AGL limits gas deal with Cooper Energy
AGL Energy has halved the level of gas supplies it will take under a new Sole field contract with Cooper Energy.
AGL Energy has halved the level of gas supplies it will take under a new Sole field contract with Cooper Energy amid ongoing constraints with the Orbost processing plant on Victoria’s Bass Strait coast, while retaining options to boost its supplies through the decade.
The power giant, in the midst of a major plan to separate into two companies, will buy 6 petajoules of gas under a new contract starting in January 2022 compared with the previous 12PJ a year deal.
The contract term has been extended by two years until December 31, 2030 and AGL has the ability to add an extra 6PJs from future production increases at Sole with the total volume capped at 30PJs.
AGL has also agreed a new gas sales contract for all developed and uncontracted volumes from Cooper’s Otway Basin Casino, Henry and Netherby wells until either the end of production from existing wells or first production from Otway phase 3 development. Pricing for the second deal is at $6-8 a gigajoule.
The Orbost plant has been plagued by start-up issues which are still being investigated and have meant the facility is producing at rates a third below its target of 68 terajoules a day. Orbost is processing gas from Cooper Energy‘s $600m offshore Sole field.
Cooper lowered its 2022 sales volume guidance to 3.7m-4.1m barrels of oil equivalent from the previous 3.7m-4.3m boe range.
Broker RBC estimates AGL’s Sole contract has reduced from 90 PJs to 54PJs under the new deal.
“The total gas volume in the new AGL base contract drops by a material 40 per cent from prior contracted volumes, assuming no Sole option volumes of up to a further 6 PJ/yr are taken up by AGL. Even in a best-case scenario, where AGL takes up its full option volumes, the new total AGL volumes are below the prior contractual amount,” RBC analyst Gordon Ramsay said.
Cooper is also lowering its exposure to third-party gas purchases in the 2022 financial year, RBC noted, after high third-party gas purchases to meet Sole contractual sales volumes cost Cooper $13.4m over the FY21 full-year period.
“These third-party gas sales represented 33 per cent of Cooper’s total 4Q FY21 sales volumes, due to high customer nominations, 10 per cent above contract). The risk and additional cost of possibly undertaking high FY22 third-party gas purchases to meet Sole gas contracts is now lowered.”
AGL shares fell 0.7 per cent to $6.07 on Monday, while Cooper rose 4.4 per cent to 24c.