US major ConocoPhillips has agreed to sell for $1.355 billion its remaining Indonesia assets to local player Medco Energi.
Medco Energi is set to boost its domestic portfolio with the purchase of ConocoPhillips’ subsidiary that owns a 54% operated interest in the Corridor production sharing contract in Sumatra and a 35% stake in the Transasia Pipeline Company.
The $1.355 billion sale to Medco Energi is subject to customary adjustments and is expected to close in early 2022, subject to certain conditions precedent.
The assets produced around 50,000 barrels of oil equivalent per day for the nine months ended 30 September and had proven reserves of approximately 85 million barrels of oil equivalent at the end of 2020.
The effective date for the transaction will be 1 January 2021.
The Corridor PSC has two producing oilfields and seven producing gas fields located onshore South Sumatra. Most of the gas produced is sold under long-term contracts to customers in Indonesia and Singapore.
Through Transasia, Medco Energi will own a minority interest in the gas pipeline network supplying Central Sumatra, Batam and Singapore customers. Post Transaction, MedcoEnergi’s 2022 pro forma guidance will be oil and gas production of 155,000 boepd, with capital expenditures of $275 million and unit cash costs below $10 per boe.
“This transaction builds on Medco Energi’s track record of accretive acquisitions and fits well with our Climate Change Strategy,” said chief executive Roberto Lorato.
“The acquisition further strengthens Medco Energi’s footprint in Southeast Asia and will generate significant synergies with our Sumatra operations. We look forward to welcoming Corridor’s high-quality workforce into Medco Energi group.”
The current equity interests in Corridor are ConocoPhillips on 54%, Repsol of Spain (36%) and Pertamina (10%).
However, under a revised deal agreed in 2019 with the Indonesian authorities, the operator's interest will reduce from 54% to 38.4% post-2023 to accommodate a greater role for national oil company Pertamina, which will increase its stake to 30%, and a local public company, which will take a 10% share.
Also, Pertamina is set to take over operatorship of Corridor in December 2026 after a three-year transition period of the new contract, which has gross split terms.
ConocoPhillips is not turning its back on Asia Pacific, where it is exercising its pre-emption right to purchase up to a further 10% equity in APLNG.
The US player has notified Australia’s Origin Energy that it intends to purchase up to an additional 10% in Australia Pacific LNG (APLNG) from Origin for up to US$1.645 billion.
A ConocoPhillips subsidiary currently holds a 37.5% APLNG shareholding interest and would own 47.5% of APLNG upon closing if the other relevant APLNG shareholder does not exercise its preemption rights.
This transaction is expected to close in the first quarter of 2022 and is subject to Australian government approval.
ConocoPhillips’ full-year 2020 production from APLNG was approximately 115,000 boepd, and full-year 2021 distributions are expected to be approximately $750 million, excluding distributions resulting from any additional shareholding interest arising from preemption.
“Today’s announcement reflects our ongoing commitment to further strengthen our company across every aspect of our global portfolio,” said Ryan Lance, ConocoPhillips chief executive.
“The Asia Pacific region plays an important role in our diversification advantage as an independent E&P and these two transactions enhance that advantage by lowering our aggregate decline rate and diversifying our product mix.”
Lance added that ConocoPhillips is proud of its almost 50-year history in Indonesia and is pleased that MedcoEnergi recognises the value of this business.
“We are also pleased to have the opportunity to effectively deploy the proceeds from the sale of our Indonesia assets toward additional shareholding interest in APLNG, which supplies LNG to long-term buyers in both China and Japan and is currently the largest supplier of natural gas to Australia’s East coast domestic market, meeting over 30% of its total demand,” he said.
“Through the achievements of APLNG and its other shareholders, Origin Energy and Sinopec, APLNG has become a world-class integrated LNG operation. It will continue supplying customers in the Asia Pacific region with reliable energy that is lower in GHG intensity than many of the alternatives, and thus help meet energy transition pathway demand for years to come.”
