Asset A&D

Jadestone Energy Acquires a 90% Interest in the Lemang PSC in Indonesia

By Deepak Sharma
June 30, 2020
2 minutes read
Oil & Gas Rig

Singapore-based E&P company Jadestone Energy Inc. has entered into an agreement with Mandala Energy Ltd. to acquire a 90% operated interest in the Lemang Production Sharing Contract (PSC) in the South Sumatra basin in Indonesia.

Under the terms of the agreement, Jadestone will pay an initial cash consideration of US$12 million, and make an additional contingent payment of US$5 million payable upon first gas. Jadestone may also make further contingent payments of up to US$26.7 million tied to the timing of development, project costs, oil & gas prices, and certain exploration outcomes.

The transaction has been structured as a purchase of the interest by a wholly-owned subsidiary of Jadestone, with a guarantee from the company in respect of the initial consideration.

The remaining 10% working interest in the PSC is currently held by PT Hexindo Gemilang Jaya, a subsidiary of Ramba Energy Ltd. The Indonesian government holds a back-in right for up to a 10% working interest at the time of development sanction. If exercised, it would result in an 81% interest net to Jadestone.

The Lemang PSC covers an area of approximately 4,238 sq. km located across Jambi and Riau Provinces in Sumatra. The block contains the Akatara gas field, which was previously developed as an oil-producing asset. The field ceased production in December last year after reaching its economic limit for oil production.

The block contains estimated unrisked 2C Contingent Resources (net to the interest acquired by Jadestone) of approximately 17.2 million barrels of oil equivalent (MMboe), of which 53% is gas and the remainder is LPG and condensates. Jadestone estimates costs for the development of these resources at approximately US$93.5 million.

Paul Blakeley, Jadestone’s President & CEO stated, “The acquisition adds 17.2 million barrels of oil equivalent of 2C gas resource, prior to any local government back-in, implying a headline consideration of US$0.70 per barrel of oil equivalent, and which we believe can be developed for US$5.44/barrels of oil equivalent, thanks in part to the re-use of existing facilities.”

The closing of the transaction is subject to customary closing conditions, including the approval of the assignment of the 90% interest to a Jadestone affiliate and the appointment of the affiliate as the operator under the Lemang Joint Operating Agreement. The deal is expected to close in Q1 2021.

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