Salamander Energy has announced it has signed a sale agreement with SONA Petroleum Berhard to dispose a 40% working interest in the B8/38 concession containing the Bualuang oil field and the surrounding G4/50 concession, both located in the Gulf of Thailand.
Under the terms of the Transaction:
Mitsui Oil Exploration Co Ltd, from whom Salamander acquired its 100% interest in G4/50, holds back-in rights to up to 50% of the concession while the licence is in its exploration phase. In the event that MOECO exercises its back-in rights, Salamander’s and SONA’s effective working interests will each be diluted in proportion to their ownership in G4/50 (being 60 / 40).
The Transaction remains conditional, amongst other things, on approval by Salamander’s shareholders and SONA receiving regulatory approval from the Securities Commission of Malaysia and approval by its shareholders. The consideration will be met by SONA via existing cash resources and financing arranged with BNP Paribas the final documentation of which is a condition to closing of the transaction. The transaction is not subject to any other regulatory approvals.
The B8/38 concession is located in the Gulf of Thailand and contains the Bualuang oil field. The field was brought on-stream in 2008 and to date has produced over 17 million barrels of oil. It has two production platforms, Alpha and Bravo, and a Floating, Production, Storage & Offtake vessel (FPSO) which processes and stores Bualuang crude and from which cargoes are offloaded on a regular basis. Gross daily production in 2014 is expected to average between 11,000 and 14,000 barrels of oil per day (bopd).
The field is currently undergoing a phase of development drilling and infrastructure upgrade, with wells being drilled from the Bualuang Bravo Platform. The Bualuang FPSO is to be replaced with a Floating, Storage & Offtake vessel (FSO) and the Bualuang crude will be processed using newly installed modules located on the Bravo platform. The FSO is currently in the field awaiting hook up, once the facilities upgrade is completed, it is expected to result in substantial savings in operating costs.
The G4/50 concession surrounds the B8/38 concession and Salamander has acquired 3D seismic over the acreage and mapped a large number of prospects and leads in the 10-100 MMbo size range. Environmental permits are currently being sought to cover 20 drilling locations in the G4/50 acreage.
For the twelve months ended 31 December 2013, on an IFRS basis, Salamander Energy Bualuang Limited (SEBG), the Group’s wholly-owned subsidiary which holds 60% interest in the B8/38 concession, and which is the subject of the proposed transaction, generated revenues of approximately US$272 million and profit before taxation of US$103 million. Gross assets of SEBG, as at 31 December 2013, were US$438 million.
In connection with the proposed transaction, and with effect from 1 January 2014, SEBG has agreed to transfer a 40% working interest in G4/50 to a subsidiary of Salamander. The value of the interest to be transferred was US$11.3 million as at 31 December 2013, reducing the gross assets, the subject of the proposed transaction accordingly.
Terms of the transaction
The proposed transaction is to be effected via a share sale to SONA of an interest in SEBG which will result in SONA having an effective 40% working interest in both B8/38 and G4/50.
Following the transaction, Salamander Energy (Bualuang) Limited will continue to operate the B8/38 concession. Salamander will retain an effective 60% interest in both the B8/38 and G4/50 concessions through its residual holding in SEBG and through Salamander Energy (E&P) Limited, a second, wholly-owned subsidiary which holds a direct 40% interest in the B8/38 concession.
Clifford Chance acted as legal adviser to Salamander on the transaction.
James Menzies, CEO of Salamander, commented:
“The transaction announced today, represents excellent value for shareholders. Since increasing our stake in the field in 2010, Bualuang has produced over 10 million barrels of oil and generated significant cash flow. This deal demonstrates that during that time, Salamander has more than doubled the value of the field under its stewardship against a flat commodity price
Partially crystallising that value now allows us to significantly strengthen the balance sheet and return capital to shareholders while retaining a majority interest in, and operatorship of the field. Meanwhile, we are looking forward to both the continued development of the field and the exploration of the G4/50 concession together with our new partner.”