Arrow has increased reserves, finalised terms for the Shell agreement, secured the Central Queensland Gas Pipeline licence, sold its stake in the NQ Gas Pipeline to Townsville and committed to Braemar #2 power station. Gas sales were 16.3PJ for FY07/08, up from 10.4PJ in FY06/07, and electricity sales were up sharply with the purchase of a 50% interest in the Townsville power station, from 20.9GWh to 615.4GWh. Reported EBITDA was A$70.5m (from A$6.6m), and NPAT was A$37.2m, after A$9.2m of income tax was expensed, compared with A$18.5m reported after a tax benefit of A$19.8m in FY06/07. Shell has executed definitive agreements to acquire a 30% interest in AOE’s upstream Australian assets, and a 10% stake in AOE’s Asian assets. For the Australian interests Shell will pay US$413m initially, including costs from 1 January 2008, a further US$133m on the FID for an LNG project, and US$66.5m when the project is producing at an annualised 1 mtpy of LNG. For the Asian assets it will pay US$50m initially and reimburse some costs. It will pay US$25m on the signing of two Production Sharing Contracts, and pay US$50m if AOE International’s reserves exceed 5 TCF. Within five years it can acquire a 50% interest in any AOE International tenement by paying the pro-rata share of sunk costs, excluding the Indian licences. On reserves, AOE reported net reserves of 1,430PJ for 2P and 3,127PJ for 3P, prior to the divestment to Shell. It has sold its 50% interest in the North Queensland Gas Pipeline, retaining the benefits of the Enertrade deal. It has received government approval (with AGL Energy 50%) for the Central Queensland Gas Pipeline from the Bowen Basin to provide a second gas supply to the proposed Gladstone LNG trains. The gas-fired Braemar 2 power station of 450MW AOE 50%) is scheduled for commissioning in mid-2009 with Arrow to supply 11.5PJ per year, and the Incitec Pivot ammonium nitrate plant to take 7 PJ per year from mid-2010.
AOE Price at posting:
$1.97 Sentiment: ST Buy Disclosure: Held
