Conrad Asia Energy and Empyrean Energy have reached a binding settlement over historical cash call arrears in the Duyung Production Sharing Contract, involving asset transfers and payments that realign project interests and support the Mako gas field’s development timeline.
- Binding term sheet signed to settle cash call arrears dispute
- Empyrean transfers 8.5% interest in Duyung PSC to Conrad’s subsidiary
- Creation of Singapore-based special purpose vehicle with shared ownership
- Empyrean to pay US$706,777 as full settlement of past claims
- Conrad to hold 22.875% interest and remain operator of Duyung PSC
Settlement Resolves Longstanding Dispute
Conrad Asia Energy Ltd (ASX, CRD) has announced a significant step forward in resolving a protracted dispute with Empyrean Energy PLC concerning cash call arrears under the Duyung Production Sharing Contract (PSC) in Indonesian waters. The companies have signed a binding term sheet that outlines a comprehensive settlement, including the transfer of Empyrean’s 8.5% participating interest to Conrad’s subsidiary, West Natuna Exploration Limited (WNEL).
This agreement follows a series of default and withdrawal notices issued by WNEL last year, reflecting the tensions over unpaid cash calls. The settlement not only addresses these historical financial issues but also aligns the interests of all parties involved, paving the way for smoother project execution.
Structural Changes and Financial Terms
Under the terms, a Singapore-domiciled special purpose vehicle (SPV) will be established, with Empyrean holding an 8.5% stake and Conrad 91.5%. Following the transfer of Empyrean’s interest and a subsequent transfer of WNEL’s 75% interest to Nation Petroleum Natuna Barat (NNB), the SPV will own 100% of WNEL. This restructuring is designed to streamline ownership and operational responsibilities.
Empyrean will make an upfront payment of approximately US$353,388 to Conrad, with an additional US$353,388 to be paid from Empyrean’s share of future SPV dividends. These payments represent full and final settlement of all past claims, effectively closing the chapter on the financial dispute.
Implications for the Mako Gas Field Development
With these transactions completed and regulatory approvals secured, Conrad will hold a 22.875% participating interest in the Duyung PSC and continue as operator. The Mako gas field, a significant asset within the PSC, contains contingent resources estimated at 376 billion cubic feet, with Conrad’s net share adjusted to 58 billion cubic feet post-transfer.
Conrad’s Managing Director and CEO, Miltos Xynogalas, emphasised that the settlement removes a major obstacle, enabling the company to focus on delivering the Mako project’s production start-up, targeted for the fourth quarter of 2027. The agreement also facilitates the release of a US$5 million tranche from NNB, further supporting project financing.
Regulatory and Market Outlook
The transactions remain subject to customary conditions precedent, including approval from Indonesia’s regulatory bodies such as SKK Migas and the Ministry of Energy and Mineral Resources. These approvals are critical to finalising the ownership transfers and ensuring compliance with local regulations.
Investors will be watching closely as Conrad progresses with formal documentation and regulatory submissions. The resolution of this dispute and the clarified ownership structure should bolster confidence in the project’s viability and Conrad’s operational leadership in the region.
Bottom Line?
With the dispute settled and ownership clarified, Conrad Asia is poised to accelerate development toward Mako’s 2027 production target.
Questions in the middle?
- Will Indonesian regulatory approvals proceed smoothly and on schedule?
- How will the adjusted resource estimates impact Conrad’s valuation and financing plans?
- What operational challenges remain for WNEL as operator post-settlement?