Matrix ceases Indonesian production, places subsidiaries under administration

ASX listed oil company Matrix Oil NL announced on Wednesday that its Langsa oilfield offshore North Sumatra had ceased production as per October 15 and two of its Indonesian subsidiaries, namely Matrix Oil (Asahan) Pty Ltd and Matrix Oil (Glagah Kambuna) Pty Ltd have been placed under Administration. The company had also requested ASX suspend its shares effective immediately.

Matrix said Langsa oilfield ceased production after the company received termination contract for its Floating Production Storage and Offloading (FPSO) vessel on site at the Langsa TAC from contractors and advice that all oil production would cease at midnight 15 October 2002. Matrix said it strongly refuted the right of the contractors to terminate the contract.

Prior to production closure, Langsa was flowing just 350 barrel per day of crude after one of its two wells (L1 well) was shut due to a technical problem following a leak in a subsea pipeline. The field came onstream in November 2001 at a rate of 7,000 BPD. The company had since struggling hard to raise funding to finance re intervention and re entry programs to get the oilfield back to initial production level.

?The directors of Matrix have decided to take this action as current world events have made it very difficult to raise funding for offshore oil fields in SE Asia. The patience and cooperation of Matrix's creditors during the year has been exceptional, but with the current difficult circumstances it is necessary to now present a plan through the Administration,? said the company in a statement.

Matrix also said it had commenced legal proceedings in the High Court of Justice in the United Kingdom against PT Bawana and Langsa FPL Pte Ltd, the contractors for the supply and management of the FPSO vessel on site at the Langsa TAC. The proceedings are for breach of contract and relate to the alleged negligence of those Contractors when opening the Ll well in November 2002 resulting in mechanical failure and the subsequent shut down of L1 well.

Unspecified damages are sought including loss of profits as a result of the failure of the Langsa TAC fields, and of other investment opportunities to Matrix, said the company. (alex)