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Key Points:
- EWC is selling its 51% interest in the Sengkang PSC to PT EMP Energi Jaya for US$35 million, transferring control of significant gas assets.
- Jaya will assume all liabilities related to the operations of EEES, including tax, environmental, and decommissioning responsibilities.
- The sale is expected to close on 31 October 2024, with additional agreements in place for future gas sales and the settlement of disputes between EWC and EMA.
Energy World Corporation (ASX:EWC) has announced a significant transaction involving its 51% participating interest in the Sengkang Production Sharing Contract (Sengkang PSC), located in Indonesia. EWC’s subsidiary, Energy Equity Epic (Sengkang) Pty Ltd (EEES), currently holds this interest, which it will now sell to PT EMP Energi Jaya (Jaya), a related party to PT Energi Maju Abadi (EMA), for a total consideration of US$35 million. This deal, known as the "Sengkang Transaction," marks a pivotal moment for EWC’s involvement in the Sengkang Contract Area, which covers over 2,900 square kilometers of potential gas reserves.
Background of the Sengkang PSC
The Sengkang PSC grants EWC and its partners the right to explore and produce petroleum, including natural gas, within the Sengkang Contract Area until 2042. EWC holds a 51% interest in the contract, with EMA owning the remaining 49%. The contract includes the Kampung Baru Gas Field, which is already in production, and the Wasambo Gas Fields, where three wells have been drilled and are ready for gas production. Additionally, the area boasts numerous prospects and leads, representing further potential for gas discoveries.
Key Terms of the Share Purchase Agreement (SPA)
Under the share purchase agreement (SPA), PT EMP Energi Jaya will acquire 100% of the shares in Energy Equity Holdings Pty Ltd (EEH) and Epic Sulawesi Gas Pty Ltd (ESG), which hold EWC's interest in EEES. The transaction will transfer indirect ownership of EWC’s 51% stake in the Sengkang PSC for US$35 million. Importantly, Jaya will take ownership of EEES on an "as is, where is" basis, accepting all operational liabilities, including tax, environmental, and decommissioning responsibilities.
The sale is subject to several conditions:
- EWC and Ventures Holdings Pty Ltd (VH) must notify Indonesia's Ministry of Energy and Mineral Resources (MEMR) through SKKMigas, the regulator of upstream oil and gas activities, about the change of control of EEES.
- The transaction must proceed without any material adverse effect occurring before completion.
The deal, which does not require shareholder approval under ASX Listing Rules, is expected to close by October 31, 2024.
Additional Agreements and Settlement of Disputes
Upon completion of the SPA, EWC and EMA will enter into two additional agreements:
- Memorandum of Understanding (MOU): EMA will agree to develop and sell natural gas from the Wasambo Gas Field to EWC’s subsidiary, PT South Sulawesi LNG (SSLNG). This sale will depend on necessary regulatory approvals and pricing agreements, to be decided by Indonesia’s Minister of Energy and Mineral Resources.
- Settlement Agreement: EWC, EMA, and EEES will settle all outstanding civil disputes and criminal allegations related to the Sengkang PSC. This includes the withdrawal of police reports filed by EMA against EEES and its employees.
Strategic Implications
The sale of EWC’s 51% interest in the Sengkang PSC allows the company to monetize its stake in the project while relieving itself of operational liabilities. The transaction is part of a broader strategic shift, enabling EWC to focus on other areas of its business, such as its liquefied natural gas (LNG) ventures.
For PT EMP Energi Jaya, this acquisition strengthens its position in Indonesia's upstream gas sector by gaining a majority stake in the Sengkang PSC. With both producing and near-production assets, the Sengkang Contract Area holds substantial potential for future gas production, making the deal a key growth opportunity for Jaya.
The agreement between EMA and EWC to sell gas to SSLNG also signals a future collaboration that could provide significant benefits to both parties.
