Strategy

 

CBM Asia Development Corp. (CBMA) is a Canadian-based pure-play Indonesia CBM operator, holding interests in five awarded PSC’s and one joint study with a gross acreage of 6,863 km2 in high-potential basins. Three of CBM Asia’s recent acquisitions, the Hulu, Besar and Kuala Kapuas I Production Sharing Contracts (PSC) provide operatorship and 70-80% working interest for all-in costs for less than USD5.00/acre – far below North America land acquisition costs of hundreds to thousands of dollars per acre. CBM Asia trades on the TSX Venture Exchange under the symbol "TCF".

Investment Strategy: 

  • Acquire high-quality CBM acreage in Indonesia with the potential to generate 10-15 trillion cubic feet ("Tcf") of net recoverable resources

  • Concentrate acquisition efforts in key exploration basins to gain access to CBM sweet spots and hold material positions

  • Partner with oil & gas majors to leverage financial strength and technical capabilities to build out required infrastructure

  • Farm out acreage where applicable to reduce capital requirements

  • Employ North American rig and completion technology to reduce operating costs, accelerate drilling and enhance recovery

  • Divest non-strategic assets and use proceeds to fund majority owned and operated assets

  • Achieve early cash flow by selling test gas to local power generation companies

  • Derisk projects to Plan of Development stage (70-80%) and then divest assets as a basin package.

Investment Return Target: CBMA has proved its 20-fold exploration investment strategy. We and our partners discovered an NSAI-certified 1.06 Tcf of gross recoverable prospective resources at the Sekayu PSC (compliant with NI 51-101 Canadian standards) for a cost of USD9.3 million. This equates to less than USD0.01/Mcf. Realized well-head gas prices in South Sumatra have reached $10/Mcf during 2012. Management believes it can achieve its 20-fold investment return target at all its existing and future CBM PSCs.

Why Indonesia? Indonesia has one of the largest CBM resources in the world with a potential 453 trillion cubic feet ("Tcf"), more than double the country's natural gas reserves (Society of Petroleum Engineers, 2004). The South Sumatra Basin, the largest CBM basin in Indonesia, is estimated to contain in-place resources of approximately 183 Tcf; the Barito Basin, the second largest basin is estimated to contain in-place resource of approximately 102 Tcf and the Kutei Basin the third largest CBM basin in Indonesia, is estimated to contain in-place resources of approximately 80 Tcf. CBMA has interests in PSCs and applications in all three key basins.

Leveraging On Global CBM Experience. During 2007-9 Major oil companies consolidated the Australian CBM space by buying out or joint venturing with independent E&P’s who had derisked massive exploration blocks. More than AUD30 billion in deals took place as the true scale and quality of Australian CBM assets became apparent. These deals depend on an export strategy with the first LNG facilities coming on line during 2014-5. Transactions valued 3P reserves at an average USD0.45/Mcf. Now many of the same Majors plus new entrants are setting their sights on Indonesia, which has similarly large and high-quality CBM resources (453 Tcf GIP), much of which is located close to pipeline and LNG infrastructure. No other country is receiving or is likely to attract such attention for CBM development. Certainly not China, where Majors tested during the 1990’s but then abandoned due to poor geologic conditions.

Milestones Achieved in Indonesia’s CBM Nascent Industry:

  • In 2008 the Sekayu PSC, the first-ever production sharing contract for the exploration and development of CBM in Indonesia is awarded. PT Medco Energi is the operator. The following year CBM Asia acquired an interest in this early PSC.

  • BP, the world’s largest CBM producer, established commercial production at its Sanga-Sanga PSC and since March 2011 has been exporting CBM from Bontang as LNG to high-priced Japanese markets. This is the first ever CBM-to-LNG export, four years ahead of Australia.

  • TOTAL was awarded a new CBM block close to Bontang, the company’s first ever upstream CBM license, and plans to start exploration drilling shortly.

  • ExxonMobil is drilling a planned 19 test wells at four CBM blocks in the Barito Basin in South Kalimantan, the company’s first CBM project.

  • Santos, Australia’s CBM giant, farmed into two CBM blocks in South Sumatra. The prestigious company’s first CBM venture overseas, this is a particularly strong endorsement of Indonesia’s prospectivity. Santos plans to spud the first of 12 exploration wells in 4Q 2012.