New Gas Sales contracts for East coast at $7-8 / GJ, page-2

Some background:

EnergyAustralia to buy gas from Cooper Energy's $550m Sole project

http://www.copyright link/business/energy/gas/energyaustralia-to-buy-gas-
from-cooper-energys-550m-sole-project-20161213-gtalfi

Cooper Energy is developing the only new conventional gas project on
the east coast.

Cooper Energy is developing the only new conventional gas project on
the east coast. James Davies

by Angela Macdonald-Smith

Cooper Energy chief executive David Maxwell is expecting to be kept
busy this holiday period with ambitions to wrap up deals on partnerships,
funding and gas sales for the company's $552 million Sole project by
March.

One of those deals was announced on Wednesday, with news that
EnergyAustralia has signed up as the fourth customer for the project off
Victoria's coast.

As the only major conventional gas supply project under development on
the east coast, the Sole venture is attracting plenty of market attention,
particularly after Cooper's buy-out of Santos's interest in a $82 million
deal in October.

That deal put 100 per cent of the project into Cooper's hands, and while
it now has a bigger stake it needs to sell to partners, the simplification
has made it more attractive for financiers and prospective co-investors,
Mr Maxwell said.

"It was a robust project so it was always financeable, but the interest
level has increased since the Santos deal as it has increased the
certainty of the project, while gas prices have continued to rise," he said
in an interview.

The Santos deal forced a delay in the date for a final go-ahead for Sole
until March from late this year, but Cooper has bought $9 million-$10
million of long-lead equipment to preserve the 2019 target for gas
deliveries to start.

Cooper, which has seen its share price more than double this year, has
signed up AGL Energy, glassmaker O-I Australia and Western Australian
retailer Alinta Energy as gas customers, plus now EnergyAustralia. The
retailer will buy 5 petajoules a year for at least five years, with a
possible three-year extension.

"The reality is that if we're to move away from coal fired power, we will
require more gas-fired generation to balance increases in intermittent
renewable energy," said EA managing director Cath Tanna.

Extra gas needed

Mr Maxwell, a former senior executive at BG Group and Woodside
Petroleum, said further sales contracts were expected to be signed
"within the next few months".

Prices are understood to be in the $7-$8 a gigajoule region, more than
double historical prices but within the range expected for later this
decade given the volume of extra gas needed for the new Queensland
LNG export projects. The price of Sole gas is linked to inflation rather
than to the crude oil price in at least one of the sales contracts.

Consultancy EnergyQuest said that apart from Sole, the only material
sources of near-term gas available for long-term contracts sat with oil
giant Shell in its Arrow Energy venture in Queensland, and with the
huge ExxonMobil-BHP Billiton joint venture in the Gippsland Basin.
Meanwhile, the softening in oil services costs means the final budget for
Sole is likely to fall to below $550 million, Mr Maxwell said.

He noted that Cooper could end up with different partners for the
offshore part of the project to the onshore gas processing plant part,
where infrastructure investors could come into play.

Cooper, which is being advised by Grant Samuel and has a market value
of about $234 million, is aiming to sell a 30-35 per cent stake in the
venture.

The company raised $62.6 million in new equity in November to help
fund the Santos deal but cornerstone shareholder Beach Energy only
took up part of its entitlement, reducing its stake to about 10.3 per cent.
Mr Maxwell said he expected financing for Sole to involve a combination
of sources, including project debt, co-investment by partners and
potentially new equity.