AWE Limited (ASX: AWE) has announced that it has entered into an agreement to sell its 42.5% interest in the Bulu PSC to a 100% owned subsidiary of HyOil Pte Ltd for cash consideration of up to A$27.5 million, subject to Indonesian government approval. The Bulu PSC is located offshore east Java and includes the undeveloped Lengo gas project.
The transaction is structured in two tranches:
The sale is expected to be neutral for accounting purposes, with a nominal book gain after tax anticipated after final purchase price adjustments. AWE will receive a cash deposit of A$1.5 million and the effective date is 1 April 2016.
David Biggs, AWE’s Managing Director and CEO, said the company continues to deliver on its strategy of divesting non-core assets in order to recycle capital into high value growth projects, such as the Waitsia gas project in Western Australia.
“The sale of the Bulu PSC, including the undeveloped Lengo gas project, is another important step in reshaping AWE to deliver sustainable growth in a low oil price environment,” Biggs said.
“We recently completed the sale of Sugarloaf in the USA, at a price that exceeded market expectations, and at the end of the March quarter AWE was cash positive with no drawn debt. The sale of Lengo, when completed, will further reduce capital commitments and strengthen the company’s balance sheet,” he said.
“In the current low-oil price environment, we are focused on achieving near-term growth through the delivery of valuable domestic gas projects. We have commenced construction of Stage 1A of the Waitsia gas project, an A$18 million (gross) development that will supply gas to the historically strong Western Australia domestic gas market from the third quarter of this calendar year.
“The Waitsia joint venture is already considering options for the next phases of development to deliver up to 100 TJ/day, and gas marketing is well under way,” Biggs said.
“In addition, over the next 12 to 24 months we will be recontracting gas from our east coast production assets in the Bass and Otway basins and we anticipate achieving gas prices substantially higher than the historic contracts,” he said.
“In Indonesia, we remain focused on progressing the Ande Ande Lumut (AAL) oil project (101 mmbbls gross recoverable oil, net 24.3 mmbbls to AWE), which will provide AWE with exposure to any rise in oil prices.
“The joint venture is planning to drill an appraisal well on the underlying G-sand reservoir before the end of the current financial year, which has the potential to increase the AAL project’s total gross recoverable oil by a further 30 to 40 mmbbls.
“Following the sale of Sugarloaf and Lengo, AWE has significantly strengthened its balance sheet. With its substantial portfolio of Reserves and Resources, AWE is well positioned to pursue key development projects and deliver long term growth in revenue and cash flow,” Biggs said.
Adapted from a press release by Louise Mulhall
Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/05052016/awe-sells-lengo-for-up-to-a275-million/