ASX
ASX CODE: CTP
ANNOUNCEMENT AND
MEDIA RELEASE
04
June
2015
CENTRAL ACQUIRES 50% OF MEREENIE OIL & GAS FIELD
AND OPERATORSHIP FROM SANTOS
Central Petroleum Limited (ASX:CTP)
(“Company”
or
“Central”
) today announced it has agreed
to acquire
a 50% interest in the Mereenie Oil & Gas Field from Santos
Limited
and assume Operatorship of the field in
the Northern Territory’s Amadeus Basin. The move
will
significantly increase Central’s operations and
enable Central and Santos
to maximi
se the amount of gas available for the proposed Northern Territory
-
East
Coast gas pipeline (referred to as NEGI).
The acquisition is subject to regulatory approvals and completion
of
the expansion to the existing M
acquarie Bank
debt facility which
are
normal for transactions of this nature
.
The acquisition is immediately value accretive to Central, with a significant increase in free cash flow,
reduction in unit production costs and
enables
Central
to be
cash positive even without NEGI
.
By taking on
Operatorship of Mereenie, Central
will become
the common Operator across all three
conventional gas fields producing in the Amadeus Basin. This creates immediate operating efficiencies and
provides employment opportunities in and around Alice Springs by
utilising local services and resources.
This acquisition will increase Central’s oil production to over 500 bopd and contracted gas sales to over 4
PJ/p.a. (equity accounted).
Under the
agreement
Central will pay $45 million in cash to Santos, structured
as $35 million on financial
closure of the deal and the balance of $10 million to be paid in
June 2016
.
In addition, Central will free
-
carry Santos under a $10 million work program prior to NEGI aimed at increasing
2P reserves at Mereenie to 280 PJ (Pre
-
NEGI Work Program)
. Central will also
grant
an option to Santos to
cause a transfer of certain permits in the Amadeus Basin
plus
other financial arrangements.
Conditional on the NEGI pipeline project
proceeding
, Central will pay Santos a
NEGI bonus payment of $15
million and commit to free
-
carry Santos under a $55 to 75 million NEGI Work Program to develop the
Mereenie field for production into the NEGI pipeline.
Central Petroleum Managing Director, Richard Cottee, said: “
This agreement en
ables
Central
and
Santos
to
efficiently expand the
low
-
cost conventional gas supply
from
the Amadeus Basin
to
the eastern seaboard
domestic market
within 4 years
, and makes Central a significant producer in its own right
.”
The financing will be through
a c
redit approved
increase in the existing Palm Valley and Dingo debt facility
with
Macquarie Bank. Under
this expanded debt
facility, the interest rate will be reduced relative to the
existing loan by 170 basis points. Central will cancel the 15 million o
ptions previously issued to Macquarie
Bank and issue 15 million new options
with an exercise price of $0.20 and an exercise period of 48 months.
A further 15 million options with the same terms will be issued to Macquarie Bank should the full debt facilit
y
limit of $90 million be drawn.
The new total debt facility
of
$90 million ensures that financial
closure of the
deal is not subject to any equity raise. Should NEGI
proceed
, Central expects to have substantial new
revenue generation through new bankable Gas Sales Agreements and so it is envisaged that the contingent
NEGI funding can be covered by
conventional bank
debt.
The mutual objective of the joint venture is to maximis
e gas reserves
at
Mereenie and
volumes
available for
NEGI to create a market for presently discovered
conventional
gas and provide exploration incentive to
surrounding acreage. There are two viable routes for the NEGI Pipeline. Whilst the northern route
appears
to be the shortest, additional transportation tariffs charged for existing pipelines before and after NEGI
suggest the Moomba route could be the preferred option if our
exploration and appraisal
program is
successful. The primary objective of the
$10 million Pre
-
NEGI Work Program (which
forms
part of the
acquisition consideration) is to confirm reserves and deliverability that can be dedicated from Mereenie to
underpin the NEGI gas sales and transportation contracts.
Central has engaged Netherland,
Sewell & Associates, Inc. (NSAI) to review existing data in the light of the
prospect of NEGI going ahead and the Company remains confident that the review together with workovers
should enable the target of 280 PJ to be reached. The work will also ident
ify a series of gas target zones for
reserve and resource additions.
For personal use only
ASX ANNOUNCEMENT AND MEDIA
RELEASE
–
CENTRAL PETROLEUM LIMITED
Page
2
Under the existing farmout arrangements Santos remains Operator in the Southern Amadeus Basin joint
venture and North West Mereenie joint venture enabling a higher degree of focus on the
vast acreage.
Under this deal the Amadeus Basin acreage has been further rationalised with Santos having the right to
acquire a 50% interest in EPA 111 and EPA 124 and Central assuming the acreage in the area of EP82 to
the North of the Dingo Field to add
to Central’s existing holding in RL 3 & RL 4 (Ooraminna). The map
below
shows the acreage in the Amadeus as a result of this rationalisation.
“We hope this deal will
underpin
the
available
gas supply and supportive economics of the
NEGI, an
important and
much needed infrastructure project
that will provide for the development of an efficient
domestic gas market
,” said Richard Cottee.
“Should NEGI occur, not only will it significantly re
-
rate our vast exploration acreage in the Amadeus Basin
but also our interest in the producing fields. It would be a culmination of
a
strategy developed nearly two
years ago to make Central an oil and ga
s producer of note, with the first step our acquisition of
the
Palm
Val
ley & Dingo assets last year.”
