Central inked a $10 million pre-paid gas sales agreement with Big Mac Bank just days after paying $3.45 million to pick up an option on payments tied to the further growth of Central’s Mereenie field.
Mac then paid Magellan Petroleum Corporation for the right to the bonus payments over the Amadeus Basin field, which is triggered once production exceeds 2500 barrels of oil equivalent per day, triggering a $5 million payment, and which tops out at $17.5 million for production of 10,000boepd.
The Coy's Production at Mereenie is well below 1000boepd, at 775bopd and 3.74 terajoules per day. The gas can flow at higher rates, but penny dreadful lacks a sales contract so additional production is being re-injected.
Big Mac's recent deal with penny dreadful is to buy 5.2 petajoules of gas over three years with an additional 3.5PJ over two further years, but while production is not expected to begin until 2018 Central will be paid immediately, allowing it to finalise the deferred final purchase payment for Mereenie.
Mr. Central says part of the deal terms remove its exposure to its half of the production bonus, a potential liability of $8.75 million. In short, Mr. Central stated something to the effect that the deal eliminated yet another economic impediment to increase production.
What the above paragraph means is that the ability to repay the pre-purchase gas sale through a financial settlement over a number of years after 2018 gives the parties the flexibility to avoid having to conclude a gas transportation agreement by any particular time. Now, think about that statement and think about current state of play between Central and Big Mac.
Now fellows, if for any reason, Central can’t deliver the gas it will need to repay a portion of the funds, and if Macquarie wants the gas delivered elsewhere it will need to cover the transportation costs. This is a significant risk and expense should the inability be realised, don't you think.
How involved are Incitec Pivot behind the Big Mac review of books, think about fellow shareholders. So far Central has secured an expression of interest negotiations for the potential sale of up to 12PJ of gas over 10 years to the east coast gas market and 15PJ for the delivery of gas to Incitec Pivot under a non-binding framework agreement.
So far Central has ONLY secured an expression of interest negotiations for the potential sale of up to 12PJ of gas over 10 years to the east coast gas market and 15PJ for the delivery of gas to Incitec Pivot under a non-binding framework agreement. The deal from memory may including funding by Incitec Pivot for additional drilling and support Incitec Pivot supply and demand requirements, it gphas been quoted that Incitec Pivot will save around 55 million per year once gas molecules start flowing into the NGP.
Central did say mid year period that they plan to test 2-3 existing wells by fraccing the low permeability Stairway and P4 sands, and drilling up to a new wells and recomplete existing wells to fully develop the Pacoota P1 and P3 zones. But but but,where is penny dreadful to secure the findings for such drilling?? Are we about to see yet another innovative or as I put it, bean counter deal and is the Big Mac review in line with risk mitigation by those who may become zipped at the hip with central, who knows, certainly not me, but but but...................
What we do know fellow long term, long suffering shareholders is that Central will carry Santos’ costs through the workover program has part of its $130 million deal to enter the field. Again I raise the importance attached to funding for penny dreadful.
So, are we about to see a big picture emerge, is the M&A about to invite central as a potential suitor, but should this be a possibility, which parties would align and who's common interest would best benifit such zipping up at the hip with penny dreadful central.
Interesting times ahead, but puzzle has become a little more clearer for this long term, long suffering central shareholders, let's just Egypt the show rolling and place the misery that has been simpmce year 2012 well and truely behind the horror show that has been.
