Cooper Energy says the east coast gas market has improved, despite a loss driven by writedowns

While Cooper Energy posted a large loss mainly based on writedowns, it says the fundamentals of the east coast gas market have improved if anything.

David Maxwell is the managing director of Cooper Energy.

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Record production and sales revenue at Cooper Energy were dented by the impact of COVID-19 and the delayed start up of its Sole gas plant in Victoria, with the Adelaide company posting an $86 million net loss.

That result was largely as a result of a $107.5 million non-cash writedown in the value of the company’s assets due to lower oil and gas prices as well as an increase in the company’s estimate for its restoration expenses.

On an underlying basis the company posted a net loss of $6.6 million, compared with a profit of $13.3 million the previous year.

The company had expected to sell 12 petajoules of gas from the Sole project at contract prices to the end of the financial year, but only ended selling two petajoules at spot prices due to problems with the APA group-operated Orbost plant which was processing the gas.

“Whilst the revenue and cash flow uplift anticipated from Sole in 2020 did not eventuate, it is important to note the production and revenue are deferred – not lost,’’ Cooper managing director David Maxwell said.

Mr Maxwell said the transition agreement with APA announced in August was expected to enable a clear pathway to practical completion of the Orbost plant “and the commencement of gas supply to our long-term customers’’.

On the upside, Mr Maxwell said despite the need to writedown the value of assets in the face of lower prices, the fundamentals of selling into the east coast gas market had improved if anything, and set the company up well for the future.

“Notwithstanding the impairments, our analysis shows the contract prospects for uncontracted gas in southeast Australia from 2022 onwards are even stronger than they were six months ago” he said.

“The industry-wide cutbacks to capital expenditure in 2020 and 2021 will accelerate the production decline already forecast for existing supply sources and intensify the tightening gas supply in southeast Australia expected from 2022.

“The growth in our gas assets and opportunities during 2020 will prove propitious.

“The acquisition of the Minerva Gas Plant during the year will give access to a low-cost processing hub for offshore Otway Basin gas. The Annie and Dombey gas discoveries made during the year hold potential which we are currently pursuing.’’

Sales revenue for the full year grew 3 per cent to $78.1 million, despite a 38 per cent contraction in oil revenue due to lower prices and production.

A 22 per cent increase in revenue from gas, which grew from $52.3 million to $63.6 million, more than offset the impact of reduced revenue from oil, the company said.

Cash flow from operating activities of $48.1 million (including $19.8 million liquidated damages received from APA Group) was 134 per cent higher than the previous year’s comparative of $20.5 million.

Cooper said it expected “substantially increased” production and sales this year due to the ramp up of Sole.