Baron Oil, through its wholly owned subsidiary SundaGas Banda Unipessoal, Lda. (“SundaGas”), and TIMOR GAP Chuditch Unipessoal Lda (“TIMOR GAP”), have reached a pivotal milestone by signing farm-up agreements related to the TL-SO-19-16 Production Sharing Contract (the “Chuditch PSC”), a significant venture in the offshore territory of the Democratic Republic of Timor-Leste. The completion of this agreement is now contingent upon the approval by Timor-Leste’s National Petroleum Authority (Autoridade Nacional do Petróleo or “ANP”).

Financial Implications of the Farm-Up Agreement

The directors of Baron Oil have assessed the value of the farm-up by TIMOR GAP to be approximately US$8.5 million, considering both the reimbursement for back costs, estimated at around US$1 million, and the offset of future expenses, anticipated to be about US$7.5 million in 2024. The agreement stipulates that TIMOR GAP’s cash payments relating to back costs will be finalized upon completion of the farm-up, payable to Baron within 30 days.

Operational Plans and Terms

The operational strategy remains focused on drilling and flow testing the Chuditch-2 appraisal well in late 2024, depending on the availability of drilling rigs and services, along with the completion of financing for the drilling operation. Upon completion of the farm-up, SundaGas will retain its operatorship, holding a 60% working interest in the Chuditch PSC, while TIMOR GAP will acquire a 40% interest. This includes a new 15% paying interest along with its original 25% interest, which is carried to first gas. From this point, TIMOR GAP will be responsible for contributing 20% towards all costs, including the drilling of the Chuditch-2 appraisal well.

Condition Precedent and Legal Framework

The transfer of the 15% working interest from SundaGas to TIMOR GAP is contingent upon the fulfillment of the sole condition precedent. Governed by the laws of Timor-Leste, the farm-up agreements have a set deadline. If the condition precedent remains unfulfilled or unwaived by 31 March 2024, the agreements may be terminated by either party.

Statements from Leadership

Andy Yeo, Chief Executive of Baron Oil Plc, expressed enthusiasm about the agreement: “We’re delighted to have now signed the documents to increase TIMOR GAP’s participation in the Chuditch PSC through the assignment of a paying interest. The expedited preparation and execution of these agreements demonstrates our excellent working relationship, and we thank TIMOR GAP for their engagement in our overall combined efforts to progress the Chuditch PSC.”

This partnership between Baron Oil’s SundaGas and TIMOR GAP in the Chuditch PSC is a testament to the growing interest and strategic investments in offshore petroleum exploration. The financial and operational collaboration highlights the commitment to exploring and developing offshore energy resources in a region with significant potential. As the global energy landscape evolves, such partnerships are essential for advancing exploration technologies and methodologies, potentially reshaping the oil and gas industry in Timor-Leste and beyond.

  Andy Yeo, Baron Oil, Chuditch PSC, SundaGas Banda Unipessoal Lda, TIMOR GAP, Timor-Leste