Artist & Entertainment Group (ASX: AEM) has entered into a binding Heads of Agreement to acquire Centre Energy Petroleum, which owns a majority interest in the Wailawi Oil and Gas Project in East Kalimantan, Indonesia.
Under the agreement, AEM will issue $12.8 million worth of shares to the three shareholders of Centre Energy to acquire the company.
Centre Energy has also agreed with Perusda Benuo Taka to establish a joint venture company, which is to receive an assignment of Perusda's participating interest in a production sharing contract over Wailawi, subject to the approval of upstream oil and gas regulator SK Migas.
Perusda is an Indonesian company owned by the East Kalimantan Panajam Paser Utara Regency Government.
On incorporation of the joint venture company, which is expected to occur in the next one to two weeks, a binding assignment agreement between Perusda and the joint venture company is to be entered into and the approval of SK Migas of the assignment is to be sought.
On completion of the assignment, Centre Energy Petroleum will be entitled to receive a share of the net project earnings generated from the Wailawi Project on the condition that it meets its obligations under the Cooperation Agreement.
These obligations include undertaking further exploration activity in the Wailawi Project area, particularly on previous unexplored prospective compartments of the project area.
The Wailawi Project was discovered in 1975 and brought into production in 1979 producing gas from just four wells, with peak production reaching 18 million cubic feet of gas per day in 1985.
An additional two more wells were drilled in 1986 with production continuing until 1999.
However the low gas and oil prices brought about by the Asian financial crisis of the late 1990s resulted in the project being placed on care and maintenance and it wasn’t until October 2005 that the field resumed production after Perusda reached a Production Service Agreement with BP Migas.
Separately, AEM has signed a binding memorandum of understanding with Project Global Investments to work together on identifying oil and gas projects in Indonesia in which they may wish to invest, acquire or otherwise seek to develop, including by means of the development and deployment of enhanced oil and gas recovery technology.
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