Central Petroleum (ASX: CTP) has signed a significant multi-year gas sales agreement (GSA) with the Northern Territory Government.
This development coincides with the expiry of a separate agreement for the Mereenie field, prompting a shift in strategy.
The new agreement secures up to 21 PJ of gas (10.5 PJ Central share) through end-2034, and underwrites the Final Investment Decision for two new Palm Valley wells.
The agreement features take-or-pay provisions and CPI-indexed pricing, providing revenue certainty and underpinning an expected circa 40% increase in Central's production capacity.
Central has increased its Macquarie Bank loan facility to approximately A$15 million to fund its share of drilling costs, estimated at A$26 million.
Mereenie Agreement Expires
The Letter of Intent with the NT’s Power and Water Corporation (PWC) for a new Mereenie gas sales agreement has expired without reaching agreement.
The existing PWC gas supply agreement remains in place through 2030.
The JV has suspended further infill drilling at Mereenie, reducing the 2026 forecast capital expenditure by approximately US$5 million.
Central will now focus on gas marketing and contracting discussions with other market participants for Mereenie.
Production Capacity Boost
The two new Palm Valley wells are expected to return the field's production capacity to 15 TJ/day, with the development projected to lift Central's overall gas production capacity by approximately 40%.
First production from the new wells is anticipated progressively from the second half of 2026.
Central's share of drilling and completion costs for the Palm Valley wells is estimated at A$26 million.
A US$5 million reduction in 2026 capital expenditure is realised due to the suspension of Mereenie infill drilling.
Preparations for Palm Valley wells, including approvals, long-lead items, and rig contracting, are substantially complete.
Outlook and Risks
Central Petroleum's new Palm Valley gas contract provides strong revenue visibility and underpins significant production growth, marking a positive step for the company.
However, the successful execution of the drilling program (execution and timing risks), managing potential cost pressures, and securing alternative contracts for Mereenie gas, along with commodity price fluctuations, remain key areas for investor focus.
