Hi Numeraire,
I suspect this was the best deal possible at the time and knew the pricing would blow out the liability. You could argue they are hedged to this financial arrangement as the they simply pass on the higher gas revenue they receive to Mac. However, it does take away from our upside for 5.2PJ of production and everything Richard knew was going to happen in east coast market.
"If they did sell at a fixed price we should seeing a larger financial loss in the liabilities"
They did record a fairly large loss in the financials in 2017 of $9.5m and 2018 of $0.4m. Refer to my first table above which presents the movements.
Overall, I can understand the rationale of the transaction:
1. It enabled us to pay the Mereenie deferred consideration - we would have needed additional debt on junk terms with flow on effects to our secured debt.
2. Eliminated future liability relating to the Mereenie Production bonus which was estimated between $2.5m - $8.75m in 2016. Now we are further down the track, i'm not sure what quantum it would have turned out to be.
3. Was relatively expensive, but above, probably the best option at the time. In total, we borrowed $11.80m and will repay in cash/gas c. $25m. If you consider the above, it's not a bad deal in the scheme of things.
