Ramba to farm-out 35% interest in Lemang PSC to Mandala

By Romel S. Gurky

SGX-listed Ramba Energy Ltd said on Monday that its Indonesian subsidiary PT Hexindo Gemilang Jaya had on October 4 entered into a farm-in agreement with Mandala Lemang Singapore Pte Ltd, pursuant to which Hexindo shall farm-out a 35 percent participating interest in Lemang PSC, Jambi.

Ramba said in a statement that the proposed transaction is subject the approval of the Indonesian government. Hexindo, which is 80.4 percent indirectly owned by Ramba Energy, as of the date of the announcement owns a 51 percent participating interest in the Lemang PSC.

The statement said that as part of the proposed transaction and concurrently with the farm-in agreement, Hexindo had on October 4 entered into a back-to-back agreement with Eastwin Global Investments Limited, a company incorporated in the British Virgin Islands, and which owns the remaining 49 percent participating interest in the Lemang PSC.

Under this back-to-back agreement, Hexindo shall acquire a 15 percent participating interest in the Lemang PSC from Eastwin. As such the net effect of the proposed transaction is that Hexindo will effectively farm-out a 20 percent participating interest (net assigned participating interest?) and retain a 31 percent participating interest in Lemang PSC while Eastwin will retain a 34 percent participating interest in the Lemang PSC.

Ramba said in a separate statement that Mandala will invest up to US$179.6 million in Hexindo. This consists of:
? an upfront cash payment of US$26.25 million;
? sliding-scale future contingent payments based on certification of oil and gas reserves;
? partial carry for Ramba?s share of 3 exploration wells; and
? a cash payment upon declaration of the first new exploration discovery

Ramba also said that Hexindo had on October 4 entered into a joint operating agreement (new JOA) with Eastwin and Mandala, pursuant to which all three parties to the new JOA shall define their respective rights and obligations with respect to petroleum operations conducted under the Lemang PSC. This new JOA shall replace the old JOA signed between Hexindo and Eastwin.

Ramba explained that Hexindo will, on completion of the proposed transaction, enter into a secondment agreement with Mandala, pursuant to which Mandala will be entitled to send its qualified personnel to fill certain positions in Hexindo?s organization for the conduct of certain petroleum operations after completion of the proposed transaction.

Singapore-based Mandala is a South East Asia-focused oil and gas exploration and production company backed by leading global investment firm KKR.

Ramba said that this transaction provides an opportunity for the company to realize value from its investment in Lemang, and enter into a partnership which combines its local operating strengths with the technical and financial capabilities of Mandala.

The company said that with an approved Plan of Development for the Akatara Field in place, Ramba and Mandala look forward to working together to bring first production online in the near term, appraising the significant upside in the field itself, and pursuing the material exploration potential of the Lemang block. Ramba and Mandala anticipate that the project will also enable the partnership to contribute to the Government of Indonesia?s goal of increasing national production.

?Mandala?s decision to select Indonesia as the location of its first transaction greatly underscores our view of Indonesia as a desirable investment destination. Mandala and Ramba?s collaboration is a unique coming-together of two partners with complementary skillsets, which we both look forward to leveraging. Despite the current low-oil-price environment, this partnership validates Ramba?s overall strategy and the positive economic returns we expect from the Lemang block. We look forward to a long-term partnership which goes beyond just Lemang,? said David Soeryadjaya, CEO of Ramba.

?For Mandala Energy, this marks an excellent first step in building our South East Asia portfolio. Combining Ramba?s local relationships and knowledge with Mandala?s technical and operational strengths will provide an ideal platform for securing early production whilst pursuing significant upside potential in the Lemang project,? said Barry O?Donnell, CEO of Mandala

Ramba said in August that development of the Akatara Field and commercialization of the Lemang block will commence immediately with a view to commence production within six months at an initial rate of 1,635 barrels of oil per day (bopd) and 4.10 million standard cubic feet of natural gas per day (mmscfd) in late 2017.

Editing by Reiner Simanjuntak