It’s been a tumultuous 18 months for South East Asian oil producer Salamander Energy (SMDR). First, the company drilled a string of expensive exploration wells offshore Indonesia that did not result in a commercial discovery. Then a weather-related accident at its fully owned Bualuang oil field offshore Thailand shut down production for six weeks. These events stretched the company’s finances just as it was ramping up development spending, and led the board to examine a partial asset sale to reduce risk. Salamander received an offer for the sale of the whole group, but the board considered it unfavourable.
Instead, Salamander has agreed to sell a 40 per cent interest in Bualuang to Sona Petroleum for $280m (£168m). That's a good price, at over $19 per barrel of reserves compared with an average sale price of around $11 a barrel in South East Asia. The deal will allow Salamander both to pay down debt ahead of a further round of development spending at Bualuang, and to return $50m to shareholders via dividends or share buybacks. The company can also breathe easier knowing that funding won’t be an issue at the Kerenden gas field development in Indonesia, where first production is expected by the end of the year.