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AWE Acquires Growth Assets in Indonesia

Source: 1/26/2012, Location: Asia

AWE Limited (AWE) has executed a Sale and Purchase Agreement (SPA) with a subsidiary of Genting Berhad (Genting) whereby a wholly owned subsidiary of AWE will acquire a 100 percent interest and operatorship of two Production Sharing Contracts (PSCs) offshore Indonesia, including an undeveloped oil field with an estimated 76 million barrels of recoverable oil. The consideration for the acquisition of the interest in the PSCs will be $39 million. Additionally, a wholly owned subsidiary of AWE will assume the loans and receivables in the two companies which are parties to the PSCs for a net amount of approximately $100 million. The transaction has an Effective Date of 1 January 2012 and completion of the acquisition is anticipated in February 2012.

The acquisition is a key initiative in AWE's strategy to grow the Company's business in Australia, New Zealand and Asia through selective exploration and acquisition. The purchase will be funded from existing cash reserves and from the proceeds of the recently announced sale of part of AWE's interest in the BassGas Project, which is expected to complete in late February 2012. The Company also has an undrawn AUD $150 million loan facility available to meet any short term funding requirements.

Asset Description

The two PSCs, the North West Natuna Production Sharing Contract (NWN PSC) and the Anambas PSC are located in the Natuna Sea in 70 metres to 90 meters of water. The NWN PSC contains the undeveloped Ande Ande Lumut (AAL) Oil Field which is estimated to contain 76 million barrels of recoverable heavy oil. Three exploration and appraisal wells have been drilled in the field.

A Plan of Development (PoD) for the AAL Oil Field was approved by the Indonesian government in late 2011, with first production targeted for end 2014 at an initial plateau production rate of 25,000 barrels of oil per day. The PoD includes the installation of a well head platform and a leased floating production, storage and offloading vessel (FPSO), together with the drilling of 43 development wells at an estimated total development cost of approximately $600 million over the period from 2013 to 2015. Significant funding for the project will not be required until 2013 and AWE has considerable flexibility in financing the development. Funding will be available to the Company from operating cash flows from the existing business and from available loan facilities. In addition, AWE may consider the farmout of part of the project, providing further funding for development costs.

In addition to the AAL Oil Field, the NWN PSC also contains additional oil exploration potential, with a number of prospects and leads identified within the PSC, some of which are adjacent to the AAL development.

The Anambas PSC contains the Anambas Gas Field, discovered in 2006, together with a number of additional exploration prospects within an offshore area containing significant gas development and pipeline infrastructure.

Following the Final Investment Decision (FID) for the AAL Oil Field development, expected at the end of 2012, AWE's 2P Reserves are expected to be increased by approximately 43 million barrels of oil, representing the net production interest from the field under the terms of the PSC. AWE has estimated existing 2P Reserves at 31 December 2011 of 56 million BOE, after adjustment for the sale of part of the Company's interest in BassGas.

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Related Categories: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Industrial Development  Insurance  Investment  Mergers and Acquisitions  Risk Management 

Related Articles: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Insurance  Investment  Mergers and Acquisitions  Risk Management 

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