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The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, makes no
representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever
arising from or in reliance upon the whole or any part of the contents of this announcement.
(incorporated in Bermuda with limited liability)
Website: www.citicresources.com
(Stock Code: 1205)
DISCLOSEABLE TRANSACTION
ACQUISITION OF A 51% PARTICIPATING INTEREST
IN THE SERAM ISLAND NON-BULA BLOCK, INDONESIA
On 11 July 2006, CITIC Seram, an indirect wholly-owned subsidiary of the Company, has agreed conditionally to
acquire from KUFPEC a 51% participating interest in the benefits, rights and obligations of the Contractor in the
Production Sharing Contract for a purchase price of US$97.4 million, subject to adjustment. A cash deposit of US$5.0
million has been paid by CITIC Seram and the balance of the purchase price shall be paid by CITIC Seram to
KUFPEC in cash at Completion. The payment of the purchase price by CITIC Seram to KUFPEC is guaranteed by the
Company pursuant to the Guarantee.
Completion is subject to certain conditions precedent described in this announcement including the approval of
BPMIGAS and the Government of Indonesia and which must be satisfied by the Long Stop Date.
The Directors believe that the acquisition of the Participating Interest is an important step for the Group’s business
development in the energy sector and it is in line with its long term development strategy of becoming the natural
resources arm of CITIC Group, its ultimate parent. The Directors further believe that the acquisition will provide
additional income diversification to the Group.
The applicable percentage ratios concerning the acquisition of the Participating Interest exceed 5% but are less than
25%. Accordingly, the acquisition of the Participating Interest constitutes a discloseable transaction for the Company
under Chapter 14 of the Listing Rules.
A circular containing details relating to, amongst other things, the acquisition of the Participating Interest by CITIC
Seram and information on the Seram Non-Bula Block and KUFPEC will be despatched to Shareholders as soon as
practicable.
Shareholders and potential investors should note that the implementation of the Sale and Purchase Agreement is
subject to the satisfaction or waiver of the conditions precedent described in this announcement and therefore
Completion may or may not occur. Shareholders and potential investors are advised to exercise caution when
dealing in the securities of the Company.
INTRODUCTION
The Directors are pleased to announce that on 11 July 2006, CITIC Seram, an indirect wholly-owned subsidiary of the
Company, has agreed conditionally to acquire from KUFPEC a 51% participating interest in the benefits, rights and
obligations of the Contractor in the Production Sharing Contract relating to the Seram Non-Bula Block, Indonesia.
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DETAILS OF THE SALE AND PURCHASE AGREEMENT
Date
11 July 2006
Parties
(1) CITIC Seram
(2) KUFPEC
Asset Acquired
CITIC Seram has agreed conditionally to acquire the Participating Interest which represents a 51% interest in the benefits,
rights and obligations of the Contractor in the Production Sharing Contract and the Joint Operating Agreement relating to
the Seram Non-Bula Block with effect from the Effective Date.
Purchase Price and Deposit
The purchase price payable by CITIC Seram to KUFPEC in respect of the acquisition of the Participating Interest is
US$97.4 million (HK$759.7 million), subject to adjustment as described below.
A cash deposit of US$5.0 million (HK$39.0 million), representing 5.1% of the purchase price, has been paid to the Escrow
Agent upon signing of the Sale and Purchase Agreement and shall be released to KUFPEC at Completion. In the event the
conditions set out below are not satisfied or Completion does not occur, in either case other than as a result of the default
of CITIC Seram, the deposit will be refunded to CITIC Seram.
The balance of the purchase price of US$92.4 million (HK$720.7 million) shall be paid by CITIC Seram to KUFPEC in
cash at Completion.
The purchase price has been determined on an arm’s length basis and submitted to KUFPEC as part of a bid process after
taking into account factors such as the characteristics of the Seram Non-Bula Block, its potential reserves, the potential for
exploration upside and recoverable costs.
The purchase price shall be funded by internal resources of the Company and existing facilities.
As CITIC Seram is acquiring the Participating Interest from the Effective Date, all income and other benefits that have
been received, and all costs and expenses that have been incurred, by KUFPEC in respect of the Participating Interest
during the period from the Effective Date to Completion shall belong to or be borne by (as the case may be) CITIC Seram.
The purchase price will be adjusted following Completion by deducting income payable by KUFPEC to CITIC Seram and
adding any costs that should be reimbursed by CITIC Seram to KUFPEC.
Conditions Precedent
Completion is conditional upon the satisfaction of the following conditions precedent:
(A) receipt by KUFPEC, in the form of a letter, of the approval of the Government of Indonesia and of BPMIGAS with
respect to the sale and assignment of the Participating Interest from KUFPEC to CITIC Seram;
(B) approval (in form and substance satisfactory to CITIC Seram, acting reasonably) by Lion, and Third Party Co if
completion of the Third Party Co Sale occurs prior to Completion, as required under Clause 13.2 of the Joint
Operating Agreement of the sale and assignment of the Participating Interest from KUFPEC to CITIC Seram (as
evidenced by the execution by Lion and Third Party Co (as the case may be) of the deed of assignment relating to the
sale and assignment of the Participating Interest by KUFPEC to CITIC Seram);
(C) receipt by KUFPEC, in the form of a letter, of the approval of the Government of Indonesia with respect to CITIC
Seram succeeding KUFPEC as the Operator; and
(D) all votes and approvals (in form and substance satisfactory to CITIC Seram, acting reasonably) needed under the Joint
Operating Agreement to appoint CITIC Seram as Operator with effect from Completion, including if required a
waiver of the notice period specified under Clause 5.2 of the Joint Operating Agreement and including Third Party Co
as a party to the Joint Operating Agreement if the Third Party Co Sale completes prior to Completion.
In the event any of the conditions precedent set out above is not satisfied by the Long Stop Date, either KUFPEC or CITIC
Seram may give notice to the other terminating the Sale and Purchase Agreement unless it has failed to perform or observe
in any material respect its covenants and agreements under the Sale and Purchase Agreement so as to cause Completion to
fail to occur.
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Shareholders and potential investors should note that the implementation of the Sale and Purchase Agreement is
subject to the satisfaction or waiver of the above conditions precedent and therefore Completion may or may not occur.
Shareholders and potential investors are advised to exercise caution when dealing in the securities of the Company.
GUARANTEE FROM THE COMPANY
The payment of the purchase price by CITIC Seram to KUFPEC under the Sale and Purchase Agreement is guaranteed by
the Company pursuant to the Guarantee.
DETAILS OF THE SERAM NON-BULA BLOCK
Location
The Seram Non-Bula Block is located on Seram Island, Indonesia and occupies an area of about 4,572 square kilometres.
Oseil Field
The principal field in the Seram Non-Bula Block is the Oseil Field. The average production in the first six months of 2006
was about 4,300 barrels per day (gross) of 15° to 22° API oil.
The gross oil reserves of the Oseil Field have been estimated by independent technical advisers to be about 39 million
barrels as at 31 December 2005 and comprises 7 million barrels of proven reserves, 6 million barrels of probable reserves
and 26 million barrels of possible reserves.
Production Sharing Contract
Under the Production Sharing Contract, the Contractor has been granted a 100% right to explore, develop and produce oil
from the Seram Non-Bula Block until 2019. The current Contractor comprises KUFPEC and Lion presently holding 97.5%
and 2.5% respectively of the Contractor’s rights and obligations under the Production Sharing Contract.
Participants’ Interests in the Contractor’s Rights and Obligations in the Production Sharing Contract following
Completion and completion of the Third Party Co Sale
Upon Completion and completion of the Third Party Co Sale, the participants holding interests in the Contractor’s rights in
the Production Sharing Contract and the Joint Operating Agreement will be as follows:
Name/Description of Participant Participating Interest
(1) CITIC Seram 51.0%
(2) KUFPEC 30.0%
(3) Third Party Co 16.5%
(4) Lion 2.5%
The costs relating to the development and production at the Seram Non-Bula Block shall be borne by the participants in
accordance with their respective participating interests in the Contractor’s rights in the Production Sharing Contract.
The income from the Seram Non-Bula Block, after deducting operating costs, shall be shared amongst BPMIGAS (37.5%)
and the Contractor (62.5%). Following Completion, CITIC Seram will hold an effective economic interest of 31.875% in
the Seram Non-Bula Block.
OPERATOR OF THE SERAM NON-BULA BLOCK
Under the terms of the Sale and Purchase Agreement, CITIC Seram will become the Operator responsible for the day to
day petroleum operations at the Seram Non-Bula Block and an assignment of the operatorship related contracts from
KUFPEC to CITIC Seram will take place at Completion.
INFORMATION ON THE COMPANY AND CITIC SERAM
The Company is an integrated provider of key natural resources and commodities with business interests in aluminium
smelting, coal mining, import and export of commodities, manganese mining and processing and investments in companies
exploring and developing oil and gas. The Company has also held direct interests in the oil and gas sector and, until
recently, had a participating interest in the Kongnan Block within the Dagang oilfield in the PRC which was converted into
common shares of Ivanhoe Energy Inc. in March 2006. The Company’s interest in the Kongnan Block was a 40%
participating interest with the 60% balance held by Ivanhoe Energy Inc.
CITIC Seram is an indirect wholly-owned subsidiary of the Company.
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BENEFITS OF THE ACQUISITION OF THE PARTICIPATING INTEREST
The acquisition of the Participating Interest follows on from the Group’s collaboration with Ivanhoe Energy Inc. in the
Kongnan Block. The Directors believe that the acquisition of the Participating Interest is an important step for the Group’s
business development in the energy sector and it is in line with its long term development strategy of becoming the natural
resources arm of CITIC Group, its ultimate parent. The Directors further believe that the acquisition will provide additional
income diversification to the Group.
The Directors have confirmed that the Sale and Purchase Agreement was entered into on normal commercial terms after
arm’s length negotiations and the terms thereof are fair and reasonable and in the interests of the Company and
Shareholders as a whole.
INFORMATION ON KUFPEC
KUFPEC is a subsidiary of Kuwait Petroleum Corporation and has held a participating interest in the Seram Non-Bula
Block since 1985. Kuwait Petroleum Corporation is focused on international oil and gas exploration, development and
production activities in the Middle East, Africa, Asia and Australia.
To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, KUFPEC and the
ultimate beneficial owner of KUFPEC are third parties independent of the Company and connected persons of the
Company.
DISCLOSEABLE TRANSACTION
The applicable percentage ratios concerning the acquisition of the Participating Interest exceed 5% but are less than 25%.
Accordingly, the acquisition of the Participating Interest constitutes a discloseable transaction for the Company under
Chapter 14 of the Listing Rules.
A circular containing details relating to, amongst other things, the acquisition of the Participating Interest by CITIC Seram
and information on the Seram Non-Bula Block and KUFPEC will be despatched to Shareholders as soon as practicable.
The circular will also be published on the respective websites of the Stock Exchange and the Company.
DEFINITIONS
In this announcement, unless the context otherwise requires, the following terms shall have the following meanings:
“API” the American Petroleum Institute’s scale for specific gravity for liquid
hydrocarbons, measured in degrees. The lower the API gravity, the heavier the
liquid and, generally, the lower its commercial value
“BPMIGAS” Badan Pelaksana Kegiatan Usaha Hulu Minyak dan Gas Bumi, the oil and gas
upstream regulatory authority in Indonesia
“CITIC Seram” CITIC Seram Energy Limited, a company incorporated under the laws of the
British Virgin Islands
“Company” CITIC Resources Holdings Limited, a company incorporated under the laws
of Bermuda and the issued shares of which are listed on the Stock Exchange
“Completion” completion of the sale and purchase of the Participating Interest pursuant to
the Sale and Purchase Agreement
“Contractor” the contractor under the Production Sharing Contract, being collectively the
participants (other than BPMIGAS) under the Production Sharing Contract
“Directors” the directors of the Company
“discloseable transaction” has the meaning ascribed thereto in the Listing Rules
“Effective Date” 00:00 hours Jakarta time on 1 January 2006, being the date determined by
KUFPEC as the basis on which bids were made to acquire the Participating
Interest
“Escrow Agent” HSBC Bank Middle East Limited, Kuwait Branch
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“Group” the Company and its subsidiaries
“Guarantee” a guarantee dated the same date as the Sale and Purchase Agreement and
made between the Company and KUFPEC pursuant to which the Company
has guaranteed the obligation of CITIC Seram to pay the purchase price
payable under the Sale and Purchase Agreement
“Hong Kong” the Hong Kong Special Administrative Region of the PRC
“Joint Operating Agreement” the joint operating agreement dated 1 November 1985 between the then
parties to that agreement being (i) CSR Petroleum (Asia) Limited, (ii)
KUFPEC, (iii) Canada Northwest Energy Limited, (iv) Canada Northwest
Australia Oil N.L., (v) Tricentrol Exploration Overseas Limited, (vi)
Amadeus Oil N.L. and (vii) Bligh Oil and Minerals N.L. relating to the
Seram Non-Bula Block
“KUFPEC” KUFPEC (Indonesia) Limited, a company incorporated under the laws of the
Cayman Islands
“Lion” Lion Petroleum (Seram) Limited, a company incorporated under the laws of
Hong Kong
“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange
“Long Stop Date” the date falling 120 days after the date of the Sale and Purchase Agreement
“Operator” the operator appointed under the Joint Operating Agreement with specific
responsibility for operating and managing the operations at the Seram Non-
Bula Block on behalf of the Contractor
“Participating Interest” an interest of KUFPEC in and representing a 51% interest in the whole of the
benefits, rights and obligations of the Contractor in the Production Sharing
Contract and a corresponding interest in the Joint Operating Agreement and
all other commercial interests entered into pursuant to the Production Sharing
Contract and the Joint Operating Agreement
“percentage ratios” has the meaning ascribed thereto in the Listing Rules
“PRC” the People’s Republic of China
“Production Sharing Contract” the Seram Non-Bula Block production sharing contract dated 1 November
1969, originally granted by Perusahaan Pertambangan Minyak dan Gas Bumi
Negara to Gulf & Western Industries Inc., as renewed in favour of KUFPEC
by agreement dated 22 May 2000 and effective 1 November 1999
“Sale and Purchase Agreement” the sale and purchase agreement dated 11 July 2006 and made between
KUFPEC and CITIC Seram relating to the sale and purchase of the
Participating Interest in accordance with its terms
“Seram Non-Bula Block” the Seram Island Non-Bula Block defined as the contract area and more
particularly described in the Production Sharing Contract and as varied from
time to time under the terms of the Production Sharing Contract
“Shareholders” the shareholders of the Company
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“subsidiaries” has the meaning ascribed thereto in the Listing Rules
“substantial shareholder” has the meaning ascribed thereto in the Listing Rules
“Third Party Co” a third party company independent of the Company and its subsidiaries and
their respective chief executives, directors and substantial shareholders
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“Third Party Co Sale” the sale by KUFPEC of an additional 16.5% participating interest in the
benefits, rights and obligations of the Contractor in the Production Sharing
Contract to Third Party Co which is independent of and not conditional upon
Completion
“HK$” Hong Kong dollars, the lawful currency of Hong Kong
“US$” United States dollars, the lawful currency of the United States of America
This announcement contains translation between US$ and HK$ at US$1.0=HK$7.8. The translation shall not be taken as a
representation that the HK$ amount could actually be converted into US$ or the US$ amount could be converted into HK$
at that rate stated or at all.
By Order of the Board
CITIC Resources Holdings Limited
Kwok Peter Viem
Chairman
Hong Kong, 12 July 2006
As at the date of this announcement, the executive directors of the Company are Mr. Kwok Peter Viem; Mr. Ma Ting Hung;
Mr. Shou Xuancheng; Mr. Sun Xinguo; Ms. Li So Mui; Mr. Mi Zengxin; Mr. Qiu Yiyong; Mr. Zeng Chen and Mr. Zhang
Jijing and the independent non-executive directors are Mr. Fan Ren Da, Anthony; Mr. Ngai Man and Mr. Tsang Link Carl,
Brian.
Please also refer to the published version of this announcement in The Standard.