Santos Buys into AAL Oil Project for $188 Mln (Indonesia)

AWE Limited today announced that it has signed a sale and purchase agreement to sell a 50% interest in the Northwest Natuna PSC, which includes the Ande Ande Lumut oil project, to a subsidiary of Santos Limited or a total consideration of USD188 million, or approximately AUD209 million at current exchange rates.

The consideration comprises USD100 million in cash payable on completion of the sale and a USD88 million cost recoverable capital expenditure carry. As a condition of the sale, AWE will also transfer Operatorship of the PSC to Santos effective on completion. The sale is subject to Indonesian regulatory approval of the transfer of a 50% interest in the PSC and operatorship from AWE to Santos.
The sale will substantially strengthen AWE’s financial position and reduce its funding commitments for the project. Following completion, AWE will be in a net cash position with an undrawn AUD300 million debt facility. The sale is expected to generate an estimated unaudited after tax profit of approximately AUD60 million.
AWE’s Managing Director, Bruce Clement, said that the successful sale highlighted the company’s value creation strategy and reflected the excellent work of AWE’s geoscience, engineering, project and commercial teams over the past 18 months.

“AWE acquired 100% of this asset in February 2012 for USD39 million plus USD100 million of debt. We identified an early stage project with significant upside potential and we immediately set about improving the reservoir mapping and modeling, drilling and completion design, and facilities design which has resulted in an optimised plan of development.
“Our teams in Sydney and Jakarta embarked on more than 12 months of comprehensive subsurface and facilities design work. Their clever and innovative solutions helped to significantly enhance the economic value of the project,” he said.

AWE increased the estimated recoverable oil in the K-Sand reservoir from 76 million barrels to 101 million barrels (gross 2P Reserves), confirmed by an independent review, with an additional 35 million barrels (gross 2C Contingent Resources) assessed in the underlying G-Sand reservoir.

“By leveraging the technical and operating experience gained from Tui and other AWE projects, we improved the facilities design and we were able to reduce the number of wells from 43 to 33 and improve oil recovery by utilising longer reach horizontal wells. Similarly, the estimated initial production rate has the potential to increase well beyond the 25,000 bopd in the original plan of development,” Clement said.
He added, “We look forward to working with Santos on this important development project. Santos is a valued partner in the project who brings an established Operating capability in Indonesia and a track record of successfully developing other offshore fields in the region.”

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Press Release, August 22, 2013