PrabuEnergy awarded the Ranau PSC
Tuesday, November 22 2011 - 02:29 AM WIB
With the formal award of the Ranau PSC to PrabuEnergy, the final condition precedent has now been satisfied for Quest?s acquisition of Merric. The Board of Quest will now proceed quickly to complete and settle the acquisition of Merric this week and commence an accelerated exploration program at the Ranau prospect beginning with confirmation of priority drill targets through a 2D seismic work program.
Chairman Elect Gus Simpson said ?Quest is now in the fortunate position of holding a large Production. Sharing Contract in one of the most prospective oil and gas regions in the world. Recent work completed by the Company has delineated four project areas within the Ranau PSC that have the potential to host multiple, large scale, hydrocarbon occurrences in close proximity to South Sumatra?s main pipeline infrastructure?.
Acquisition of Merric Capital
On 9th of June 2011 the Company announced it had executed an agreement to acquire 100% of Merric Capital Pty Ltd.
Following Quest shareholder approval of the Merric acquisition on 8 August 2011, completion was subject to a number of conditions being satisfied including the grant of the Ranau PSC by the Indonesian Government and completion by Merric of a rights issue to raise approximately $1,000,000. Merric successfully completed the rights issue during October, raising $1,097,000 before costs to be applied to the initial exploration programs at Ranau.
On 22 September the Company advised that the Indonesian Government had declared PrabuEnergy as the winning bidder of the Ranau Block and the signing ceremony on Monday formally granted the Ranau PSC to PrabuEnergy, thus satisfying the final condition precedent to the Merric acquisition. Quest had previously provided a US$1,000,000 bank guarantee via a loan arrangement to Merric in order to facilitate PrabuEnergy?s bid for the Ranau PSC. This US$1,000,000 bank guarantee will now be converted to the standard PSC signature bonus required to be paid to Migas following the formal grant of the Ranau PSC.
Quest, which currently holds a 25% shareholding in Merric, will issue 963,300,000 ordinary shares and 296,400,000 1.5 cent options to the Merric vendors in order to acquire the remaining 75% of Merric and complete the acquisition, as detailed in previous announcements.
As part of the acquisition, Gus Simpson will be appointed to the Board as Non-executive Chairman and Saxon Palmer will be appointed as Technical Director, replacing Jim Malone and Mark Freeman on the Board of Quest.
Commencement of Ranau PSC Work Programs
Quest will commence an expedited exploration program including 2D seismic and the drilling of priority exploration wells. As a condition for the grant of the Ranau PSC, a new US$1,500,000 performance bond has been put in place for the Ranau work programs, which can be reduced in tranches upon completion of certain exploration work program activities, with the moneys refunded to the Company.
These work programs are already underway, with planning of the 2D seismic and data acquisition to occur in the first half of 2012. Drilling is currently planned to commence in the second half of 2012.
A successful exploration program would lead to the first production of gas and/or oil under the terms of the PSC. The Company is optimistic about the exploration and production potential of the Ranau PSC as it contains extensions of proven Sub-Basins of the prolific onshore South Sumatra Basin. These Sub-Basins contain several large scale structures within the Ranau PSC which will be further defined into drillable prospects by the initial 2D seismic work program.
Experienced Technical Team
Merric has been led by Saxon Palmer, an experienced oil and gas executive who until 2007 had been Exploration Manager Australia/Asia and Portfolio Manager for BHP Billiton.
Merric, through PrabuEnergy, has developed key relationships with prominent oil and gas professionals in Indonesia, in particular with Mr Mochamad Thamrin, a leading industry professional with a deep knowledge of the petroleum geology of South Sumatra. These relationships are important to implementing our understanding of the petroleum geology of South Sumatra, acquiring assets and executing work programs in the area. Key personnel of Merric and PrabuEnergy will be joining the Company?s management team as part of the transaction.
Background on the oil and gas industry in Indonesia and Sumatra
Sumatra is the 6th largest island in the world and has had a substantial oil and gas industry since 1885 when Indonesia?s first successful oil well was drilled in North Sumatra, creating the Royal Dutch Shell group. Since then more than 400 oil and/or gas fields have been discovered containing more than 45 billion barrels of oil equivalent.
Today Sumatra produces oil for domestic and international markets and gas for domestic markets in Sumatra and West Java, and to international markets in Singapore, via pipeline, and North Asia, via LNG export.
The North and Central Sumatran petroleum basins are dominated by large international petroleum companies such as Chevron, Pertamina, CNOOC, ConocoPhilips and ExxonMobil. In South Sumatra the industry is dominated by Pertamina (Indonesian?s national oil company) and smaller local companies.
The value creating opportunity for Quest is that PrabuEnergy believes it can bring industry leading ideas and technologies to explore for and produce oil and gas in the established, long term, production environment of South Sumatra. (ends)