Novus on Indonesian assets update
Tuesday, January 28 2003 - 11:24 PM WIB
corporatefile.com.au
Novus also recently announced the sale of two of its Indonesian properties, Malacca Strait (26.03 percent) and Lematang (15 percent).
The total net proceeds amount to US$13.1 million and will be used in the first instance to retire debt. The prices of US$1.06/boe for Malacca Strait and US$0.21/boe for Lematang seem quite low. How do you justify the sale price?
CEO Bob Williams
That sale price of US$1.06/boe for Malacca Strait is actually quite high compared to the price when we bought it in 1995 and it's also high compared to our assessment of its current value. It's actually a very attractive price for us and is above the discounted cash flow
value we calculate. The dollar per unit reserve appears low because the Malacca Strait's fiscal regime is quite harsh and the fields are nearing the end of their life.
Lematang's main reserves are associated with an undeveloped gas field, and the sale price of US$0.21 per boe reflects this. The value of those reserves is low because of the capital cost, risk and time that would be required to develop them.
So, overall, the financial contribution these assets would make to Novus, had we held them, is modest despite the size of reserves.
corporatefile.com.au
Why have you chosen to sell these two assets now?
CEO Bob Williams
In the case of Malacca Strait, the offer was too good to refuse. In the case of Lematang, another partner in the block, Amerada Hess, had recently sold its interest so we took the opportunity to exit as well given that we don't see a commercially attractive development in this part of Sumatra for some time.
corporatefile.com.au
How do your remaining Indonesian assets, Kakap (25 percent) and Brantas (50 percent), compare with Malacca and Lematang?
CEO Bob Williams
Really, there's no comparison. They operate in different markets with different gas prices. Kakap and Brantas are long life, valuable properties. For example, Kakap sells gas into Singapore at a very respectable US dollar gas price, which is linked to global oil prices, which are currently particularly strong.
Brantas is on Java and when it was developed it received favourable fiscal terms and has a low government take. There's also been a very rapid growth in gas demand in heavily-industrialised East Java, as a consequence of the roll-back of Indonesian liquid fuel subsidies. As a consequence, Brantas benefits from strong gas prices, paid in US dollars.
corporatefile.com.au
Do you intend to sell Kakap or Brantas?
CEO Bob Williams
No, we don't intend to sell them.(*)