ANDALAS ENERGY AND POWER PLC
08 March 2016
Andalas Energy and Power Plc
("ADL" or the "Company")
Signs Tuba Obi East gas project farm-in agreement
Andalas Energy and Power Plc, the AIM listed investment company, is pleased to
announce that it has conditionally entered into a farm-in agreement for the
Tuba Obi East ("TOE") Technical Assistance Contract ("TAC") ("the concession"),
which is located in the South Sumatran basin approximately 30km north-west of
Jambi city in Jambi province, Sumatra.
Highlights:
* ADL to acquire 30% working interest in TOE TAC via a farm-in;
* TOE is the entry point for Andalas into the profitable Indonesian gas and
power sector;
* Any future gas production from the concession may support either:
+ Gas export with the project located close to a major export route; or
+ Gas-to-power being located in an area where a significant shortfall in
power generation exists;
* Farm-in via execution of a US$1.075 million work programme;
* Work programme comprises technical studies and the drilling and testing of
one well which would be put into production on success;
* Work programme is being jointly operated by Andalas;
* Planning and preparations for drilling are advancing rapidly;
* Subject to well results, further gas and power development studies will be
undertaken;
* Gaffney Cline and Associates is in the final stages of completing a
Competent Person's Report ("CPR") assessing the gas resources within the
TAC; and
* Farm-in constitutes a reverse takeover pursuant to the Aim Rules and,
accordingly, the farm-in agreement is subject to the approval of Andalas'
shareholders in general meeting.
* An admission document which will include notice of a general meeting
seeking shareholder approval will be published in due course.
Andalas CEO, David Whitby, said "The signing of this agreement follows the
Letter of Intent announced on 3 February 2016 and secures ADL's foundation gas
asset. We are keen to take full advantage of the opportunity Tuba Obi East now
affords Andalas, and we regard it as the base upon which a profitable
Indonesian gas and power business can be built.
"TOE has all the essential features to be a successful first asset for the
Company. It has gas proven by two wells into the reservoir zone that has been
defined on 3D seismic and confirmed by well logs, all whilst located in a
prolific hydrocarbon basin. In addition, the field is close to both gas and
power infrastructure and has easy access to Indonesia's burgeoning energy
market which is generating high prices for producers. It represents an
unrivalled opportunity for a new Indonesian gas and power market entrant like
ADL."
Farm-in Summary
As previously announced, under the terms of the proposed farm in, Andalas will
acquire a 30% direct working interest in the concession through the execution
of a single well work programme. The work programme includes the completion of
a geological, geophysical and reservoir ('GG&R') study along with the drilling
and flow testing of a single well to assess the deliverability, recoverable
volumes, and gas quality in the Air Benakat formation.
Block operator PT Akar Golindo and Andalas will jointly operate the well work
programme, which is expected to cost around US$1.075 million. Andalas has also
agreed to pay a further sum of US$500,000 to PT Akar Golindo if the concession
is renewed beyond its expiry date of 15 May 2017.
Pursuant to Rule 14 of the AIM Rules for Companies this farm-in constitutes a
reverse takeover and, accordingly, the farm-in agreement is subject to the
approval of Andalas' shareholders in general meeting.
Work Progress
Under the terms of the agreement the Company will be the technical operator for
the Tuba Obi East well work programme. Accordingly, ADL's in-country team has
expedited the design, planning and site preparations for the farm-in well
(provisionally called TOE-2). The concession operator, PT Akar Golindo, has
also been supporting this work.
Two well locations (a preferred location and an alternate) have now been
selected and site surveys have been completed, along with the inspection of
potential drilling rigs, during the week commencing 22 February 2016. The
drilling team is now progressing the rig selection process whilst services
contracting continues apace, with the preparation of critical tender documents.
Additionally, ADL has prepared a draft gas and power development plan for the
TOE concession. As part of the TOE-2 well approval process this plan will be
presented to Pertamina (the Indonesian national oil company) in the coming
weeks. Work has also commenced on a power production feasibility study in
parallel with GG&R evaluations of gas discoveries in the area surrounding the
concession.
As part of the reverse takeover process, representatives from the Company's
nominated adviser, Cantor Fitzgerald (Europe), have visited the field. Gaffney
Cline and Associates in Singapore has almost completed its CPR assessing the
gas resources within the concession. The results of their analysis are
expected shortly. Andalas will publish the Admission Document in due course.
Tuba Obi East Gas
Tuba Obi East is located in the South Sumatran basin approximately 30km
north-west of Jambi city. The wells previously drilling in the concession have
tested gas in the key South Sumatra hydrocarbon bearing formations, namely, the
Air Benakat Formation ('ABF') and the Talang Akar Formation ('TAF'). A total
of six wells (three wells within the concession and a further three just
outside) have been drilled through these zones, with a number having been
logged across the ABF and TAF. Several have also flowed gas to surface.
Crucially, the ABF has flowed gas outside the TAC at commercial rates, but only
limited data from this formation has been gathered within the concession area.
Andalas' technical analysis indicates that this reservoir zone contains
potentially substantial gas resources that can be proven via the drilling and
flow testing of the proposed TOE-2 well. If the work programme proves
successful, the TOE-2 may be completed as a future production well.
Further GG&R and development studies will be undertaken following the analysis
of test results from the well. This work will be conducted in parallel with
development planning and a proactive approach to the renewal and extension of
the concession contract. Preliminary discussions will also be held with
targeted gas and power consumers.
**ENDS**
For further information, please contact:
David Whitby Andalas Energy and Power Plc Tel: +62 21 2783 2316
Sarah Wharry Cantor Fitzgerald Europe Tel: +44 (0) 20 7894
Craig Francis (Nominated Adviser and Joint 7000
Broker)
Lucy Williams Peterhouse Corporate Finance Tel: +44 (0) 20 7469
Charles Goodfellow Limited (Joint Broker) 0930
Colin Rowbury Cornhill Capital (Joint Tel: +44 (0) 20 7710
Broker) 9610
Frank Buhagiar St Brides Partners Limited Tel: +44 (0) 20 7236
Susie Geliher 1177
Andalas Energy and Power : Signs Tuba Obi East gas project farm-in agreement
March 08, 2016 at 08:36 am EST
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