Magellan Signs Long-Term Gas Sale Contract for Dingo Field in Northern Territory, Australia
Magellan Petroleum (NASDAQ:MPET)
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Today : Thursday 12 September 2013
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DENVER, Sept. 12, 2013 /PRNewswire/ -- Magellan Petroleum Corporation ("Magellan" or the "Company") (NASDAQ: MPET) today announced that on September 12, 2013, the Company through its indirect subsidiary, Magellan Petroleum Corporation (NT) Pty Ltd ("MPNT"), signed a gas supply and purchase agreement (the "Dingo GSPA") with Northern Territory Power and Water Corporation ("PWC") for the long-term sale of gas from the Company's Dingo gas field. Pursuant to the Dingo GSPA, the Company has contracted to supply up to 31 PJ (30 Bcf) of gas to PWC on a 100% take-or-pay basis over a 20-year supply period. The Company's supply obligation is expected to begin in early calendar year 2015 at a fixed price escalating with Australian CPI. The Dingo GSPA has been approved by the boards of directors of both PWC and Magellan. The Dingo GSPA is subject to certain customary conditions, including the Company successfully obtaining all regulatory approvals and constructing facilities necessary for commissioning the Dingo field for commercial gas production.
With this long term contract now in place, the Company will use the time before the commencement of gas supply to design, construct, and commission the surface facilities and tie-in pipeline necessary for the production and delivery of Dingo's gas. Currently, the Company is undertaking the front-end engineering and design ("FEED"), which is a continuation of work performed during the pre-FEED stage in fiscal year 2013, and which is expected to take approximately six months to complete. Gas volumes are expected to be produced from three wells drilled at Dingo in the 1980s and 1990s, two of which have since been temporarily shut-in, and which are expected to be capable of producing gas volumes sufficient to meet the delivery requirements under the Dingo GSPA. Concurrently with the FEED work, the Company will be applying for various regulatory approvals necessary for constructing the Dingo facilities and pipeline and commissioning Dingo for commercial gas production. The Company expects to receive all approvals by the summer of 2014 and intends to begin construction of the pipeline and facilities immediately thereafter.
J. Thomas Wilson, President and CEO of Magellan, stated, "Contracting for the sale of a substantial portion of Dingo's gas resources is yet another milestone achieved in our strategy of proving up the value of the Company's assets. Dingo's reserves potential was established nearly 25 years ago through a four-well exploratory program, but, with no customer, the field has since been left dormant. We will work vigorously to achieve the regulatory approvals and commissioning of Dingo as quickly as possible, and we look forward to working once again with PWC, who has been a valued customer of Magellan at our Palm Valley gas field over the past three decades.
"We believe we have now achieved the key milestones of our strategy for our Amadeus Basin assets, onshore Australia: we completed an asset swap with Santos in September 2011 to consolidate our interests in Palm Valley and Dingo and received $25 million in cash, we contracted most of Palm Valley's remaining gas reserves to Santos in September 2011 under a long-term contract, and now we have contracted up to 30 Bcf of Dingo's gas reserves with PWC. Following on the Company's initiation of the CO2-EOR pilot program at Poplar announced on August 12, 2013, we remain focused on executing the other key milestones of our strategy to increase net asset value per share."
