Australian energy company AWE has signed an agreement to sell its 42.5% interest in the Bulu production sharing contract (PSC) in offshore east Java, Indonesia, to a wholly owned subsidiary of HyOil for A$27.5m ($20m).

The Bulu PSC comprises the undeveloped Lengo gas project.

AWE managing director and CEO David Biggs said that the company will continue to deliver on its strategy of divesting non-core assets to recycle capital into high value growth projects, such as the Waitsia gas project in Western Australia.

Biggs said: "The sale of the Bulu PSC, including the undeveloped Lengo gas project, is another important step in reshaping AWE to deliver sustainable growth in a low oil price environment.

"The Waitsia joint venture is already considering options for the next phases of development to deliver up to 100TJ/day."

"We recently completed the sale of Sugarloaf in the USA, at a price that exceeded market expectations, and at the end of the March quarter AWE was cash positive with no drawn debt."

Once the sale of Lengo concludes, it will further reduce the company’s capital commitments.

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AWE has also started construction of Stage 1A of the A$18m Waitsia gas project, which will supply gas to the Western Australia domestic gas market beginning the third quarter of 2016.

Biggs added: "The Waitsia joint venture is already considering options for the next phases of development to deliver up to 100TJ/day, and gas marketing is well under way,"

The company also plans to recontract gas from its east coast production assets in the Bass and Otway basins over the next 12 to 24 months.

In Indonesia, AWE’s primary focus will remain on progressing the Ande Ande Lumut (AAL) oil project, which will provide the company with exposure to any rise in oil prices.

KrisEnergy operates the Bulu PSC with a 42.5% interest. AWE owns 42.5%, Satria Energindo holds a 10% interest and the remaining 5% is owned by Satria Wijayakusuma.