VANCOUVER, British Columbia, Sept. 28 /PRNewswire/ -- The following is being issued by Gary R. Schell, President of Continental Energy Corporation, on behalf of the Board of Directors: Continental Energy Corporation ("Continental")(OTC Bulletin Board: CPPXF; Vancouver: KK) is pleased to announce that its wholly owned Indonesia operating unit Apex (Yapen) Ltd. ("Apex") has signed a new Production Sharing Contract ("PSC") with Pertamina, the state oil company of Indonesia. The PSC grants to Apex (Yapen) Ltd. exclusive oil and gas exploration and production rights to the 2.5 million acre (9,500 km2) Yapen Block contract area located offshore from the northeast coast of the island of New Guinea in the province of Irian Jaya, Indonesia. Under the terms of the PSC Apex is obliged to pay Pertamina US$200,000 compensation for data bonus within 30 days of signing the PSC and is further obliged to expend a total of US$5 million in exploration work within the Yapen Block during the first three PSC contract years. At the end of the third contract year Apex may either return the Yapen Block to Pertamina or may continue exploration on a year by year basis for any additional seven years and in such case would annually accrue an additional work expenditure obligation stipulated in the PSC totaling US$13 million if the entire seven year period is realized. In the event of discovery of a commercially viable oil or gas accumulation the term of the PSC automatically becomes 30 years from the signature date. The Yapen Block PSC is a special form of PSC known as a "frontier terms" PSC and contains a substantially more favorable production sharing split between the contractor and Pertamina than do "standard terms" PSCs. Frontier terms are permitted by the Indonesian government to provide additional incentive for oil and gas exploration in what it defines as "frontier areas" which includes deep water offshore areas, remote and logistically difficult onshore areas and for largely under-explored areas of the economically under-developed eastern portion of Indonesia. It is this latter qualification, being located in eastern Indonesia, that permitted the Yapen PSC to be negotiated by Apex with frontier terms. The production share of oil to which Apex is entitled for Yapen Block oil production under frontier terms is 62.50% but under standard PSC terms the oil share entitlement would be 26.7857%. Gas share entitlement for Apex under Yapen's frontier terms is 71.4286% compared to a gas share of 62.50% under standard terms. These terms are after cost recovery has been achieved. The Yapen Block lies entirely offshore in mainly shallow water less than 600 feet deep. The area was last explored in the early 1970's by Tesoro Petroleum who drilled a well in 399 feet of water named the R-#1 well on a large dome identified on seismic and named the "R" structure. The well encountered gas and oil shows in several sands between 5,356 to 6,372 feet before reaching total depth of 7,568 feet in basement. Logs indicated the presence of gas in four separate sands totaling 78 feet thickness in an apparent hydrocarbon column of as much as 671 feet. A drill stem test in one of these zones tested gas at a rate of 21.6 million cubic feet per day on a 5/8-inch choke together with an accumulated 5-10 barrels of 47 degrees API black oil. Gas analysis indicates the gas to be 99% methane. At the time the R-#1 well was drilled in 1973 there was little market for the gas despite the fact the seismically mapped "R" structure is very large and potentially contains a very major gas resource. The gas market situation has changed dramatically in Irian Jaya since 1973 with Arco's Tangguh Liquefied Natural Gas (LNG) project some 200 miles west of the Yapen Block and also in Irian Jaya province. Arco is developing its 19 TCF Wiriegar Field and plans to construct a LNG plant to liquefy the gas for sale in Japan, Korea or Taiwan. As additional gas in the area is discovered and developed the LNG plant will likely expand into a petrochemical complex with several plants utilizing gas as a feedstock. Apex has already purchased from Pertamina some 3,000 line kilometers of seismic data within the Yapen Block which was previously acquired by Tesoro in the early seventies. While this data has proved sufficient to evaluate the potential of the block it is not sufficient to fully explore the block or to properly exploit any of the currently recognized structures on the block. The first planned exploration activity in the Yapen Block will be two seismic surveys conducted successively in year 2000, the first consisting of a 3D seismic survey shot over approximately 1,000 square kilometer site over the "R" structure for the purposes of confirming locations for appraisal and delineation drilling. The second survey will consist of 1,000 line kilometers of 2D profiling of selected portions of the block for exploration purposes. Appraisal drilling on the "R" structure to offset the R-#1 discovery well will probably start in 2001. Continental director and president of Apex (Yapen) Ltd., Richard L. McAdoo, said from Jakarta after the signing, "The Yapen Block brings Continental its second high potential exploration property in Indonesia. Together these PSCs make up a critical mass that should quickly propel Continental into a position of being a substantial player in the Indonesian oil and gas world. We are currently developing several other property acquisitions including some with existing oil production and are clearly focused on our goal of being the next large independent oil and gas company to emerge in Indonesia. We are particularly proud of these first two PSCs because both Yapen and Bengara-II were identified and evaluated as being high potential petroleum exploration areas in-house by our own Jakarta exploration staff. We targeted the areas, we secured direct negotiations rights from Pertamina in return for an in-house conducted, year-long geological evaluation and then we successfully negotiated PSCs with bonuses and commitment terms very favorable compared to those negotiated in other recently signed PSCs by other companies." The signing of the Yapen Block PSC gives Continental its second major PSC in Indonesia. Another wholly Continental owned unit, Apex (Bengara-II) Ltd., owns and operates a 100% interest in a standard terms PSC with oil and gas exploration and production rights for the 1.2 million acre Bengara-II Block contract area located mostly onshore but partially offshore, East Kalimantan, Indonesia on the island of Borneo. Continental is an oil and gas exploration and production company focused on properties in Indonesia and the state of Texas. Certain matters discussed within this press release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although Continental believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from expectations include financial performance, oil and gas prices, drilling program results, regulatory changes, changes in local or national economic conditions and other risks detailed from time to time in the Company's Form 20-F reports filed with the S.E.C. NOTE: The Vancouver Stock Exchange has neither approved nor disapproved the contents of this news release. CONTACT: Gary R. Schell or Craig Doctor, both of Continental Energy Corporation, 604-687-3434 or 888-556-3213, or fax: 604-687-3073, firstname.lastname@example.org.
SOURCE Continental Energy Corporation