RH Petrogas Signs A Seismic Option In Respect Of The Production Sharing Contract For Block M-1, Offshore Myanmar

abarrelfullabarrelfull wrote on 12 Dec 2012 08:22
Tags: asia myanmar rh-petrogas upstream

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The Board of Directors of RH Petrogas Limited (the “Company”) refers to its announcement (SGXNet Announcement No 116) made on 6 December 2012 in relation to the change of basis of measurement for the purposes of Chapter 9 of the Listing Manual from Net Tangible Asset Value to Net Asset Value. The Board wishes to announce that the Company had on 11 December 2012 executed a farm-in option agreement (“Seismic Option Agreement”) with Rimbunan Petrogas Limited (“RPL”) pursuant to which RPL has granted the Company a seismic option (the “Seismic Option”), to farm-in and acquire 50% of RPL’s participating interest in the Production Sharing Contract for Block M-1 located offshore Myanmar (the “PSC”) (“Proposed Acquisition”).

RPL and UNOG Pte Ltd signed the PSC with Myanma Oil and Gas Enterprise (“MOGE”), a stateowned corporation of the Union of Myanmar, on 9 March 2007 . RPL is the operator of the PSC with a 93% participating interest, with UNOG Pte Ltd holding the remaining 7% participating interest. Under the PSC, MOGE may elect to participate in upto a 25% interest in the PSC upon a commercial discovery having been made, and such state participation is to be contributed by RPL and UNOG Pte Ltd proportionately.

Pursuant to an extension of the exploration period under the PSC granted by MOGE, RPL is required to acquire a new 300-500 line kilometres of 2D seismic (“2D Seismic Program”) by 7 June 2013.

The key terms of the Seismic Option include:

  • Consideration: the Company will pay for 50% of RPL’s share of the cost of the 2D Seismic Program and the 50% share is estimated to be approximately US$3.6 million. No upfront consideration is payable by the Company on signing of the Seismic Option Agreement.
  • Option Period: the Seismic Option is exercisable at any time after the signing of the Seismic Option Agreement with RPL and up to 7 June 2013.
  • Company’s Participating Interest in the PSC: upon exercise of the Seismic Option and execution and completion of a farm-in agreement between the Company and RPL, the Company will farm-in and acquire a direct net undivided 46.5% participating interest in the PSC.

MOGE’s consent is required for completion of this farm-in and acquisition.
The consideration estimated to be US$3.6 million is the only amount payable by the Company for the Seismic Option.

The Company will review the results of the 2D Seismic Program to determine whether to exercise the Seismic Option. If the Company exercises the Seismic Option and becomes a partner in the PSC, it will acquire and assume 50% of RPL’s rights and obligations under the PSC and under the joint operating agreement dated 5 March 2007 between RPL and UNOG Pte Ltd in respect of the PSC (“JOA”). As a partner in the PSC, the Company will be required to contribute its share of the PSC expenditures going forward which include the costs of drilling the outstanding one well commitment and other work programs as agreed among the partners. The future expenditure to be contributed by the Company in relation to its participating interest in the PSC, if the Siesmic Option is exercised, cannot be determined at this stage, as it will depend on a number of factors such as the seismic results and the operator’s proposed work programs. On the other hand, if the Company decides not to exercise the Seismic Option after reviewing the results of the 2D Seismic Program, it will not be liable for any further cost under the PSC or JOA. 2

RPL is controlled by Tan Sri Datuk Sir Tiong Hiew King, Executive Chairman of the Company. Pursuant to the provisions of Chapter 9 of the Singapore Exchange Securities Trading Limited (“SGX-ST”)’s Listing Manual, RPL is an associate of Tan Sri Datuk Sir Tiong Hiew King and hence an interested person and any transaction between the Company and RPL is an interested person transaction (“IPT”).

The latest audited consolidated net asset value (“NAV”) of the Group for the financial year ended 31 December 2011 is US$109,828,000 and accordingly 3% of NAV of the Group is US$3,294,840 and 5% of NAV of the Group is US$5,491,400.

The expected size of the IPT is estimated to be US$3.6 million, which will be more than 3% of NAV of the Group and less than 5% of NAV of the Group. Accordingly, Shareholders’ approval is not required for the IPT.

The Company has given an undertaking to SGX-ST that it will:

  • comply with Chapter 9 of the Listing Manual in respect of the Company's share of the cost of the Seismic Program and any subsequent share of the capital expenditure needed for the PSC;
  • ensure that all future capital expenditure to be funded by the Company in relation to the PSC will be aggregated with the Company's share of the cost of the Seismic Program, and if the aggregated costs exceed 5% of the Group’s latest audited NAV (or 5% of the latest audited Group net tangible assets (“NTA”) if the Company is required to revert to using its NTA), the Company will seek shareholders' approval prior to exercising the Seismic Option or prior to accepting commitment to provide funding.

In addition, the Company has also given an undertaking to SGX-ST that when the Company records sustained positive consolidated audited NTA for at least 2 financial years in future, the Company will consult the SGX-ST on the appropriate measure to use for the computation of the Chapter 9 thresholds at that point in time.

There are a number of gas and condensate discoveries in the region around the block. South-west of the block is the Yadana Gas field with recoverable reserves of 5.8 Tcf. There was a recent gas and condensate discovery to the south-west of the block and there are onshore oil and gas fileds north of the block. With the transformation taking place in Myanmar’s political and investment landscape and the country opening its doors to the world, the management considers it a good opportunity to explore the possibility of the Company’s participation in the Block M-1 PSC.

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