Mako Gas Field Development Advances, But Resource Cuts Raise Questions

Milestone Payment Signals Progress

Conrad Asia Energy Ltd (ASX: CRD) has announced a significant milestone in its journey from exploration to production with the receipt of a US$5 million cash payment. This payment is the first instalment of a US$16 million consideration linked to the transfer of participating interests (PI) in the Duyung Production Sharing Contract (PSC), operated by Conrad’s subsidiary West Natuna Exploration Limited (WNEL). The transaction with PT Nations Natuna Barat (NNB) is a crucial step in advancing the development of the Mako gas field, one of the largest gas discoveries in the region.

The milestone unlocks immediate funding that Conrad’s Managing Director and CEO, Miltos Xynogalas, describes as timely. It supports ongoing procurement activities fully backed by a previously announced Carry Loan Agreement, underscoring Conrad’s transition from a gas explorer to a producer. Production is targeted to commence in late 2027, nearly a decade after the initial discovery of the Mako field.

Strategic Positioning in the Duyung PSC

Following the completion of the PI transfer, Conrad will hold a 22.875% operated interest in the Duyung PSC, located in the Riau Islands Province of Indonesia. The Mako gas field within this PSC contains 2C contingent resources estimated at 376 billion cubic feet (Bcf) gross, with 58 Bcf net attributable to Conrad post-transfer. This represents a reduction from previous resource estimates, which may reflect updated technical assessments or the impact of the farm-out transaction.

Beyond Mako, the cash injection enables Conrad to advance operations in offshore Aceh, where multiple undeveloped gas accumulations present a substantial contingent resource base. This positions the company for a potentially robust gas production growth profile extending well into the next decade.

Resolving Financial Disputes and Strengthening Foundations

In addition to the farm-out milestone, Conrad has executed definitive documentation to settle a cash call arrears dispute with Empyrean, a joint venture partner. This resolution removes a significant financial uncertainty and clears the path for smoother project execution. The settlement aligns with a previously announced binding term sheet, reflecting a cooperative approach to joint venture management.

Conrad’s leadership, including industry veteran Peter Botten as Chairman, brings deep experience in navigating complex upstream projects. Their expertise will be critical as the company moves towards a Final Investment Decision (FID) and eventual production ramp-up.

Looking Ahead

While the immediate cash flow and dispute resolution are positive developments, the path to production remains subject to operational and market risks. The timing of subsequent payments and the targeted production start in late 2027 will be closely watched by investors. Moreover, the reduction in net contingent resources warrants further scrutiny to understand its implications for long-term reserves and production potential.

Overall, Conrad Asia Energy’s latest announcement marks a pivotal moment in its evolution, signalling tangible progress in unlocking value from its Indonesian gas assets and setting the stage for future growth.