Oil and gas firm Ramba Energy is selling part of its stake in the Lemang production sharing contract (PSC) in Indonesia.
The deal involves Mandala Energy investing up to US$179.6 million (S$257.3 million) in Ramba Energy's Indonesian subsidiary PT Hexindo Gemilang Jaya, which currently holds a 51 per cent working interest in the Lemang PSC.
Mandala Energy, which is backed by international investment firm Kohlberg Kravis Roberts & Co (KKR), will emerge with 35 per cent of PT Hexindo, according to a filing by Ramba Energy with the Singapore Exchange yesterday.
The Lemang block is in the northernmost part of the South Sumatra basin, a proven region for oil and gas production.
The deal, which is subject to Indonesian government approval, will include an upfront cash payment of US$26.25 million.
There will also be sliding-scale contingent payments based on certified oil and gas reserves, partial costs or returns for Ramba Energy's share of three exploration wells and a cash payment when the first new discovery is made.
A production sharing contract is an agreement between one or more investors and the government, in which the corporates are granted rights over an oilfield for a specific period.
Under another concurrent agreement, Hexindo will acquire 15 per cent of the Lemang PSC from another firm, Eastwin Global Investments, which currently holds the remaining 49 per cent stake.
As a result, Hexindo will retain a 31 per cent stake in Lemang PSC.
Ramba Energy said the transaction 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, a South-east Asia-focused oil and gas exploration and production company.
It added that the partnership will also be able 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 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," he added.
Mandala Energy chief executive Barry O'Donnell said 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 yesterday after having called for an extended trading halt since Sept 28.
The counter jumped 1.7 cents or 9 per cent to 20.5 cents.
