CBM Asia Development Corp. (Toronto Venture: TCF) sent a letter to shareholders promising improved corporate communications and emphasizing the company's focus on achieving commercial gas production.

"CBM Asia has new management and a new direction - focused on achieving commercial gas production this year and selling it into the high-priced Asian markets," according to the letter. "This letter is the first reflection of the new management's policy of improved corporate communications, updating our investors on a more regular basis as we progress our assets towards commerciality.

"Our new CEO Charles W. Bloomquist has 40 years of operating experience in Indonesia and North America. Charlie knows our assets and is single-mindedly focused on commercializing the company's nearly 1 Tcf of audited resources this year. He and chairman Scott Stevens were among the first to recognize and promote the exploitation of Indonesia's CBM beginning 20 years ago. Our Indonesia GM and VP Operations, Keith Potter, with 10 years experience in the coalbed methane and natural gas industries in Indonesia, is a key element of our management team working closely with Charlie to realize this objective.

"CBM Asia has substantial CBM resources - nearly 1 Tcf of audited net recoverable prospective resources in two well-positioned blocks. The company strongly believes that even small-scale levels of commercial production will greatly enhance the already substantial value of these assets."

Highlights from the letter include:

  • 705 Bcf at Kutai West: CBM Asia holds an 18% working interest in the Kutai West Production Sharing Contract (PSC), with 705 Bcf of net recoverable prospective resources based on an independent audit conducted by Netherland, Sewell & Associates Inc. Kutai West is regarded as one of the best and commercially most advanced of the approximately 50 awarded CBM blocks in Indonesia. Importantly, Kutai West borders the Sanga-Sanga PSC, where Vico (BP and partners) is commercially producing and selling CBM for power generation and gas export from the nearby Bontang LNG facility. As Vico notes: "This is the first time in Indonesia that any CBM facilities have produced and sold gas and represents a major milestone in the exploration of CBM potential." Kutai West will exploit the same coal seams as Sanga-Sanga. To date, the company and its partners have drilled four CBM test wells on our block, recording thick coal seams with high gas content and saturation, and good 5-mD permeability. The KWCBM-01 well is currently being dewatered, venting a small but increasing volume of produced gas from the flare, which is a key first step towards larger scale production. Management's main focus this year is to accelerate gas production at Kutai West with a 5-well pilot, followed by a larger commercial scale 30-well development. We have reached initial agreements to sell the produced gas to Navigat Energy for on-site power generation and later to VICO to feed the massive and gas-short Bontang LNG export network. Anticipated gas prices are high, in the range of $8-12/Mcf. Bontang exports LNG to Japan and other Asian rim importers, who are critically short of natural gas due to significant rollbacks of their nuclear power generation.
  • 276 Bcf at Sekayu: CBM Asia also holds a 26% working interest in the Sekayu PSC in South Sumatra, providing us with an additional 276 Bcf of net recoverable prospective resources (NI 51-101 compliant audit conducted by NSAI). Four CBM test wells have verified thick coals with favorable coal properties. We are working with operating partner Medco Energi to accelerate the commercialization at Sekayu, initially through on-site power generation, or by co-development with a nearby recently discovered conventional gas field.
  • Cost Reductions. With the termination of the major ExxonMobil JV late last year, the company has significantly reduced overhead and continues to look for ways to reduce costs. The Vancouver head office cost has been cut by half. The company's Jakarta office will be sized and staffed to best match our requirements in Indonesia.
  • Changes to Board of Directors. Former CEO and president Alan T. Charuk resigned his management and board positions in late January, while director James Charuk is stepping down at the annual general meeting next month. The company currently has two independent directors continuing their service on the board (James Friberg and Clint Sharples). The board plans to further strengthen corporate governance this year by adding a third independent director for a total six board members.