Andalas enters services agreement for work at Betun-Selo

The AIM-traded firm said it had also issued a £2m unsecured, interest-free convertible loan note facility arranged by Optiva Securities.

It said the Betun-Selo KSO comprised the producing Betun field and the non-producing Selo field.

The company explained that, under the services agreement, Andalas would undertake a four-well workover programme on the producing Betun field, which would allow it to earn 90% of the proceeds of the sales of cost hydrocarbons and profit hydrocarbons derived from incremental production at the KSO, until such time as the funds and services it provided had been repaid in full.

Betun currently produced 70 barrels of oil per day, with the work programme targeting an increase in production by an incremental 80 bopd, to a total of 150 bopd.

Selo was currently non-producing, but did consist of resources of interest and up to five drilling locations, Andalas reported.

The firm said it had an option to acquire a participating interest in the Betun-Selo KSO - excluding any right to existing production - which had scope for further development.

Andalas said the work programme was expected to cost up to $0.65m, to be financed by an immediate £0.5m net drawdown from the convertible note.

The board said it had issued the convertible note to provide up to £2m of group funding, subject to draw-down conditions, which could be converted into ordinary shares on the election of the company or noteholder at an issue price being equal to the higher of 0.15p and a 5% discount to the closing bid price on the day immediately prior to draw down.

“We are very excited by the Betun Selo KSO opportunity in Indonesia,” said Andalas chief executive officer Simon Gorringe.

“This provides Andalas with the potential to earn direct access to oil production and revenues, which has always been one of our key objectives.

“Under the terms of our agreement, ADL may earn into the KSO by committing to workover the four existing Betun wells to increase production.”

Gorringe said the opportunity played “directly” to the firm’s strengths in rejuvenating and optimising late life fields, and highlighted the skills that existed in the team based in Indonesia.

In addition, he said the board believed that the Selo field offered “substantial” upside, with a number of “highly productive” formations that could be accessed by one well.

“We are very pleased to be working with PT Celebes Artha Ventura, the major shareholder in PT Petroenim Betun Selo, the Betun Selo KSO contractor, and are very positive about the opportunity to enter into more oil and gas development and production opportunities with CAV over the longer term.”