oil shipping custody
transfer facility. Production is shipped to the Pertamina EP Adera
field through a 4" trunkline.
The Selo field was discovered in 1936 and developed through
1940. The last well drilled, Selo-20, was drilled in 1959. The
wells drilled targeted and produced from the Talang Akar formation.
However, the Talang Akar horizon is considerably shallower in Selo
than Betun with targets in the 800 - 900m range. Currently there
are no wellbores accessible for workover/production, and no
production facilities in the Selo field. The field has been
essentially abandoned. However, analysis of recent passive seismic
work as well as reprocessing and analysis of 2D seismic have
indicated targets in the Lower Talang Akar and Basement suitable
for drilling.
Given Andalas may acquire an interest in the Betun-Selo KSO, it
will not acquire an interest in the historic revenue, losses or net
assets of PBS, the Betun-Selo KSO contractor.
PT Celebes Artha Ventura
The Betun-Selo KSO contractor, PBS, is controlled by PT Celebes
Artha Ventura (CAV) (www.celebescapital.com). CAV trades under the
name Celebes Capital and is the largest venture capital fund by
assets under management in Indonesia.
Convertible Note
The unsecured convertible loan note facility providers comprise
Optiva Securities and clients of Optiva Securities (corporate
brokers to Andalas) (Facility Providers).
The GBP2 million principal of Loan Notes have been constituted
and created pursuant to a loan note instrument dated 20 June 2019
executed by the Company.
The Facility Providers have agreed to provide an immediate
amount of GBP560,000 under the Loan Facility to fund the Work
Programme (the "Initial Drawdown"). Save for the Initial Drawdown
and subject to the agreement of the Facility Providers, the
commitments by the Facility Providers to subscribe for the Loan
Notes (the "Convertible Loan Notes Facility") may be called upon by
Andalas after production exceeds 150 bopd and in agreed amounts
within the size and timeframe of the Convertible Loan Notes
Facility. The Facility is for Group purposes and there is no
restriction on its use.
Andalas may also terminate any commitments under the Convertible
Loan Notes Facility and make repayments of any amounts drawn down
by the Company by way of subscription for Loan Notes, at any
time(s) of its choosing, without penalty.
A commitment fee of GBP30,000 is to be paid on drawdown by
Andalas to the Facility Providers as a result of acceptance by the
Company of the committed facility and will be payable again on the
anniversary of that acceptance date (to the extent that the
commitments or, following draw down, the Loan Notes remain
outstanding at such anniversary date) if the facility has not been
terminated. Andalas shall also pay a drawdown fee of 5% on such
amounts as are drawn by the Company under the Convertivle Loan
Notes Facility (the "Drawdown Fee"). In addition, the Company has
agreed to issue Optiva with warrants permitting it to subscribe for
new shares at an exercise price equal to a 5% discount to the
10-day volume weighted average price of Andalas ordinary shares in
an amount equal to 5% of the amounts drawn under the Convertible
Loan Notes Facility.
The Drawdown Fee may, at the Company's sole option, be satisfied
by the issue of new shares of no par value in Andalas ("Andalas
shares"), cash or any combination of the two. For this purpose,
Andalas shares will be valued at a 5% discount to the volume
weighted average price of the shares over the ten days' trading
immediately prior to the relevant date, subject to a floor price of
0.15 p per Andalas share.
The Loan Notes may be converted into Ordinary Shares on the
election of the Company or Noteholder at any time (subject to any
restrictions being in place because the relevant Noteholder(s)
is/are in receipt of unpublished price sensistive information on
the Company) at an issue price being equal to the higher of 0.15
pence and a 5% discount to the closing bid price on the day
immediately prior to draw down.The final repayment date for any
Loan Notes issued to the Facility Providers (following any draw
down by the Company of their commitments) is 30 June 2020.
Qualified Person's Statement
The technical information contained in this announcement has
been reviewed and approved by Mr. Gregor Mawhinney. Mr. Mawhinney
is consulting for Andalas, acting in the role of Vice President
Operations. He has nearly 40 years experience in the oil and gas
industry, is a member of the Society of Petroleum Engineers (SPE)
and a member of the Professional Engineers and Geoscientists of
Newfoundland and Labrador (PEGNL).
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ('MAR). Upon the
publication of this announcement via a Regulatory Information
Service ('RIS'), this inside information is now considered to be in
the public domain.
For further information, please contact:
Simon Gorringe Andalas Energy and Power Plc Tel: +44 1624
681250
Graham Smith FIM Capital Limited Tel: +44 1624
681250
Roland Cornish/ James Biddle Beaumont Cornish Limited Tel: +44 20 7628
(Nominated Adviser) 3396
Colin Rowbury Novum Securities Limited Tel: +44 207 399
(Joint Broker) 9427
Christian Dennis Optiva Securities Limited Tel: +44 20 3411
(Joint Broker) 1881
Technical Glossary
1P Denotes Low Estimate of Reserves (i.e., Proved
Reserves). Equal to P1.
2P Denotes the Best Estimate of Reserves. The
sum of Proved plus Probable Reserves.
3P Denotes High Estimate of reserves. The sum
of Proved plus Probable plus Possible Reserves.
bcf Billion cubic feet
bfpd Barrels of fluid per day
COGS Chance of Geological Success
Contingent Resources Those quantities of Petroleum estimated, as
of a given date, to be potentially recoverable
from known accumulations by application of
development projects but which are not currently
considered to be commercially recoverable
due to one or more contingencies.
cost hydrocarbons Means the portion of oil and natural gas from
which PBS may recover its Operating Costs.
KSO Means the Betun-Selo Operations Co-operation
Agreement between PT Pertamina EP and PBS
dated 28 June 2012.
mmbbls Million barrels
Operating Costs Means expenditures incurred by PBS in carrying
out operations under the KSO.
Petroleum Defined as a naturally occurring mixture consisting
of hydrocarbons in the gaseous, liquid, or
solid phase. Petroleum may also contain non-hydrocarbon
compounds, common examples of which are carbon
dioxide, nitrogen, hydrogen sulphide, and
sulphur. In rare cases, non-hydrocarbon content
of Petroleum can be greater than 50%.
profit hydrocarbons Means the portion of incremental oil and natural
gas that PBS is entitled to take after allocation
of Operating Costs in accordance with the
KSO.
Prospective Resources Those quantities of Petroleum which are estimated,
as of a given date, to be potentially recoverable
from undiscovered accumulations.
Reserves Those quantities of Petroleum anticipated
to be commercially recoverable by application
of development projects to known accumulations
from a given date forward under defined conditions.
Reserves must further satisfy four criteria:
They must be discovered, recoverable, commercial,
and remaining (as of a given date) based on
the development project(s) applied.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
AGRPGUMUQUPBGMU
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