Afternoon RK. I've thought the same so did some back of the...

Afternoon RK. I've thought the same so did some back of the envelope calcs. Not sure that we've seen the detailed TnC's but to accurately answer your initial question you'd need a copy of the contract.

I'm assuming there's a minimum supply agreement of 9PJ through to 2026. To meet this you would need an average gas rate of circa 2mmscf/d per well for those 4years. Given the spot market is so high you would think that the JV would only look to sell the minimum contract amount and go to the spot for the rest. In saying that there maybe an exclusivity clause to AGL over the contract period and spot prices are only realised once the max sales contract volume (16PJ) has been achieved - details I couldn't find.

Glass half full scenario - For 9PJ at $8/GJ you'd be looking at a minimum, total contract value of 72Mill... of which 15mill has been pre-paid. The upside is what can be sold at spot rates for that period given the flowrates you're able to get from the well and how long these initial rates are maintained. Without being a res eng I'd have to assume that the JV would look to go for maximum possible production rate at all times during the field life. Who gets the benefit of the surplus would come down to the details in the contract.

Naturally when the contract was cut $8/GJ was probably seen to be a great rate and the thought would have been to target the max possible sales agreement (16PF @ $8GJ spot for $128mill total value). Now the spot is so high you'd want to try and sell the 7PJ to the open market - it's just a matter of whether that's permissible.

The other thing to consider is whether there is a a single, base line minimum flow rate throughout the contract? OR is there a higher initial base rate with a linear/exponential decline? Not sure we'll ever be privy to those details.

Cheers.