CBM Asia Hikes Interest in Sekayu PSC

CBM Asia has increased its participating interest in the Sekayu PSC for the 583.49 square km Sekayu block in the South Sumatra Basin of Indonesia to 26%. Currently, the Sekayu PSC is held 50 per cent by a consortium of shareholders through South Sumatra Energy Inc. and the rest by PT Medco CBM Sekayu, as operator.

Under its original letter of intent, the company acquired the right to earn, indirectly through South Sumatra Energy, a 12-per-cent participating interest in the Sekayu PSC (with the exclusive right to provide financing for up to an additional 12-per-cent participating interest) from certain arm's-length vendors in consideration for $1-million in cash, of which $730,000 was paid on Dec. 14, 2009, and exploration expenditures totalling $3,243,500.

Pursuant to the participation agreement, the company will be responsible for financing all of Ephindo's and Far East Methane's exploration expenditures under the Sekayu PSC up to the earn-in cap of $8-million, of which $6,422,938 had been incurred by the company and the vendors as of Dec. 22, 2011. Upon the company financing the remaining $1,577,062 of the earn-in cap, each party will be responsible for paying its pro rata share of future exploration and other costs under the Sekayu PSC.

Certain transactions contemplated in the deed, including the change in control of South Sumatra to the company and the transfer of the direct interest in the Sekayu PSC to Ephindo, are subject to the approval of BP Migas, the government of Indonesia's executive agency for regulation of upstream oil and natural gas activities.