Central Petroleum (ASX: CTP) has terminated its conditional agreement to sell its EP112 and EP125 permit interests to Georgina Energy.
The sale was cancelled because the specified conditions precedent were not satisfied by the due date.
Following this, Central's wholly owned subsidiary Frontier Oil & Gas withdrew from the EP112 Joint Venture with Santos (ASX: STO).
This decision was made due to a reassessment of the commercial prospects and the high drilling costs associated with the Dukas prospect in EP112.
As a direct consequence of this withdrawal, Central Petroleum expects to record a $1.7 million impairment charge in its FY26 financial results.
EP125 Appraisal Continues
Despite the changes in EP112, Central Petroleum confirmed it will continue its participation in the Mt Kitty/Jacko Bore appraisal well within EP125.
This appraisal well is currently slated for drilling in 2027.
The Mt Kitty/Jacko Bore resources are estimated at 12 bcf of 2C natural gas, alongside an additional 12 bcf of associated helium and hydrogen.
Central's beneficial interest in this project has also seen an increase, moving from 24% to 30%.
Palm Valley Gas Sales Agreement
In a separate but significant development, Central Petroleum previously executed a binding multi-year Gas Sales Agreement (GSA) with the Northern Territory Government for its Palm Valley wells.
This agreement provides a solid foundation for drilling two new Palm Valley wells.
Drilling is expected to commence in mid-2026, with progressive production coming online from the second half of 2026.
The GSA ensures a firm, take-or-pay supply of up to 10.5 PJ of Central's share of gas through to end-2034, with pricing subject to CPI escalation.
These new wells are anticipated to boost Central's gas production capacity by approximately 40%.
Mereenie Gas Market Uncertainty
Looking at other assets, an earlier Letter of Intent (LOI) with the Northern Territory's Power and Water Corporation (PWC) for a new Mereenie gas sales agreement has expired without a new agreement being reached.
The existing PWC gas supply agreement for Mereenie remains in effect, running through to 2030.
As a result of the unfulfilled LOI, the Mereenie joint venture has suspended further infill drilling.
This decision is expected to reduce the forecast 2026 capital expenditure by approximately USD 5 million, with the focus now shifting to gas marketing and contracting with other market participants.
Oil & Gas Outlook
Central Petroleum's strategic pivot away from sub-salt exploration, marked by the EP112 JV exit and permit sale termination, leads to a $1.7 million impairment.
The company is prioritising its EP125 appraisal and previously announced positive developments in the Palm Valley gas sales agreement.
It believes this should underpin significant production growth and revenue certainty.
