14 January
2019
Andalas Energy and
Power Plc
(‘Andalas’ or the
‘Company’)
Update on Bunga
Mas PSC
Andalas Energy and Power PLC, is pleased to report that Arcandra
Tahar, Deputy Minister of Energy and Mineral Resources (“Deputy
Minister”) issued a press release on Friday 11 January 2019, that the Bunga Mas PSC will be
one of 6 licences that will be converted to gross split PSC’s by
mid-February 2019. As announced on
29 August 2018, Andalas has a
conditional agreement to acquire an initial 25% (rising to 49% and
then 100%) interest in the Bunga Mas PSC.
The operator of the Bunga Mas PSC applied to convert the PSC to
a gross split PSC as part of the process to extend the exploration
period, one of the key conditions to completion of Andalas’s
acquisition of an interest in the Bunga Mas PSC. Andalas
regards the conversion to a gross split PSC as an important and
positive step in this process.
The modelling performed by the Company to date indicates that
the conversion of the PSC to the gross split PSC is likely to alter
the economic profile of a successful development of Bunga
Mawar. Importantly, however, it does not alter Andalas’ view
that the deal exposes shareholders to significant upside under both
the original PSC terms and the gross split PSC terms.
In addition, Andalas believes that the new gross split PSC will
provide operating advantages - the Deputy Minister highlighted that
the gross split PSC regime was created to make oil and gas licences
efficient, uncomplicated, simple and with more secure
processes.
Andalas will advise on the terms of the extension at such time
as approval is granted by the government. The terms will
include, amongst other things, the terms of the extension of the
exploration period and the application of any transitional
provisions between the old and the new regime.
Simon Gorringe, CEO of Andalas
Energy and Power PLC said, “This change in licence terms is in line
with the Indonesian government’s intention to have all oil and gas
licences structured on a Gross Split basis and although we still do
not know the exact terms of the new licence the company has the
ability to renegotiate its economic interest with the operator to
ensure the project meets our investment criteria.
“This news validates our decision to grant a short extension to
the long stop date last month. The announcement by the vice
Energy Minister indicates that the PSC will be formally converted
in February, during which time we will continue to work with the
vendor towards finalising the acquisition.
“We have established a good relationship with the Bunga Mas
Operator who wants to close the deal as soon as possible and is
willing to work with ADL to ensure that a satisfactory deal can be
agreed. I look forward to updating the market as we progress
with what continues to be an exciting deal.
“Andalas is paying consideration for the acquisition of
Bunga Mas of 19.2 million shares
(£177,600 at the closing share price on 11
January 2019), which we believe would represent very good
business should we be successful in the planned development of the
Bunga Mawar formation that has 2.3 million barrels of best case
contingent and prospective resources.
“Furthermore, successfully developing Bunga Mawar is expected to
provide cash flow to support the exploration and appraisal of the
other leads and prospects on the licence that have total operator
assessed best estimate prospective resources of 54 million barrels
of oil and 26 BCF of.
“We look forward to an exciting few weeks and months as we
provide the market with updates across our portfolio, including
completion of our acquisition of an interest in the Bunga Mas PSC
and both the forthcoming Colter new drill, which is targeting 22
million barrels of oil (1.76 million net to Andalas) and the
additional studies on our Badger investment.”
Gross Split PSC Regime
Indonesia introduced a new PSC
scheme based on gross production split in 2017. The
Government’s intention was to incentivise exploration and
exploitation activities by providing spending and operational
freedom to operators.
The new regime is based on a gross production split without
regard to a cost recovery mechanism. Hydrocarbons produced
from the PSC are shared between the contractor and the
government. The production split is determined by reference
to the characteristics of the project. The base split for oil
is 57% to the government and 43% to the contractor and for gas is
52% to the government and 48% to the contractor. The base
split is adjusted by reference to variable and progressive
components. The variable components include the status of the
working area, field location, depth of the reservoir, availability
of infrastructure, type of reservoir, carbon dioxide content,
hydrogen sulphide content, specific gravity of oil and domestic
component during the developments stage and the production
stage. The progressive components comprise oil and gas prices
and cumulative oil and gas production. By way of example, the
first plan of development under a gross split PSC will attract an
additional 5% contractors split and an off-shore field in water
depths greater than 1000m would
attract an additional 16% contractors split.
The role of SKK Migas is limited to control and monitoring of
gross split PSCs and whilst it will approve work programmes it will
not approve budgets which will be provided as a supporting
document. Contractors may carry out procurement of goods and
services independently and the governments procurement regulations
will not apply the same restrictions as under the former
regime.
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: +62 21 2965 5800 |
Roland Cornish/ James Biddle |
Beaumont Cornish Limited
(Nominated Adviser) |
Tel: +44 20 7628 3396 |
Colin Rowbury
|
Novum Securities Limited
(Joint Broker) |
Tel: +44 207 399 9427 |
Christian Dennis |
Optiva Securities Limited
(Joint Broker) |
Tel: +44 20 3411 1881 |
Stefania Barbaglio |
Cassiopeia Services
Limited
(Public Relations) |
Stefania@cassiopeia-ltd.com |