Coro Energy has decided not to proceed with the acquisition of a 42.5 percent stake in the Bulu production sharing contract (PSC), offshore East Java, which contains the Lengo gas field.
Coro said on Friday that, following the successful drilling at the Duyung PSC, it was pursuing its strategy to grow through acquiring material, low-risk assets with significant upside and would abort the acquisition of a 42.5% interest in the Bulu PSC.
The company added that the long stop date for completion under the Bulu acquisition agreement of December 2, 2019, had passed without completing the Bulu acquisition and that the parties were in the process of negotiating a further six-month extension to the long stop date to accommodate the additional time required for receiving all regulatory approvals.
“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,” the company stated.
“In that context, with the 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 added.
The consideration for the Bulu acquisition stands at $6.94 million in cash, together with an additional $1.04 million in working capital adjustments to AWE Limited. In addition, the company was to pay an additional $4 million by way of the issue of new Coro ordinary shares to HyOil (Bulu) Pte. Ltd.
Coro said that, with the Bulu acquisition not proceeding, this consideration would no longer be paid, preserving Coro’s cash balances to progress other areas of its portfolio, including the Duyung PSC. Overall, the company’s net expenditure specific to this transaction has amounted to approximately $250,000.
James Menzies, Coro’s CEO, stated: “We are excited by the opportunities we see to build a business of scale in Southeast 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.”
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