JAKARTA (Rambu Energy) – Pan Orient Energy Corp, an oil and gas exploration and production company based in Calgary, Alberta, Canada, said it has entered into an agreement for the transfer of a 51 percent direct working interest and operatorship of the East Jabung Production Sharing Contract (PSC) to a wholly owned subsidiary of Talisman Energy for a consideration ofan upfront cash payment of USD$8 million (CDN$9.2 million).
Under the agreement, Talisman Energy is committed to fund the first USD$10 million (CDN$ 11.4 million)towards the first exploration well in addition to all related G&A and overhead costs incurred by the operator until the first USD$10 million expenditure has been completed.
In return, Pan Orient has an option to acquire a 20 percent working interest in a Talisman operated South Sumatra, Joint Study Area.
In addition, Talisman also agrees for a contingent commitment to fund the first USD$5 million (CDN $5.7 million) towards an appraisal well, if justified, in addition to all associated G&A and overhead incurred by the operator until the first USD$5 million expenditure has been completed.
Pan Orient said the completion of transaction is subject only to the Indonesian government approval. It expects to complete the transaction by March 2015.
Pan Orient said it believes that Talisman as a partner, given their significant presence, infrastructure and experience in South Sumatra, provides the best option towards rapid monetization of any hydrocarbon discovery at East Jabung.
“Pan Orient has demonstrated significant progress towards the corporate initiative of strengthening the Company’s balance sheet and de-risking its portfolio of assets, through partial sale or seeking partners,” Pan Orient President and Chief Executive Officer Jeff Chisholm said.
“The final goal is to retain meaningful working interests with significant upside exposure and a strong balance sheet, facilitating growth and flexibility going forward,” he added.
Pan Orient Energy Corp. won a bid from the Indonesian government in 2011 to develop the East Jabung block. Prior to the farm-out or the transfer of interest, Pan Orient holds 100 percent working interest in the block. East Jabung block, located on and offshore South Sumatra, covers 6,228 square kilometers
East Jabung PSC is directly east and adjacent to the company’s 97 percent working interest and operated Batu Gajah PSC.
The fiscal terms for the East Jabung PSC are more attractive compared to other blocks in western Indonesia, with a split of profits 65 percent to the government and 35 percent to the contractor for oil, and 60 percent to the government and 40 percent to the contractor for natural gas.
Pan Orient operations currently located onshore Thailand, Indonesia and in Western Canada. The company is listed on the TSX Venture Exchange, Canada. (*)