Continental farms out E. Kalimantan oil, gas project

Canadian oil explorer Continental Energy Corporation announced Monday that it had sign agreement to farm-out 40 percent portion of its interest in Bangkudulis technical assistance contract (TAC) oilfield onshore East Kalimantan to Apex oil & Gas Co.

Under the farm-out agreement, Apex is to provide all necessary bridge funding to GATB until Continental's related financing arrangements are closed and in place. Thereafter Apex shall also take up and pay a 57 percent share of property drilling and development costs and Continental shall provide 43 percent. From the date of government approval to commence commercial production Continental's obligation to contribute to GATB costs reduces to 30 percent and Apex's obligation to 40 percent.

At that time, PT Garis Astatunggal Bangkudulis, a local Indonesian company which holds the remaining 30 percent interest in Bangkudulis, must commence payment of its own 30 percent interest and begin repayment to Continental and Apex of the amounts of funding advanced on their behalf by Continental and Apex during the period during which such interest was ``carried'' by Continental and Apex.

Continental had also given Apex an option to sell back its interest 60 days after Indonesian government gave to commence commercial production from the Bangkudulis Property.

Continental's owns 70 percent working interest in Bangkudulis TAC through its subsidiary GAT Bangkudulis Petroleum Company Ltd. (``GATB'') which owns and operates the project.

The Bangkudulis oil and gas field was discovered in 1980 by ARCO but was relinquished prior to commercial development of the field. During an ARCO 60 day extended production test the discovery well tested at rates up to 6,500 barrel of oil per day (BOPD) of 41 API (American Petroleum Institute) degrees gravity sweet crude from four sand zones with an accumulated thickness of 117 feet at a depth of 3,200 feet.

A fifth sand zone of 60-feet thickness at 4,500 feet depth flowed gas at 7.5 MMCFD.

Meanwhile, Continental also said two privately owned financial investors, B-First Holdings Ltd. and Worldrail Enterprise Ltd., both of Jakarta, hade agreed to make private placement investments of US$ 525,000 each for a total investment of US$ 1,050,000 into ``Units'' of securities of Continental at a price of US$ 0.15 per Unit.

The company said the proceed from the placement will be used to fund Bangkudulis field development project.

Continental Energy is a small oil and gas exploration company focusing its efforts on discovering major reserves in Indonesia. Apart from ownership in Bangkudulis TAC, Continental owns and operates a 60 percent interest in two exploration properties under Production Sharing Contracts covering some 3 million acres in Indonesia, the onshore Bengara-II Block and the offshore Yapen Block. (alex)