AWE Sells Share in BassGas Project (Australia)
AWE Limited has agreed to sell an 11.25%interest in T/L1 (BassGas infrastructure & Yolla field) and a 9.75% interest in T/18P (Trefoil field) in Australia to Prize Petroleum Company Limited, a subsidiary of Hindustan Petroleum Corporation Limited, for a total cash consideration of AUD85 million.
AWE will receive AUD80 million upon completion of the sale with a further AUD5 million deferred payment payable upon meeting the following conditions:
• AUD2.5 million on completion of the BassGas Mid Life Enhancement (MLE) project (drilling of two development wells and installation of gas compression);
• AUD2.5 million if the MLE project costs do not exceed an agreed threshold.
The sale is subject to standard joint venture and government approvals for a transaction of this nature including the Australian Foreign Investment Review Board and the Reserve Bank of India. The effective date for the sale is 1 July 2013 and is subject to completion adjustments. At completion, AWE will hold 35% in T/L1 (BassGas/Yolla) and 35% in T/18P (Trefoil). Upon completion, the sale is expected to generate an estimated unaudited after tax loss of approximately AUD10 million, subject to the completion date and subsequent adjustments.
AWE’s Managing Director,Bruce Clement, said,“The sale of an 11.25% interest in BassGas is another successful strategic initiative for the company and is an excellent outcome for AWE. Whilst recording a non-cash loss on the sale, the release of capital from the BassGas asset will further strengthen our financial position and reduce AWE’s exposure to capital commitments for the final stages of the MLE project. Our remaining 35% interest in BassGas is an appropriate holding in this nonoperated asset and, importantly, maintains our voting rights at a level that provides control over major investment decisions.
“AWE remains well positioned to take advantage of rising east coast gas prices where we note that a number of gas supply contracts were renegotiated towards the end of 2013 with oil linked pricing mechanisms and at higher base rates.”
“The majority of AWE’s existing east coast gas supply contracts expire in 2017 and 2018 and we expect to commence marketing our uncontracted gas in the near future,” Clement said.
“AWE holds a valuable portfolio of production, exploration and development assets across the Otway and Bass Basins with direct access to the east coast gas market.
“With strong cash flows and a substantial net cash position, backed by a recently renegotiated AUD300 million syndicated loan facility, AWE’s financial position is the strongest it has been for some years. Upon completion of the sale, the company will be inan excellent position to fund its significant planned growth activity and consider new acquisitions.”
Growth well funded
“Over the next few years, we look forward to the successful delivery of the Ande Ande Lumut oil project in Indonesia, the Sugarloaf unconventional gas and oil project in the USA and the remainder of the BassGas MLE project, all of which will substantially increase our production and cash flow, and deliver value to our shareholders.
“Also moving towards commercialisation are the undeveloped Lengo gas field in Indonesia, our unconventional gas fields in Western Australia, andthe Trefoil and La Bella gas fields offshore Victoria.
“AWE’s growth outlook is excellent and this sale helps to ensure our future is well funded,” Clement said.
Bass Gas Project
The BassGas project consists of an offshore wellhead platform connected by pipeline to the gas processing facility at Lang Lang, Victoria.
Gas is currently produced from two wells, Yolla-3 and Yolla-4. The offshore facilities have been designed to incorporate additional production wells from the Yolla field and also to tie-in other gas discoveries in the region.
The project has achieved its design gas throughput rates of 67 Terajoules per day, with budgeted liquid recoveries.
A 2-well drilling program (Trefoil-2 and Rockhopper-1) was completed in early 2010.
The BassGas Mid Life Enhancement Project (MLE) commenced in 2011. This project comprised the installation of an accommodation module (completed in 2012) and the installation of a compression module (deferred). The joint venture is also planning to drill further development wells (Yolla-5 and Yolla-6).