Fulucai Productions Ltd. has entered into a Memorandum of Understanding (the “MOU”) with Blue Sky Langsa Ltd. (“BSL”) whereby the Company has the right to acquire certain oil and gas interests in North Sumatra, Indonesia, including offshore leases and equipment.
The asset is known as Langsa TAC and is a 77 square kilometer offshore concession in 325 feet of water depth, 55 kilometers from the North Sumatra shoreline. The block has 2 discovered fields, known as the L and H fields, and 7 wells. Historic sunk costs for the Langsa TAC are approximately $59.5 Million. Mobil Oil initially made the discovery in 1980.
The Company and BSL intend to enter into a formal Securities Purchase Agreement for the acquisition following accordance with normal industry standards, requisite regulatory requirements and approvals in the U.S., Canada and Indonesia. Under the terms of the agreement, the Company will acquire 100% of the shares of BSL from the BSL shareholders for $7.5 Million consisting of $1.0 million cash at closing and $6.5 Million to be paid from 15% of cash flow (net to BSL’s interest) generated by Langsa TAC. At closing, BSL will hold a total of 65% interest in Langsa TAC.
Following execution of the MOU, the Company will proceed to conduct due diligence on BSL, including evaluation and field inspection of the Properties, prior to the execution of the SPA. The Company hopes to finalize the Share Purchase Agreement by December 31, 2013 and close the acquisition by January 15, 2014, with an effective date of January 1, 2014. As this is a related party transaction, Fulucai will engage a third party to provide a fairness opinion on BSL. At closing, the current non-independent directors and officers of BSL will resign in favor of Fulucai appointees.
Press Release, December 03, 2013