Lion Energy reported on 24 July the sale of its 40.7% participating interest in the South Block A PSC, located in onshore North Sumatra, to Blue Sky Resources Ltd. Consideration for the sale was a nominal amount of USD 10. Lion will have no further obligations towards the PSC joint venture, however it will retain entitlement to royalties from future production from the block, up to a maximum of USD 4.5 million. The royalty, equal to 0.8% of the revenue from the block, will become payable as soon as 50% of the cost recovery pool at first production has been recovered.  Lion was holding the participating interest through fully owned subsidiary KRX Energy. The deal is subject to final approval from Indonesian government. Operator RENCO Elang will retain operatorship and 59.3% interest in the block.  RENCO is planning to drill exploration well Amanah Timur 2 in the block, possibly in Q3 2018, to further evaluate the potential oil and gas discovery made by the Amanah Timur 1 wildcat in January 2017.  After the completion of Amanah Timur 1, the operator received a four-year extension for the exploration period of the South Block A PSC, until January 2021. The work programme for the extension includes three wells and 50 sq km of 3D seismic acquisition. After the first two years, work progress will be monitored by SKK Migas and failure to complete the programme or to submit a Plan of Development may result into PSC expiry, with no financial penalty.  Future drilling in the block could be targeting the Jerneh prospect which is considered by Lion among the largest undrilled prospect in the North Sumatra Basin.  With the sale of South Block A, Lion has mostly completed its portfolio review towards focusing on producing and near-producing assets in Southeast Asia. The company retains interests in several unconventional Joint Study Areas in onshore North and Central Sumatra, which could be still under consideration for potential disposal. A key focus area for the company will be the Seram Island, where Lion holds a 2.5% participating interest in the Seram (Non-Bula) PSC and has been awarded the East Seram Gross Split contract, with 100% operating interest, on 2 May 2018.  Background Information  South Block âAâ PSC  The block was awarded in May 2009 to Realto Energi Nusantara Corelasi (RENCO) (51%, operator) and PT Prosys Oil & Gas International. Prosys (49%).  KRX Energy Pte Ltd was reported on 31 October 2012 to have received government approval for the acquisition of 35% non-operating stake in the block from Prosys, which retained a 14% stake. Lion Energy provided the funds to KRX for the said stake acquisition. Lion Energy, in return, would earn a 30.77% stake in KRX under an earlier deal announced on 18 June 2012. Consideration for the participating stake in the block would involve KRX paying 49% of the gross cash calls of USD 8 million made by operator RENCO for the current and future work program. After the payment of the said amount (USD 3,920,000), expenditures by the participants would be on an equity share basis. KRXâs 35% stake was delivered free and clear of all loans, liens, mortgages, and any other encumbrances, specifically clear of any requirement to reimburse Prosys for the paid signature bonus, or part thereof.  Lion Energy announced on 22 January 2013 an agreement with KRX Energy for the acquisition of all the remaining issued share capital of KRX, in addition to the 30.77% it was previously holding.  RENCO and KRX increased the respective stakes in November 2016 following the default of PT Prosys Oil & Gas International. The new interest holding became RENCO, 59.3% and KRX, 40.7%.  After partial area relinquishments, the PSC covers 421 sq km which include all the previously identified prospects and leads. The top six prospects in the block are estimated to contain recoverable resources of approximately 25 MMbbl of oil and condensate and 514 Bcfg (mid-case, on a 100% interest basis).  In early April 2014, the operator had completed 183 km 2D seismic survey in the block. The main objective of the survey was to identify high-grade lead and prospects (Simpang, Djerneh, Amanah, Sungai Iyu, Paya Bili). The survey was conducted by PT Quest Geophysical Asia. This seismic campaign is one of the firm commitments for the PSC.   Previous wells in the block were drilled by Asamera from the mid-1960s up until the mid-1980s. In A-1: Krueng Tuan 1, Geudongdong West 1, Pineueng South A1 and A2, Pelawi, all encountered gas shows. Three appraisals of the Paya Bilik discovery, not covered by this block, recovered minor oil. In A-2 both Sungai Lyu A-1 and Talaga Muka had oil shows, the former also had gas shows.   Amanah Timur 1  Wildcat Amanah Timur 1 was plugged and abandoned on 19 January 2017 after unsuccessfully attempting to free a stuck pipe. The well was spudded on 3 January 2017 and was drilled to a TD of 347 m, shallower than the PTD of 570 m. Despite not reaching the deeper targets (â800â and â900â sandstones), the well encountered several potential gas and oil zones in the shallower section from 115 m down to 347 m (â400â, â450â, â500â and â700â sandstones of the Keutapang Formation). The reservoir was encountered 29 m shallower than anticipated.  The stuck pipe incident occurred at a depth of 347 m within the â700â sandstone reservoir, where high gas readings caused increased pressure. During well control operations, a flare of condensate-rich gas was observed, which was interpreted to originate from the â700â reservoir  Amanah Timur 1 targeted multiple sandstone reservoirs within the Upper Miocene Keutapang Formation. The shallower reservoirs, between approximately 100 and 400 m depth, have produced approximately 200,000 bo in pre-WW II time at the nearby Paya Bilik field. Additional targets were deeper, untested sandstones of the Lower Keutapang Member.  The final operating cost for Amanah Timur 1 is expected to be lower than the budgeted cost of USD 1.3 million which included well site preparation, completion and up to three production test runs. Amanah Timur 1 fulfilled exploration commitments for the block, preventing the USD 3 million penalty stipulated in the PSC in case of non-fulfilment.  The Amanah Timur structure is a faulted anticline, well defined by seismic imaging. As of end July 2017, prospective resources (P50) for Amanah Timur was estimated at 3.9 MMbo and 4.5 Bcfg, with low case (P90) of 1.7 MMbo and 2 Bcfg, and upside of 8.8 MMbo and 10 Bcfg (P10).  Jerneh Prospect  The Jerneh prospect is a large four-way closure on trend with the Pase and Matang fields. According to Lion, Jerneh is the largest undrilled prospect in North Sumatra, with a potential closure area between 7.9 and 63 sq km. The proposed Jerneh 1 well could have a PTD of around 1,900 m and will primarily target the Lower Miocene Peutu Formation limestones. Lower-Middle Miocene Belumai Formation sandstones are secondary targets. The Jerneh prospect is estimated to contain unrisked mean prospective resources of 329 Bcfg and 7.5 MMbc, with a 34% chance of success. Estimated well cost would be around USD 5 million.  Analogues for the prospect are the Pase and Matang fields in the basin. Prospective resource estimates for the Jerneh structure are: low case (P90) of 64 Bcfg and 1.5 MMbc, medium case (P50) of 223 Bcfg and 5.3 MMbc, and high case (P10) of 760 Bcfg and 17.6 MMbc.
Lion Energy has sold its 40,7% interest in South Block A PSC (421kmÂ²) to Blue Sky Resources (Renco op.59,3%)