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Jadestone Energy acquires 90% interest in Lemang PSC

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Oilfield Technology,

Jadestone Energy has executed an acquisition agreement with Mandala Energy Lemang Pte Ltd, to acquire an operated 90% interest in the Lemang production sharing contract (PSC), onshore Indonesia, for a total initial headline cash consideration of US$12 million, to be funded from the company's cash resources, and certain subsequent contingent payments.

The Lemang PSC is located onshore Sumatra, Indonesia. The block includes the Akatara gas field, which was previously developed as an oil producing asset, but has a best estimate gross undeveloped wet gas in place of approximately 115 billion ft3 which, at 90% interest, equates to unrisked 2C resources of 55.2 billion ft3 sales gas, 2.2 million bbl of condensate, and 5.8 million boe of liquid petroleum gas.

The asset has been substantially de-risked with 11 wells drilled into the structure, plus three years of oil production history, up until the field ceased production in December 2019, after reaching its economic limit for oil production.

The remaining 10% working interest in the PSC is held by PT Hexindo Gemilang Jaya and, as is customary in Indonesia, the local government has a back-in right under the PSC, for up to a 10% working interest, at the time of development sanction. If exercised, this would result in an 81% interest, net to Jadestone.

The company anticipates completing the acquisition in 1Q21.

Paul Blakeley, President and CEO commented: "I'm delighted to re-establish our operating presence in Indonesia and to further balance our portfolio by adding a new gas resource to our reserves base. In addition to providing much-needed energy to a region of Indonesia which will benefit from it, this acquisition creates an opportunity to renew key relationships in Sumatra with local stakeholders, service providers and communities with whom we have worked closely in the past through the team's involvement in Ogan Komering, and various other assets in prior times.

"The acquisition adds 17.2 million boe of 2C gas resource, prior to any local government back-in, implying a headline consideration of US$0.70/boe, and which we believe can be developed for US$5.44/boe, thanks in part to re-use of existing facilities. While gas prices and other terms are currently being negotiated we expect to execute a gas sales agreement, ahead of development plan approval and any commitment to project capital. Local gas prices are typically in the range of US$5 - US$6/mm btu, which we anticipate will generate attractive returns on investment, making this a compelling opportunity to add value to the Jadestone portfolio.

Reflecting on the current economic climate, and our deliberate measures to conserve capital resources in 2020, Lemang provides a high degree of flexibility in the forward spending profile. The PSC carries no near-term spending commitments, doesn't expire until 2037, and as such, affords us the discretion to time the development such that spending dovetails with other high-value investments across our portfolio."

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