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- Cue Energy Resources (CUE) has given shareholders some welcome good news as joint venture (JV) disputes in Indonesia are settled, giving way to oil production
- The company has been in a scuffle with the operator of the Mahato PSC in Indonesia, Texcal Mahato EP, and its joint venture partners
- According to Cue, the JV partners were excluding Cue from participating in operations at two wells in the Mahato area, which went against the terms of their agreement with Cue
- Cue’s subsidiary, Cue Mahato, holds a 12.5 per cent interest in the Mahato PSC
- However, Cue said today it has agreed to pay around $875,000 to settle the dispute over the two exploration wells, dubbed PB-1 and PB-2
- PB-1 is currently producing around 600 barrels of oil per day, while PB-2 is expected to begin producing oil before the end of the March quarter
- Shares in Cue are up over 17 per cent and worth 8.9 cents each
Cue Energy Resources (CUE) has given shareholders some welcome good news as joint venture (JV) disputes in Indonesia are settled, giving way to oil production.
The dispute came from the operator of the Mahato PSC in Indonesia, Texcal Mahato EP, and other joint venture parties. Cue’s subsidiary, Cue Mahato, holds a 12.5 per cent participating interest in the Mahato PSC.
According to Cue, Texcal and other related parties were claiming to have excluded Cue from participating in the operations of two wells drilled in the Mahato area, dubbed PB-1 and PB-2.
Cue disputed this exclusion, saying there was no basis to cut it out of the wells under the joint operating agreement (JOA) with Texcal and its JV partners.
In April 2020, Cue said it was still evaluating all available options to assert its legal rights under the JOA, though it was not receiving adequate information from Texcal as required under the agreement.
Today, however, Cue said the dispute has been settled and the company is now able to participate in oil production from the PB-1 and PB-2 wells of the Mahato PSC.
The PB-1 well is currently producing around 600 barrels of oil per day, while Cue expects Mahato’s operators to bring the PB-2 well into production and drill three more development wells during the March 2021 quarter.
Cue CEO Matthew Boyall said the company is excited to see oil production from the PB field.
“This is a rapid progression from exploration to production. The PB field will be a third revenue stream for Cue and will further strengthen our business,” Matthew said.
“The differences between the joint venture partners and Cue have now been resolved and we look forward to a fruitful partnership as production from the PB field increases and further exploration is undertaken in the Mahato PSC,” he said.
But at what cost?
Of course, the dispute resolution over the Mahato wells was not free: as part of the settlement, Texcal has issued a cash call for roughly US$300,000 (around A$386,000) from Cue for the PB-2 exploration well.
On top of this, Cue will pay US$380,000 (around A$489,000) to the joint venture partners. The company said US$111,000 (around A$143,000) of this will come from Cue’s cash reserves, while the rest will be paid from Cue’s share of the PSC performance bond.
Investors have welcomed the news today, with Cue shares taking back some of their lost ground after the Ironbark-1 exploration well off the shore of Western Australia was plugged and abandoned.
Cue shares lost over 60 per cent in a day on the Ironbark-1 news, falling from 23 cents to 9 cents, then hitting a low of 7 cents per share on January 12.
Today, shares are up 17.11 per cent and worth 8.9 cents each at 11:45 am AEDT.
