Andalas Energy and Power Plc Update on Bunga Mas

 
TIDMADL 
 
14 January 2019 
 
                         Andalas Energy and Power Plc 
 
                         ('Andalas' or the 'Company') 
 
                            Update on Bunga Mas PSC 
 
Andalas Energy and Power PLC, is pleased to report that Arcandra Tahar, Deputy 
Minister of Energy and Mineral Resources ("Deputy Minister") issued a press 
release on Friday 11 January 2019, that the Bunga Mas PSC will be one of 6 
licences that will be converted to gross split PSC's by mid-February 2019. As 
announced on 29 August 2018, Andalas has a conditional agreement to acquire an 
initial 25% (rising to 49% and then 100%) interest in the Bunga Mas PSC. 
 
The operator of the Bunga Mas PSC applied to convert the PSC to a gross split 
PSC as part of the process to extend the exploration period, one of the key 
conditions to completion of Andalas's acquisition of an interest in the Bunga 
Mas PSC.  Andalas regards the conversion to a gross split PSC as an important 
and positive step in this process. 
 
The modelling performed by the Company to date indicates that the conversion of 
the PSC to the gross split PSC is likely to alter the economic profile of a 
successful development of Bunga Mawar.  Importantly, however, it does not alter 
Andalas' view that the deal exposes shareholders to significant upside under 
both the original PSC terms and the gross split PSC terms. 
 
In addition, Andalas believes that the new gross split PSC will provide 
operating advantages - the Deputy Minister highlighted that the gross split PSC 
regime was created to make oil and gas licences efficient, uncomplicated, 
simple and with more secure processes. 
 
Andalas will advise on the terms of the extension at such time as approval is 
granted by the government.  The terms will include, amongst other things, the 
terms of the extension of the exploration period and the application of any 
transitional provisions between the old and the new regime. 
 
Simon Gorringe, CEO of Andalas Energy and Power PLC said, "This change in 
licence terms is in line with the Indonesian government's intention to have all 
oil and gas licences structured on a Gross Split basis and although we still do 
not know the exact terms of the new licence the company has the ability to 
renegotiate its economic interest with the operator to ensure the project meets 
our investment criteria. 
 
"This news validates our decision to grant a short extension to the long stop 
date last month.  The announcement by the vice Energy Minister indicates that 
the PSC will be formally converted in February, during which time we will 
continue to work with the vendor towards finalising the acquisition. 
 
"We have established a good relationship with the Bunga Mas Operator who wants 
to close the deal as soon as possible and is willing to work with ADL to ensure 
that a satisfactory deal can be agreed.  I look forward to updating the market 
as we progress with what continues to be an exciting deal. 
 
"Andalas is paying consideration for the acquisition of Bunga Mas of 19.2 
million shares (GBP177,600 at the closing share price on 11 January 2019), which 
we believe would represent very good business should we be successful in the 
planned development of the Bunga Mawar formation that has 2.3 million barrels 
of best case contingent and prospective resources. 
 
"Furthermore, successfully developing Bunga Mawar is expected to provide cash 
flow to support the exploration and appraisal of the other leads and prospects 
on the licence that have total operator assessed best estimate prospective 
resources of 54 million barrels of oil and 26 BCF of. 
 
"We look forward to an exciting few weeks and months as we provide the market 
with updates across our portfolio, including completion of our acquisition of 
an interest in the Bunga Mas PSC and both the forthcoming Colter new drill, 
which is targeting 22 million barrels of oil (1.76 million net to Andalas) and 
the additional studies on our Badger investment." 
 
Gross Split PSC Regime 
 
Indonesia introduced a new PSC scheme based on gross production split in 2017. 
The Government's intention was to incentivise exploration and exploitation 
activities by providing spending and operational freedom to operators. 
 
The new regime is based on a gross production split without regard to a cost 
recovery mechanism.  Hydrocarbons produced from the PSC are shared between the 
contractor and the government.  The production split is determined by reference 
to the characteristics of the project.  The base split for oil is 57% to the 
government and 43% to the contractor and for gas is 52% to the government and 
48% to the contractor.  The base split is adjusted by reference to variable and 
progressive components.  The variable components include the status of the 
working area, field location, depth of the reservoir, availability of 
infrastructure, type of reservoir, carbon dioxide content, hydrogen sulphide 
content, specific gravity of oil and domestic component during the developments 
stage and the production stage.  The progressive components comprise oil and 
gas prices and cumulative oil and gas production.  By way of example, the first 
plan of development under a gross split PSC will attract an additional 5% 
contractors split and an off-shore field in water depths greater than 1000m 
would attract an additional 16% contractors split. 
 
The role of SKK Migas is limited to control and monitoring of gross split PSCs 
and whilst it will approve work programmes it will not approve budgets which 
will be provided as a supporting document.  Contractors may carry out 
procurement of goods and services independently and the governments procurement 
regulations will not apply the same restrictions as under the former regime. 
 
The information contained within this announcement is deemed by the Company to 
constitute inside information as stipulated under the Market Abuse Regulations 
(EU) No. 596/2014 ('MAR).  Upon the publication of this announcement via a 
Regulatory Information Service ('RIS'), this inside information is now 
considered to be in the public domain. 
 
For further information, please contact: 
 
Simon     Andalas Energy and Power Plc                  Tel: [phone] 
Gorringe 
 
Roland    Beaumont Cornish Limited                      Tel: [phone] 
Cornish/  (Nominated Adviser) 
James 
Biddle 
 
Colin     Novum Securities Limited                      Tel: [phone] 
Rowbury   (Joint Broker) 
 
 
Christian Optiva Securities Limited                     Tel: [phone] 
Dennis    (Joint Broker) 
 
Stefania  Cassiopeia Services                           [e-mail] 
Barbaglio Limited 
          (Public Relations) 
 
 
 
END 
 

(END) Dow Jones Newswires

January 14, 2019 02:00 ET (07:00 GMT)