Coro Energy Pulls Out of Bulu PSC Deal

January 31, 2020

The Southeast Asian focused oil company Coro Energy will not be buying a share in the Bulu PSC, offshore Indonesia, citing  increased risks around the Bulu project."

The company had in September 2018 agreed to buy a 42.5% interest in the shallow water (60m) block offshore East Java, containing the Lengo gas field for $10.96 million-plus cost reimbursements of approximately $1.04 million.

The terms of the agreement were then changed in July 2019 to restructure the cash payment to Awe Limited into four tranches.

The Bulu Acquisition remained conditional, inter alia, upon a joint venture partner pre-emption waiver and regulatory government approvals by December 2, 2019.

Then in December 2019, Coro Energy said the pre-emption waiver had been received, but government approval had been delayed, resulting in the Bulu deal not being completed by the December 2 long-stop date. The company at the time said it was negotiating a 6-months long-stop date extension.

Come January 31, 2020, Coro said it would no longer proceed with the Bulu block stake acquisition to focus on other opportunities.

Coro said that following the successful drilling at the Duyung PSC, the group was pursuing its strategy to grow through acquiring material, low-risk assets with significant upside "and will therefore no longer proceed with the acquisition of a 42.5% interest in the Bulu PSC, offshore Indonesia"

Coro said: "Following the recent successful drilling campaign on the Duyung PSC, together with the growing number of sizeable M&A opportunities in the region, Coro can be selective about the assets it chooses to bring into its portfolio.

"In that context, with the [Indonesian government's] approvals still outstanding and there being concerns around the future of the operating partner, the potential changes to the composition of the Bulu partnership group and the possibility of new requirements being introduced in satisfying the Plan of Development at Bulu, the Board views the risks associated with the Bulu Acquisition from Coro's perspective to have significantly increased. 

"As such, the Company will not be entering into an Extension and has allowed the Bulu Acquisition agreement to lapse in accordance with its terms. The Bulu Acquisition will not therefore proceed."

Coro was to pay in tranches, of $6.94 million in cash, together with an additional US$1.04 million in working capital adjustments to AWE Limited. In addition, the Company was to pay an additional US$4 million by way of the issue of new Coro ordinary shares to Hyoil (Bulu) Pte. Ltd.

"With the Bulu Acquisition not proceeding, this consideration will no longer be paid, preserving Coro's cash balances to progress other areas of its portfolio, including the Duyung PSC, and removing the need to issue further new ordinary shares in relation to this transaction. Overall, Coro's net expenditure specific to this transaction has amounted to approximately US$250,000," the company said.

James Menzies, Coro's Chief Executive Officer, said: "As we look to build our portfolio, we recognize the importance of being highly selective in identifying the right projects to pursue whilst also managing our funds in the best interests of shareholders. We are excited by the opportunities we see to build a business of scale in South East Asia, with a portfolio that would include both current production as well as both long- and near-term growth assets. 

"With that in mind, the increased risks around the Bulu project have led us to terminate the transaction, allowing us, with 2020 shaping up to be a highly active M&A market in the region, to focus our resources on opportunities that can provide near-term impact on the Company and value to its shareholders."

According to info on Coro's website, there is an approved development plan for the Lengo field, which envisions utilizing four wells drilled from a small unmanned platform, with gas transport planned to go through a 20-inch carbon steel pipeline, 65 km to shore and 5 km to planned ORF for gas processing. 

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