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Pertamina terminates operations agreement with IEV's Indonesian unit

IEV Holdings on Wednesday announced that PT Pertamina EP has terminated an operations cooperation agreement with its Indonesian subsidiary and has made a claim for the disbursement of a bank guarantee amounting to US$2.34 million.

PT IEV Pabuaran KSO received the notice on Monday for the termination of its operations in the Pabuaran Operation Area from Jan 2 for "not fulfilling certain conditions and obligations under the agreement", including the completion of a US$18.6 million work programme by Dec 11, 2017.

"The group does not intend to contest the termination letter and thus will commence discussions with PT Pertamina EP on an amicable handover of the Pabuaran KSO," IEV said in a filing with the Singapore Exchange.

IEV cited prolonged low oil prices as rendering the Pabuaran KSO production commercially unviable despite having explored a number of options geared towards achieving a profitable production level as well as attempted farm-out options.

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With this termination, IEV will exit from the exploration and production sector and focus on the offshore engineering sector.

Moreover, the group will fully impair all assets related to the KSO, including its oil and gas properties for FY2017, it said.

As a result, this may affect the group's financial results, the net tangible assets and earnings per share for FY2017 but will not impact the company's FY2018 earnings, IEV added.