24 December 2015

Andalas Energy and Power Plc

("ADL" or the "Company")

Exclusivity Agreement Signed with BUMD PT Riau Petroleum to negotiate a joint venture to seek to acquire an interest in the producing Siak PSC, Indonesia

Andalas Energy and Power Plc is pleased to announce that it has entered into an exclusivity agreement ("Agreement") with BUMD PT Riau Petroleum ("PTRP"), an Indonesian oil and gas company established by the Provincial Government and four local Regencies in the Riau Province of Indonesia.  The Agreement grants ADL the exclusive right to negotiate a joint venture with PTRP to jointly acquire from PT Pertamina Hulu Energi Siak ("Pertamina Hulu"), a participation interest in the Production Sharing Contract ("PSC") for the Siak block, which currently produces approximately 1,700 barrels of oil per day ("bopd") from the Central Sumatran Basin, Indonesia.  Pertamina Hulu is a wholly owned subsidiary of the Indonesian national oil company, PT Pertamina.

Highlights

·     Exclusive agreement signed to negotiate a joint venture with PTRP to jointly seek to acquire a participation interest in Siak from Pertamina Hulu - PTRP is entitled by law to acquire a participation interest of at least 10%

·     Over 50 million barrels recovered from the Siak licence area to date: currently producing 1,700 bopd from three oil fields; multiple development opportunities identified

·     Siak is located in a prolific hydrocarbon region adjacent to the PT Chevron Pacific Indonesia ("Chevron") operated Rokan PSC from which 11 billion barrels of oil have been recovered since 1952 and which produced 335,000 bopd in 2012 (accounting for 39% of Indonesia's total oil production) from fields including the super major Minas and Duri oil fields

·     Siak benefits from extensive installed infrastructure and shared field operations with the neighbouring Rokan PSC

Andalas CEO, David Whitby, said "The signing of this Exclusivity Agreement is an important event in the Company's history.  We are delighted to be partnering with the local governments with whom we have forged a strong working relationship. 

"This opportunity differs from the conventional farm in opportunities that we have been considering.  However, we believe it to be a compelling opportunity which may deliver a material interest in what we believe is some of the best on-shore acreage in Indonesia today."

Exclusivity Agreement Summary

The Agreement provides that ADL shall have the exclusive right to negotiate the proposed joint venture ("Cooperation Agreement") with PTRP.  It sets out the parties' preliminary understanding with respect to certain key terms to be included in the Cooperation Agreement including the terms of a proposed carry, cost recovery and net profit share.  It also provides for the payment of back costs of US$370,000.  The Agreement will terminate on execution of the Cooperation Agreement and ADL may terminate it on giving 30 days written notice to PTRP.

Siak Summary 

The Siak PSC is located onshore in the Central Sumatran Basin, which is a highly prolific oil and gas producing province in Indonesia.  The block is situated 170km northwest of Pekanbaru, the capital of Riau Province, and covers 2,480 square kilometres over three areas.  It overlaps four local regencies in the Riau Province: Rokan Hulu, Rokan Hilir, Bengkallis and Kampar.

To date Siak has produced more than 50 million barrels of oil from nine fields and currently produces around 1,700 barrels of oil per day from three oil fields: Lindai (100% within the block); Batang (unitised 65%/35% with Chevron's Rokan PSC); and Menggala South (unitised 35%/65% with Rokan PSC).  

Chevron operated the Siak PSC from 1993 to 2013 and unsuccessfully bid to renew the contract in 2013.  As of 2013, the total capital expenditure on the Siak PSC is estimated to be US$302 million (in 2013 terms).  In May 2013 the PSC was awarded to Pertamina Hulu.   

Pertamina Hulu is undertaking an extensive production optimisation programme and numerous infill, acceleration, and step-out opportunities have been identified within the three producing fields.  In addition, there are further opportunities relating to the reactivation of five shut-in fields, five undeveloped discoveries, infill and step-out drilling, and waterflood programmes.  There are also a number of oil exploration prospects identified for further analysis.  Three potential gas field developments have the potential to supply the strong local gas market.  A number of follow-up exploration prospects have been identified along this same gas fairway.

**ENDS**

For further information, please contact: