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Sound Oil farms out Bangkanai PSC

Source: www.gulfoilandgas.com 5/25/2010, Location: Asia

Sound Oil, the upstream Oil and Gas Company with assets in Indonesia, announces that it has entered into an agreement under which it has farmed out part of its interest in the Bangkanai Production Sharing Contract (“PSC”)to Elnusa Bangkanai Energy Limited, the operator of the PSC.

Under the agreement, Sound Oil has transferred a 29.99% interest in return for which its remaining 5% interest will be carried through all obligatory costs in the PSC including two forthcoming exploration wells. Sound Oil will also be covered for 5% of field development costs up to the first delivery of commercial gas. This agreement also applies to the discovered gas field at Kerendan.

The book value of the Company’s 34.99% interest in the Bangkanai PSC was approximately £16 million as at 31 December 2008 and this value will be adjusted accordingly. Activity on the PSC did not affect the Company’s profit and loss account in the year ended31 December 2008, as the Company’s low expenditure in relation to this interest was capitalised. Sound Oil will not receive any cash consideration.

Commenting on this farm out Gerry Orbell, Chairman said:
“For several years and for a number of reasons, the Operator has not undertaken the obligatory work on this PSC which should have been addressed before the end of 2006. Now that this farm out has been concluded we expect that this work will move forward to the satisfaction of the Indonesian Authorities. The two anticipated wells give Sound Oil exposure to a possible unrisked net 220 billion cubic feet of gas recoverable, at no risk and at no further cost to the Company. We also have the potential of a future revenue stream from gas production, again at no upfront cost to Sound Oil.

If we had not farmed out but paid our way instead, our share of these anticipated costs would have been around £22 million according to our best estimates. We have now removed a large financial liability from the Company and we are intent on adding value by expansion in South East Asia and elsewhere.”

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Related Categories: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Industrial Development  Insurance  Investment  Mergers and Acquisitions  Risk Management 

Related Articles: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Insurance  Investment  Mergers and Acquisitions  Risk Management 


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