CBM Asia Development Corp. (TSXV:TCF,FWB:IY2) announced that their focus on 2013 will be on incorporating two production pilot programs, one in the Barito basin and the other in Central Sumatra, as well as dewatering activities at the Sekayu PSC and the Kutai West PSC. The production pilots are planned in areas where CBM Asia holds operatorship to avoid reliance on outside partners.
As quoted in the press release:
Barito Basin: The work program calls for one core well on the Kuala Kapuas I PSC and one 5-well production pilot. The exact location of the core well and the pilot are to be determined but negotiations on rig deployment are well advanced. We plan drilling to commence in June.
Central Sumatra Basin: The work program calls for one 5-well production pilot. Negotiations on rig deployment are well advanced and we plan drilling to commence in October.
Sekayu PSC. CBM Asia expects the dewatering exercise will establish commerciality, production capability and result in an upgrade in resource classification.
Kutai West PSC. Operator Newton Energy plans to drill one exploration well in the western portion of the block and dewater the CBM-KW-01 well to prove production potential and the extent of the coal seam sweet spots in the western portion of the block.
Reduction in Derisking Capex. Much of CBM Asia’s newly acquired and Joint Study acreage in the Barito and Central Sumatra basins is contiguous, thus data gained from one block helps derisk the adjoining block. This close proximity enables CBM Asia to reduce its capital expenditures to derisk an individual PSC to the target 70-80% confidence level to approximately USD8.5-10 million including acquisition costs, one-to-three core wells, and one 5-well production pilot. This substantially reduces the Company’s long-term capital requirements, which had previously estimated that two 5-well production pilots were required with a gross expenditure of USD15-20 million per isolated PSC.
Central Sumatra Farm-out. The company is actively planning to farm-out material interest of its assets in the Central Sumatra basin to reduce 2013 and future longer-term capital costs and also accelerate production pilot drilling.
CBM Asia President and CEO Alan Charuk said:
With the number of core wells drilled and dewatering tests conducted by us and other CBM companies in Indonesia we believe there is enough geological evidence to support an accelerated drive into small-scale production pilots. We are currently gearing our operations towards that goal and with the Company in operatorship control we can reduce unforeseen delays as witnessed at the non-operated Sekayu PSC in 2012. Production pilots have the ability to generate revenue, establish and/or upgrade resources and provide the empirical evidence of commerciality. Furthermore we believe the change in our derisking strategy coupled with our Central Sumatra farm-out agenda substantially reduces future capital requirements and will ultimately increase return on investment.
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