REG - Sunda Energy PLC - Chuditch Financing & Operational Update

Sunda EnergyAnnouncement

24/04/2025 07:20

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RNS Number : 0178G  Sunda Energy PLC  24 April 2025

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24 April 2025

Sunda Energy Plc

("Sunda" or "Sunda Energy" or the "Company")

 

Chuditch Financing & Operational Update

 

Ø Fundraising announced for Chuditch-2 drilling campaign

Ø Binding farm-in agreement entered into with TIMOR GAP

Ø Convertible loan notes provide capital into Sunda

Ø Major milestones in unlocking the value of the Chuditch gas field

 

Sunda Energy Plc (AIM: SNDA), the AIM-quoted exploration and appraisal company
focused on gas assets in Southeast Asia, is pleased to announce that it has
entered into a series of agreements concerning the funding of the drilling
campaign on the Chuditch gas field on the TL-SO-19-16 Production Sharing
Contract (the "Chuditch PSC", the "PSC" or the "Project"), offshore Democratic
Republic of Timor-Leste.

 

Sunda's wholly owned subsidiary SundaGas Banda Unipessoal, Lda. ("SundaGas")
has entered into a binding Farm-In agreement (the "Farm-In Agreement") with
its government-owned joint venture partner TIMOR GAP Chuditch Unipessoal Lda
("TIMOR GAP"). In addition, the Company has conditionally raised up to US$9.0
million, before expenses, by way of the issue of unsecured convertible loan
notes (the "Loan Notes" or "CLNs") to three institutional investors. Together,
these combined funding arrangements will enable the Company to shortly execute
a contract for the use of a jack-up rig to drill the Chuditch-2 appraisal well
("Chuditch-2").

 

Highlights

·    Farm-In Agreement will increase TIMOR GAP's working interest share
from 40% to 70%

·    SundaGas paying share of costs for Chuditch-2 reduced from 80% to 30%

·    CLNs for up to US$9.0 million with three institutional investors
arranged by Marex Financial ("Marex")

·    SundaGas retains operatorship of the PSC in collaborative partnership
with TIMOR GAP

·    Rig contract being finalised and Chuditch-2 drilling currently
scheduled for early Q3 2025

·    Hannam & Partners appointed as Advisor and Joint Broker

 

Dr Andy Butler, Chief Executive Officer of Sunda, commented:

"I am delighted to announce that funding has been confirmed for the drilling
of the critical Chuditch-2 well. This funding paves the way to unlocking the
value of the Chuditch gas field. We expect to sign a rig contract shortly and
within a few months we expect to be drilling one of the most eagerly awaited
and impactful wells in the Asia-Pacific region. We are grateful for our
deepening collaborative relationship with TIMOR GAP. Their decision to further
invest in Chuditch highlights not only the Project's materiality, but also its
strategic national importance to Timor-Leste. Our aligned vision for the
accelerated early development of the Chuditch gas field means TIMOR GAP
remains the ideal joint venture partner as we enter the drilling phase. I also
thank Marex as arranger and our three new institutional investors for their
support, especially in the current challenging macro environment. We look
forward to the exciting upcoming campaign and delivery of value from the
Chuditch project for all stakeholders."

 

Terms of the Farm-In Agreement

On completion of the Farm-In Agreement ("Completion"), SundaGas will assign an
initial 30% interest to TIMOR GAP. This interest is in addition to the 15%
interest acquired by TIMOR GAP in the Farm-In transaction completed on 8
February 2024 and its original 25% interest (which portion is carried to first
gas, the "Carry").

 

This assignment results in SundaGas retaining a significant 30% working
interest in the Chuditch PSC, while TIMOR GAP will have a 70% interest. These
working interests are derived from the summation of prior costs paid by each
party from the inception of the PSC until 31 March 2025 and the estimated
contributions from each party until the end of the Chuditch-2 drilling
campaign.

 

From the effective date of 1 April 2025 until the end of Contract Year 3 of
the PSC, TIMOR GAP is responsible for paying 72% of all PSC costs, including
their share of the drilling of the planned Chuditch-2 appraisal well (and
their share of the Carry). The Farm-In Agreement contains several obligations
on the parties, including applying for an extension of Contract Year 3 (which
currently expires on 18 June 2025) for a maximum of six months to allow
sufficient time for drilling Chuditch-2 and subsequent post-well analysis.

 

Following the drilling, and prior to entry into the next phase of the PSC, an
assessment of the actual respective contributions of each party will be made
as a basis for the final allocation of working interests in the PSC (the
"Working Interest Reconciliation"). This arrangement allows for flexibility in
funding arrangements, with either party able to pay a greater or lesser share
than its agreed paying interest proportion, meaning that the Company's working
interest could increase or decrease proportionately. At the time of the
Working Interest Reconciliation, Sunda will assign a bonus 1.5% working
interest to TIMOR GAP as compensation for TIMOR GAP assuming a significant
proportion of the Carry.

 

Completion will occur on satisfaction of three conditions precedent (the
"Conditions Precedent"), namely: (i) signature of a contract for the use of a
drilling rig for the drilling of the Chuditch-2 well; (ii) the passing of the
resolutions to be proposed at a General Meeting of the Company, as described
below; and (iii) approval of the Farm-In Agreement by the upstream regulator
Autoridade Nacional do Petróleo ("ANP"). If the Conditions Precedent have not
been satisfied before 00:00 hours in Dili on 30 May 2025, then the Farm-In
Agreement may be terminated by either party at any time prior to the
satisfaction of the Conditions Precedent.

 

Summary of the Loan Notes

The Company has received letters of subscription for Loan Notes from three
institutional investors (collectively the "Investors" or singularly
"Investor"), arranged by Marex Financial, to conditionally raise gross
proceeds of up to US$9.0 million in aggregate (the "Fundraising"). The net
proceeds of the Fundraising will be used to fund SundaGas' share of costs for
Chuditch-2 and related project costs.

 

Each Investor has agreed to subscribe for an initial tranche of Loan Notes for
an aggregate sum of US$1.5 million. Provided that the Company has complied
with the draw down restrictions attached to the Loan Notes as summarised
below, the Investors are subsequently required to subscribe for five further
tranches of Loan Notes, each of an aggregate of US$1.5 million (the six
tranches collectively being the "Draw Downs" and each a "Draw Down") and to be
issued on the date falling 30 days after the previous tranche (a "Further
Issue Date"). Each Draw Down will attract a finance charge of 10% of the
aggregate principal amount of each Draw Down ("Finance Charge").

 

The Investors have the option to convert all or part of the outstanding
balance of the Loan Notes into Ordinary Shares at any time before repayment of
such outstanding balance by the Company is due, being 22 April 2026 (a
"Conversion"). The price at which a Conversion will take place (the
"Conversion Price") will be the higher of: (i) a 15% discount to the lowest
daily volume weighted average trading price (in GBP) on any of the 20 business
days prior to the issue of each individual conversion notice; and (ii) 0.025p
per Conversion Share, being the nominal value per Ordinary Share.

 

The Draw Downs are subject to certain restrictions including minimum market
capitalisation of the Company, minimum trading volume and minimum price of
0.025p. The Company has the right to redeem any outstanding balance under the
CLNs at a 12.5% premium to the principal outstanding.  Further information is
provided on a circular to be sent to shareholders shortly and posted on the
Company website (www.sundaenergy.com (http://www.sundaenergy.com) ).

 

In the event of each Conversion, the Company will also grant the Investors
warrants (the "Warrants"), which will be issued at a 30% premium to the
Conversion Price (the "Exercise Price"). The number of Warrants to be granted
to the Investors on each Conversion will be the number that equals 75% of the
GBP equivalent of the outstanding balance of the Loan Notes that is converted
into Ordinary Shares, divided by the Exercise Price. One Warrant will entitle
the Investors to subscribe for one Ordinary Share at the Exercise Price. The
Warrants can be exercised at any time prior to the third anniversary of the
date on which they were granted.

 

The Board of the Company currently has limited authority to allot new Ordinary
Shares and to grant rights to subscribe for or convert securities into new
Ordinary Shares. As such, the issue of the Loan Notes and grant of the
Warrants is conditional on approval of certain resolutions at a general
meeting of the Company (the "General Meeting") to be held on 12 May 2025. A
circular containing a notice convening the General Meeting is expected to be
sent to shareholders shortly and a further announcement will be made by the
Company to confirm this.

 

The first Draw Down is expected to take place immediately following the
General Meeting.

 

Rationale for Farm-In Agreement and Loan Notes

As a large gas field in a relatively remote location, discussions with
candidate funding partners have revolved around the development of Chuditch
gas beyond the upcoming appraisal stage. A Memorandum of Understanding ("MOU")
signed by SundaGas, TIMOR GAP and the Timor-Leste Ministry of Petroleum and
Mineral Resources (announced on 12 December 2024) addressed the question of
gas export concept, forming the basis for the Chuditch joint venture's
development plan.

 

The Company had previously announced on 12 August 2024 that it had entered
into an exclusive arrangement (the "Exclusivity Agreement") with Pacific LNG
Operations Pte Ltd. ("PLNG"), a private group specialising in resource
investments. Ultimately, discussions with PLNG did not reach a successful
conclusion and the Exclusivity Agreement has been terminated. Several other
parties submitted proposals to Sunda to participate in the Chuditch project,
but these came with commercial terms that were unattractive or conditions that
were not acceptable. These conditions included significant delays to appraisal
drilling, unachievable commercial guarantees and unrealistic development
concepts. Based on the outcome of the discussions described above, and
considering the strength and depth of support for the Chuditch project from
the Timor-Leste authorities, the board of directors of the Company considers
that the new Farm-In by TIMOR GAP represents the best route to guarantee
timely drilling of the Chuditch appraisal well and as such is in the best
interests of the Company and its shareholders. The Fundraising and the Farm-In
Agreement bring clarity to the Company's share of required capital for the
drilling of Chuditch-2 and are expected to enable Sunda to retain a material
interest in a significant gas asset.

 

The scale of the Chuditch gas resources means the asset remains highly
material to the Company. Sunda, TIMOR GAP and ANP are aligned in seeking to
realise the value of Chuditch gas resources in the interests of all
stakeholders, including the people of Timor-Leste and Sunda's shareholders.

 

Drilling Planning Update

SundaGas, in close collaboration with TIMOR GAP, is finalising negotiations on
a contract for the use of a jack-up rig to drill the Chuditch well. The
contract is expected to be signed along with a number of additional contracts
with other third-party service providers for a range of materials, equipment
and services required for the drilling campaign, all of which are concluded or
close to being finalised. A condition precedent to the Completion of the
Farm-In Agreement is the signing of the rig contract.

 

Current expectations, based on the operational activities of other companies
using the target drilling rig and its ongoing operational performance, along
with the preparations and approvals processes that are ongoing for Chuditch-2,
is that drilling of the well is most likely to commence in July or early
August 2025. The precise date will remain uncertain and subject to these same
conditions.

 

SundaGas is currently working through the various approval processes for
drilling of the Chuditch-2 appraisal well. This includes preparing the
submission of the final Environmental Impact Statement and Environmental
Management Plan, which are currently going through a public consultation
period, as announced by the Company on 11 April 2025.

 

Further information concerning operational preparations will be provided as
appropriate as the drilling campaign approaches.

 

 

Appointment of Joint Broker

SundaGas is also pleased to announce, with immediate effect, the appointment
of Hannam & Partners (H&P Advisory Ltd) as advisor and joint broker.
Allenby Capital Limited remains the Company's nominated adviser and joint
broker.

 

Media Update

The Company will publish an interview on the Proactive Investors platform with
Dr Andy Butler, Sunda CEO, who will discuss the transactions announced today
and the progress towards drilling Chuditch-2. An updated Company presentation
will be uploaded to the Company's website (www.sundaenergy.com
(http://www.sundaenergy.com) ) in due course.

 

This announcement is not for publication or distribution, directly or
indirectly, in or into the United States of America. This announcement is not
an offer of securities for sale into the United States. The securities
referred to herein have not been and will not be registered under the U.S.
Securities Act of 1933, as amended, and may not be offered or sold in the
United States, except pursuant to an applicable exemption from registration.
No public offering of securities is being made in the United States.

 

For further information, please contact:

 

 Sunda Energy Plc                                                   Tel: +44 (0) 20 7770 6424

 Andy Butler, Chief Executive

 Rob Collins, Chief Financial Officer

 Allenby Capital Limited (Nominated Adviser and Joint Broker)       Tel: +44 (0) 203 328 5656

 Nick Athanas, Nick Harriss, Ashur Joseph (Corporate Finance)

 Kelly Gardiner, Stefano Aquilino (Sales and Corporate Broking)

 Hannam & Partners Advisory Limited (Advisor and Joint Broker)      Tel: +44 (0) 20 7907 8502

 Neil Passmore (Corporate Finance)

 Leif Powis (Sales)

 Celicourt Communications (Financial PR and IR)                     Tel: +44 (0) 20 7770 6424

 Mark Antelme, Philip Dennis, Charles Denley-Myerson                sunda@celicourt.uk

 

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