Fortune Oil & Gas to acquire Bawean PSC off Java

Indo Pacific Oil & Gas Inc., a subsidiary of Fortune Oil & Gas Inc, Vancouver, BC, has agreed to acquire 100% of the shares of GFB Resources (Java) Ltd. from Carmanah Resources Ltd., Calgary. GFB Resources owns 100% of the Bawean production-sharing contract, 50 miles off the northern coast of Java in the Java Sea. Fortune will restart production from Camar field and undertake exploration drilling on the blocks.

May 26th, 2000


Indo Pacific Oil & Gas Inc., a subsidiary of Fortune Oil & Gas Inc, Vancouver, BC, has agreed to acquire 100% of the shares of GFB Resources (Java) Ltd. from Carmanah Resources Ltd., Calgary. GFB Resources (Java) owns 100% of the Bawean production-sharing contract, 50 miles off the northern coast of Java in the Java Sea.

The 3,025 sq km area consists of two blocks: Northern Camar (1,805 sq km), which contains Camar field; and Tuban (1,220 sq km). Camar field was shut in in March 1999, primarily as a result of low oil prices, says Fortune; it was producing 2,500 b/d of oil at the time.

The Bawean PSC carries a 30-year term, renewable for an additional 30 years. The PSC allows for recovery of eligible costs and expenditures. Taking into consideration unrecoverable costs and a cost recovery pool of $160 million as of Dec. 31, 1999, Fortune's subsidiary will receive 89.09% of revenues from oil sales, says the company.

Gas reserves in the Bawean area have not been sold because of the lack of a transportation infrastructure. Plans to construct a pipeline that would link with another producer's gas pipeline were abandoned in 1999, due to the cash flow difficulties of the former PSC owners. Fortune said it "anticipates that it will reopen discussions later this year in an effort to sell some of its current gas reserves to a major producer."

Camar, Tuban plans
The cost of restarting Camar field is estimated at $1.785 million. Production, expected to return to near the 2,500 b/d level, will be sold to Indonesian state firm Pertamina. Based on current oil prices and Indonesia's oil pricing mechanism, Fortune expects to receive $1.5 million/month from Camar output. Production is expected to resume in the third quarter.

Further exploration prospects have been identified in Camar field, and Fortune plans to evaluate them later this year. Fortune says it has identified prospects and leads on Tuban Block, as well. It postulates that Tuban holds 90 million bbl.

"As Camar's production potential is realized, these prospects will be evaluated through drilling," said Fortune. "Production facilities are capable of handling up to 25,000 b/d of oil; therefore, new discoveries [would] require only a modest capital expenditure to be brought on stream."

The firm says it already has acquired $3.4 million worth of piping and drilling equipment that will be needed. "This significant expansion of the drilling program is expected to commence within the next 5 months," said Fortune.

Fortune paid $373,000 upon signing the deal. A financing of $1.785 million will complete the acquisition and restart Camar production. And a further $1.5 million must be paid by March 2001. GFB Resources will receive a gross overriding royalty of 5% on existing production sites and 2.5% on all other sites.

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