CBM Asia closes LoI to acquire WI in Sekayu PSC

Vancouver-based firm CBM Asia Development Corp. announced Friday that it has closed its letter of intent (LOI) with Batavia Energy Inc. (Batavia) to acquire, indirectly, 24% of South Sumatra Energy Inc. (SSE).

SSE is a private company jointly owned by PT Ephindo and Batavia, which together with operator PT Medco Energi Internasional Tbk, holds the Sekayu coal-bed methane (CBM) PSC, South Sumatra.

Under the terms of the LOI, the company has paid an upfront cash payment of US$730,000 and is required to fund US$3,243,500 in exploration expenditures on the Sekayu block over the next three years to earn an estimated 12% working interest in the Sekayu PSC.

A second cash payment of US$350,000 is payable on or before March 1, 2011 provided that the Company has the right, in its discretion, to prepay such payment on or before March 1, 2010 for a reduced amount of US$270,000. If the Company fails to make the Second Installment, its estimated working interest in the Sekayu PSC will be reduced from 12% to 11%. Under the terms of the LOI, the Company also has the sole and exclusive right to provide financing for up to an additional 24% interest in SSE representing the remaining estimated 12% working interest in the Sekayu PSC. (alex)