Energy: AGL snaps up new Victoria gas supplies from Cooper Energy as shortages loom
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Cooper Energy (ASX:COE) has sold more Victorian gas to energy giant AGL, taking its total contracts for the Sole field in 2020 to 10 petajoules (PJ).
AGL is buying an extra 4 PJ between January and April next year from the Gippsland Basin offshore field. It’s already buying 12 PJ from the one field from mid-next year onwards.
An RBC analyst says the energy giant is getting desperate for extra gas in the southern states, while EnergyQuest’s March quarterly report suggested gas supplies to the southern states will fall short of demand come 2022.
According to a company presentation in March, Cooper had contracted 6 PJ of the 24 PJ per year available from the offshore Sole field in fiscal 2020, and 20 PJ a year between 2021 and 2027.
Cooper’s commercial general manager Eddy Glavas told Stockhead it is likely to announce “a few more contracts” in the coming weeks but the full amount it can sell is subject to the final capacity of the Orbost gas plant, owned and currently being refurbished by pipeline network operator APA (ASX:APA).
He says APA is confident it may produce above the 24 PJ/year nameplate capacity, but that won’t be known until it’s up and running and de-bottlenecking activities have taken place.
AGL will also buy all of Cooper’s share of gas from the Casino-Henry field in the 2020 calendar year which is also offshore from Victoria, in the Otway basin. In the 12 months to March 31, that volume totalled 5.55 PJ.
AGL, O-I Australia, Alinta Energy and EnergyAustralia were cornerstone customers for the Sole field, signing on in 2016 to buy 20 PJ a year.
Last week, RBC Capital Markets energy analyst Ben Wilson said Cooper was “on the cusp of a fourfold increase in production and a transition to free cash generation” as the Sole gas project comes closer to launch. He expects Sole gas production to throw off $90-150m a year in free cash for the next decade.
Today, Wilson said AGL had an “acute need” to buy more gas from FY20, and assumes the company can sell uncontracted Otway and Gippsland gas for $9.80/gigajoule, which is at the top end of where LNG netback prices (the east coast gas price once the LNG costs have been taken out).
“AGL is a natural buyer with an existing long-term contract from the Sole field and has been active in the region, most recently inking a large deal with BHP (24PJ/annum over 3.25 years),” Wilson said.
Senex Energy (ASX:SXY) says it’s started a drilling campaign in Queensland’s Surat basin that’ll cover 110 wells. It expects it to deliver 6 PJ a year to the Roma North gas processing plant and 15 PJ a year to the Project Atlas processing plant. Drilling in Roma North will continue to the end of September, when the rig will move to the Project Atlas areas. First gas from the latter is set to start towards the end of this calendar year.
Whitebark Energy (ASX:WBE) has magicked up first oil from a discovery at Wizard Lake in Canada only found in January. Production facilities for the Rex 1 well are finished and it’s been ‘tied in’ to an oil pipeline leading to said facilities. The company didn’t say what daily flow rate investors could expect, saying it’ll take a couple of weeks to level out, but over the last few months has cited the original first flow rate figures of 300 barrels of oil per day.
Talon Petroleum (ASX:TPD) has secured a 50 per cent stake in a licence over two more blocks in the North Sea, off the coast of northern Scotland. Talon also has three other, wholly owned, licences in the area.