Triton inks supply deal for Cakerawala gas

Triton Energy Ltd., Dallas, last week signed a heads of agreement with Petroleum Authority of Thailand (PTT) and Malaysian state firm Petronas for the sale of natural gas production from Cakerawala field. Triton's partners in the field are: Petronas Carigali (JDA) Sdn. Bhd., a subsidiary of Petronas; and the Malaysia-Thailand Joint Authority, the statutory body representing Thailand and Malaysia in petroleum operations in the Malaysia-Thailand Joint Development Area (JDA).

April 27, 1998

5 min read

Bill Brocato
Staff Writer

Triton's partners in the field are: Petronas Carigali (JDA) Sdn. Bhd., a subsidiary of Petronas; and the Malaysia-Thailand Joint Authority, the statutory body representing Thailand and Malaysia in petroleum operations in the Malaysia-Thailand Joint Development Area (JDA).

Under the agreement, Triton, Petronas Carigali, and the Malaysia-Thailand Joint Authority will sell gas to PTT and Petronas. The contract calls for sales of 390 MMcfd (about 372 billion BTU/day) for at least 20 years, with the deliveries being split equally between the two buyers. Deliveries will begin when the first phase of development starts up in the first half of 2001.

The supply agreement includes a "take-or-pay provision that specifies the buyers must take a minimum of 90% of the daily contract quantity and the sellers must be able to deliver a maximum of 110% of the daily contract quantity," Triton Energy vice-president Greg Dunlevy told OGJ.

Gas deliveries under the first phase of this multiphase project are expected to generate about $5.5 billion in sales over a 20-year period. Triton's share will be about 30%, or $1.65 billion.

The supply deal

The agreement specifies a formula for determining the price for gas delivered at the platform. While the base price is $2.30/MMBTU, the actual sales price, calculated and payable in U.S. dollars, will be adjusted annually by a formula that includes U.S. dollar-denominated inflation and fuel-oil price indices. That formula price, if calculated today, would be $2.56/MMBTU.

The take-or-pay agreement encompasses 2.7 tcf of gas over 20 years. Triton has offered an economic incentive-a 5% price discount to the buyers after delivery of 500 bcf-which should occur during the fourth year of production. The price discount will be increased to 10% after cumulative delivery of 1.3 tcf, said Dunlevy.

The buyers are responsible for transporting the gas from the platform. Dunlevy could not confirm if and when that pipeline infrastructure would be in place.

He said the Triton partners development plan includes three wellhead platforms, a living-quarters platform, a processing platform, facilities for gas production, a riser compression platform, a floating storage and offloading vessel, and 35 development wells.

Triton and Petronas Cariga* are each responsible for 50% of the $600 million price tag.

The field

Cakerawala was the first field discovered on Block A-18 in the Malaysia-Thailand JDA in the Gulf of Thailand (see map, OGJ, Jan. 26, 1998, p.46). It is operated by Carigali-Triton Operating Co., a 50-50 joint venture of Triton and Malaysian state exploration firm Carigali.

Cakerawala has reserves of almost 2 tcf, and Triton estimates Block A-18 holds about 10.6 tcf of proved and probable reserves.

Dunlevy said the "mammoth" oil and gas field on Block A-18 is "just the start of what could become a $20 billion oil and gas development project." He says Triton has identified eight gas fields so far "that can easily meet Malaysia and Thailand's (gas-based energy) needs for at least a decade."

Dunlevy believes that the block's current gas resource base could produce more than 1 bcfd. He said there are plans to produce Block A-18's oil and condensate, which comprise about 15% of its hydrocarbon resource base.

Condensate produced in association with the gas-about 5,200 b/d-will be sold separately. A program to develop the oil on the block will be determined later.

Triton will continue exploration efforts on the block, Dunlevy added.

Reaction

Wall Street analysts familiar with Triton were mixed in their responses to the news. Although everyone considered the news positive, analysts differed in their opinions as to how much effect the deal would have on the company's share prices, which have slipped over the past year.

"They've talked about this for so long, and have (put) the company up for sale," one analyst explained. "The annoucement just doesn't do much in terms of the market's perceptions. I just don't see a lot of enthusiasm over the project."

Triton's shares were down Wednesday morning to 391/2 , a 1/16 loss as the news hit the street.

But Pain Webber Senior Energy Analyst Bob Morris was more optimistic: "The good news is the terms of the contract revealed a better price than many had assumed. The best part of this deal is the volumes and prices. This could boost share values at least $2-3.

"And there were no surprises coming with this announcement. I'm still holding that the company's stock is worth in the $45-50 range."

Another analyst also pointed out that "the valuations, the numbers that count" aren't strong enough to push up share values, but added, once the long-term valuations are worked out and "the multiple phases of the project actually become a reality," Triton stock prices would begin moving up.