- Fully funded SE-MGH gas development expected to add ~1,000 boe/d in production where historical long-term take-or-pay contracts have ranged between $4-7/MMbtu
- 2025 oil production of 1,000 - 1,200 bbl/d, supported by 8-12 workovers with a focus on increasing margins through further operating cost reductions
- Reduced amortization payments US$2MM, resulting in cash to fund SE-MGH gas development while achieving US$3.5MM principle debt reduction in 2025
Criterium Energy, an independent upstream energy development and production company focused on energizing growth for Southeast Asia has provided an update on the Tungkal gas development plan, with the initial development of the Southeast Mengoepeh field ('SE-MGH'), and provided details of its fully funded 2025 capital program.
'Our focus in 2025 is on building on the positive momentum we created in the last year through a combination of near-term gas development in the Tungkal PSC and extension of our very successful workover program,' said Matthew Klukas, CEO of Criterium Energy. 'Diversifying our production mix, with the potential to add material gas production, should help generate higher margins and more predictable cash flow. By leveraging an innovative ModularLNG commercial and development approach, our goal is to bring gas production in the SE-MGH field online as quickly as possible, driving meaningful growth in our total production by Q1 2026, while helping Indonesia to ramp-up much needed domestic energy production. Our growing cash flow and the successful reduction of our amortization payments provide added liquidity for us to fully-fund our 2025 capital program internally, without the need for additional funding.'
Tungkal Gas Development Update
Gas was initially discovered on the Tungkal PSC in 1988 with the Macan Gedang 1 well and subsequent discoveries were made in 2004 (MGH Pad-3), 2008 (South East Mengoepeh, SE-MGH).
There are five discovered gas fields in the Tungkal PSC, but there had been little to no development previously due to a limited regional gas market and no proximal infrastructure. More recently, demand for domestic gas has increased and infrastructure has been put in place. The PSC is under a gross split agreement that expires in 2042, and the Company intends to take a staged approach to development of other discovered gas fields on the PSC over the next three years.
In 2025 the Company intends to focus on developing the SE-MGH field gas resources targeting the Talang Akar Formation ("TAF"). In advancing its program for gas development the Company recently announced it had taken the following steps:
Development Plan Approval: In 2024, Criterium completed a technical feasibility study for the development plan of the SE-MGH gas field in the Tungkal PSC and submitted it to the government for inclusion in the existing Mengoepeh Plan of Development, avoiding the need for a standalone plan. The submission was approved in the fourth quarter of 2024, reducing the government approvals and time required to bring gas on stream.
MOU with PT Energasindo Heksa Karya (EHK): To support its gas development strategy, Criterium successfully executed an MOU during Q2 2024 with PT Energasindo Heksa Karya ("EHK"), a company owned by Rukun Raharja and Tokyo Gas. Under the agreement, EHK will purchase discovered gas from SE-MGH and the Tungkal PSC.
MOU with PT BlueEnergy and ModularLNG Technology: During the fourth quarter of 2024, Criterium signed an MOU with PT BlueEnergy to support the egress of produced natural gas using Galileo Technologies' ModularLNG technology. The Cryobox™ LNG Production Station provides a modular and transportable solution for liquefying natural gas directly at the source. This technology enables efficient on-site gas processing, addressing the challenges of stranded gas by eliminating the need for and associated environmental impact of extensive pipeline infrastructure.
During the next 12 months, key milestones anticipated for gas development in the SE-MGH field include:
- Project development including site preparation has already commenced
- In early Q3 the Company expects to conduct an extended well test on the existing SE-MGH well to confirm deliverability.
- Following the completion of the extended well test the Company expects to enter into a gas sales agreement and the buyer/offtaker is expected to begin site preparation for the ModularLNG.
- First sales gas is anticipated in Q1 2026, at which time the Company will continue to look for further opportunities within its existing portfolio to deploy the ModularLNG concept.
The estimated capital expenditure required to reach first gas is approximately $3-5 million net to Criterium. Initial production is expected to range between 4 - 7 MMcf/d (700 - 1,200 boe/d). Any pricing will be determined by the successful execution of a gas sales agreement, but recent historical contracts in South Sumatra have ranged between $4 - $7/MMbtu on a long-term fixed take-or-pay basis.
Workover Program
Criterium commenced a program of low-cost, high-return workovers in the oil producing Mengoepeh ('MGH') field in March 2024 and completed a total of 15 workovers during the year targeting existing and new producing intervals. In aggregate the workovers have generated more than US$3 MM incremental cash flow1 to date from an investment of approximately US$600k. Workovers, especially those targeting the newly discovered GH sand zone, continue to perform above expectations, enabling Criterium to rapidly recycle capital given cash paybacks average less than 30 days per workover.
Building on the success of the 2024 program, Criterium is targeting an additional eight to 12 workovers in the MGH field for 2025. Successful completion of the workover program, expected to cost between $40k to $70k per workover depending on the final number of wells and zones worked over, is expected to drive sustained oil production of ~1,100bbl/d for full year 2025. The combination of operational synergies, further implementation of cost controls, and the use of produced natural gas to fuel equipment (versus diesel) is expected to help drive further margin improvements.
Fully Funded 2025 Capital Program
Criterium has continued to work with its existing lenders to ensure sufficient cash is available for growth opportunities, including the SE-MGH project. At the end of January, Criterium successfully negotiated $2MM in reduced debt payments for 2025, with further reductions available should the need arise. These reduced payments will see a ~$300k/month reduction in cash outflow. The revised debt payments, along with growing cash flow are expected to fully fund the 2025 capital budget without the need for additional dilutive capital raises.
Outlook
Based on the fully funded capital program outlined above, Criterium believes it has the potential to double current production by the end of Q1 2026. With offices in Calgary, AB and Jakarta, along with operations in Indonesia, the majority of the Company's expenses are denominated in Canadian dollars and Indonesian Rupiah, while sale of production is realized in U.S. dollars. This allows the Company to benefit from the current strength of the U.S. dollar and the premium to Brent pricing that Indonesian production has historically received. Management expects this will further support improved margins in the year ahead.
Bulu Transaction Update
On September 5th 2024, Criterium received a second US$500,000 non-refundable payment from the buyer of its wholly owned subsidiary which owns a 42.5% non-operated working interest in the Bulu Production Sharing Contract, as originally announced on May 21, 2024. Inclusive of this US$500,000 payment, to date Criterium has received US$1,000,000 of the US$7,750,000 total purchase price consideration for the transaction. Management continues to work with the original buyer to close the transaction, however, the Company is accelerating efforts to identify and evaluate alternatives to unlock value for shareholders including discussions with alternative buyers.
Source: Criterion Energy
