KrisEnergy to take over Neon Energy?s interest following default

By Romel S. Gurky

SGX-listed KrisEnergy Ltd, the operator of the Tanjung Aru PSC offshore East Kalimantan, announced on Monday that it will take over the 42 percent working interest in the block owned by its partner, Neon Energy (Indonesia) Pty Ltd, following the latter?s failure to pay its share of costs in the block.

KrisEnergy said it issued a default notice on April 7, 2014 to Neon Energy in respect of the latter?s outstanding due and unpaid cash calls amounting to US$1,000,000, including default interest at LIBOR plus 3 percent, relating to a 502 sq km 3D broadband seismic acquisition program completed in the Tanjung Aru PSC in April 2014.

KrisEnergy holds a 43 percent working interest in the Tanjung Aru PSC, with Neon Energy, the subsidiary of ASX-listed Neon Energy Limited, holding 42 percent and the remaining 15 percent held by Natuna Ventures Pte Ltd. Under the PSC?s joint operating agreement (JOA) KrisEnergy and Neon Energy entered into a deed of carry with Natuna to pay a portion, up to a capped amount, of Natuna?s share of costs associated with the Tanjung Aru PSC until December 2016. KrisEnergy therefore assumed the full costs of Neon Energy?s default amount.

KrisEnergy said its assumption of the default amount has no material effect on the company?s financial condition or business operations.

Under the JOA, Neon Energy had 20 calendar days from the date of the default notices to repay the default amount. The default notice period has elapsed and Neon Energy has not effected full payment of the default amount, and therefore Neon Energy will be required to withdraw from the contract area, pursuant to the JOA. Neon Energy?s 42 percent working interest will accordingly be transferred entirely to KrisEnergy and the company?s working interest will increase to 85 percent. Upon production from any area within the Tanjung Aru PSC, KrisEnergy will be entitled to reimbursement for the costs associated with the carry arrangement with Natuna.

Richard Lorentz, Director Business development, commented: ?We are entering an exciting phase of exploration in the Tanjung Aru block where there are two previous gas discoveries for which we carry contingent resources. We have just completed a 3D broadband seismic survey and once the data is processed, we have completed our interpretation and mapped the additional prospects and leads, we will likely look for partners to join us in the drilling phase.?

Notwithstanding the withdrawal by Neon Energy, it remains responsible for the default amount, which is due to KrisEnergy.

Editing by Johannes Simbolon