This morning saw Coro Energy (LSE:CORO) jump 8.6pc to 4.2p after announcing its first acquisition in Indonesia as part of its new pan Euro-Asian strategy, adopted at the end of last year.
The company, which also owns assets in Italy, has taken a fully-funded 42.5pc interest in the shallow water Bulu Production Sharing Contract, offshore East Java. This area contains the Lengo gas field, which includes independently certified gross 2C resources of 359 Bcf of recoverable, dry gas and gross 3C resources of 420 Bcf.
Coro will pay a total consideration of c.$11m plus cost reimbursements of c$1m to current stakeholders HyOil and Aspa for the stake, which translates into an acquisition price of $0.10/MMbtu. Specifically, it will pay HyOil up to $4m in Coro shares and will pay AWE a total of c.$8m in cash to cover the purchase price, cost reimbursement and other working capital adjustments.
The remaining 57.5pc stake in Bulu is held between sole operator Kris Energy (42.5pc) and two local partners, Satria Energindo (10pc) and Satria Wijaya Kusuma (5pc).
Indonesian authorities have approved a development plan for Lengo and marketing efforts targeting the Tuban industrial complex in East Java are underway. The program includes an initial four wells from a small platform, with a pipeline back to an onshore receiving facility and processing plant. Coro expects production from the field to plateau at c.70MMscf/d.
Coro said that potential buyers for the Lengo gas include power generation firms, the petrochemical industry and other field operators who need gas supply to make up shortfall against their delivery obligations. The field partners have already signed an MOU with an ‘established gas trading company’, which plans to use the gas to supply a local petrochemical plant and other customers on the Central – East Java pipeline route.
Coro said gas prices in the East Java area have been healthy in recent years and expects gas produced from Lengo to sell from $5.50/MMbtu – $8/MMbtu. Finally, the business confirmed that it is continuing to review and progress several other material opportunities in South East Asia. This is in line with the its objective of becoming an established player in the market.
James Menzies, chief executive officer, said: ‘This first Indonesian acquisition provides Coro with a strong initial platform on which to progress our South East Asian growth strategy; it has been crucial for us to find the right asset on which to build, and being an asset with solid, proved gas resource base together with substantial technical and commercial upside, I believe this transaction delivers that.
‘The Lengo gas discovery is the right scale and in the right address, with an approved development plan and direct access to high value markets. This asset is well suited to nimble, independent E&P players with ambitions to grow. We look forward to developing the full potential of the asset and the acreage around it as we build a regional portfolio.’
Menzies joined Coro earlier this year as the latest in a string of high profile appointments announced by Coro in support of its new pan Euro-Asian strategy. The new approach also saw Coro change its name from Saffron Energy, secure £14m of institutional funding and acquire Sound Energy Holdings Italy.
Before joining Coro, Menzies served as chief executive of Salamander before selling it to Ophir Energy in 2015 in a transaction that valued it at $850m. He is a qualified geologist with over 30 years of oil and gas industry experience and also sits on the board of Trinity Exploration & Production and Guinness Oil & Gas Exploration. The appointment, first announced in March, will also see current chief executive Sara Edmondson assume the role of deputy chief executive and remain on Coro’s board.
As part of its new strategy, Coro appointed James Parsons, chief executive officer of Sound Energy (LSE:SOU) and chairman of Echo Energy (LSE:ECHO) as its non-executive chairman last December. It also added Fiona MacAulay, chief executive of Echo Energy and Marco Fumagalli, managing director of Continental Investment Partners as non-executive directors.
In January, the company hired AIM corporate-financier and investment manager Andrew Dennan as its chief financial officer. Then, in February, it brought Ilham Habibie, a well-known Indonesian businessman and son of the country’s former president, to its board to support its focus on South East Asia.