SINGAPORE - Mandala Energy is set to invest up to US$179.6 million (S$257.3 million) in a 35 per cent stake in the Lemang Production Sharing Contract (Lemang PSC) of Ramba Energy's subsidiary, PT Hexindo Gemilang Jaya.
Ramba Energy is an Indonesia-focused oil & gas exploration and production company listed here.
The Lemang block is located in the northernmost part of the South Sumatra basin, a proven region for oil & gas production.
Ramba Energy announced in a filing to the Singapore Exchange on Monday (Oct 5) that the deal will include an upfront cash payment of US$26.25 million, sliding-scale future contingent payments based on certification of oil & gas reserves, partial carry for Ramba's share of three exploration wells, and a cash payment upon declaration of the first new exploration discovery.
Hexindo currently owns a 51 per cent stake in the Lemang PSC.
Under another concurrent agreement, Hexindo shall acquire 15 per cent of Lemang PSC from Eastwin, which currently owns a 49 per cent stake in Lemang PSC. As a result, Hexindo will retain a 31 per cent per cent stake in Lemang PSC.
Mandala Energy, which is backed by international investment firm Kohlberg Kravis Roberts & Co (KKR), specialises in the South-east Asia region.
Ramba Energy said in the filing that the transaction - subject to approval from the Indonesian government - will allow the firm to "realise value" from its investment in Lemang and enter into a partnership which combines its local operating strengths with the technical and financial capabilities of Mandala.
It added that the project will also enable the partnership to contribute to the Indonesian government's goal of increasing national production.
"Mandala's decision to select Indonesia as the location of its first transaction greatly underscores our view of Indonesia as a desirable investment destination," said Ramba Energy's chief executive David Soeryadjaya.
"Despite the current low-oil-price environment, this partnership validates Ramba's overall strategy and the positive economic returns we expect from the Lemang block."
Mr Barry O'Donnell, chief executive of Mandala Energy, added that the partnership marks an "excellent first step" for the company to build up its South-east Asia portfolio.
"Combining Ramba's local relationships and knowledge with Mandala's technical and operational strengths will provide an ideal platform for securing early production whilst pursuing significant upside potential in the Lemang project," he said.
Ramba Energy resumed trading on the local bourse at 8.30am on Monday after an extended trading halt since Sept 28. The counter was up sharply by 1.7 cents or 9 per cent to 20.5 cents as at 11.30am.