Oil and gas explorer Vintage Energy (ASX: VEN) has signed a heads of agreement to sell the gas produced from its Vali field in the Cooper Basin to the wholesale gas subsidiary of energy retailer AGL Energy (ASX: AGL).
Vintage, together with its Vali joint venture partners Metgasco (ASX: MEL) and private company Bridgeport (Cooper Basin), entered into the conditional deal with AGL Wholesale Gas Limited to supply between 9-16 petajoules of gross sales gas from the start of production (anticipated in mid-2022) through to the end of 2026.
The gas is to be sold on a mix of firm and variable pricing at market rates.
The heads of agreement’s terms will form the basis of a fully termed gas sales agreement, which is expected to include AGL providing an upfront payment of $15 million to the joint venture in three tranches as the project moves to first gas.
The funds will be used specifically to fund the Vali field program including the completion of all three Vali gas wells and the tie-in of the Vali field to the nearby Moomba pipeline network.
Vintage approaches domestic gas producer status
Vintage managing director Neil Gibbins said the deal brings the company closer to becoming a domestic east coast gas producer by providing validation that the Vali gas field will be commercialised.
“The heads of agreement for the proposed sales of up to 16 PJ of gas to AGL will deliver significant cash flow to the joint venture over the term of the contract and also provide the joint venture with an upfront payment for funding capital works required to achieve first gas,” he said.
“We are now close to supplying meaningful amounts of gas into the Australian east coast market. With strengthening gas prices in the domestic and international markets, it should be very clear to all that the Vali field is a sizeable and valuable asset for Vintage and its shareholders.”
“We are excited to have AGL as a buyer of Vali field gas and look forward to providing them with a consistent supply of gas for the initial supply term of four to five years,” Mr Gibbins added.
$10 million debt facility term sheet also signed
In a separate announcement today, Vintage revealed it has also signed a binding term sheet for a $10 million debt facility with the PURE Resources Fund, managed by PURE Asset Management.
The facility will form part of the funding of the initial capital requirements of the Vali field over the next two years and is expected to supplement the gas sales deal inked with AGL.
The facility is for a 48-month term from first draw down with the $10 million to be drawn down in two $5 million tranches.
The term sheet states the funds are to be applied to the full payment of outstanding fees as first priority, then to costs in relation to the Vali project, with working capital and general corporate purposes as the last priority.
An initial 11% interest rate will reduce to 8.5% once certain operational cash flow conditions are met and financial covenants include a minimum $1.5 million cash in the bank.
The main conditions precedent to the execution of the facility and first drawdown include entering into a raw gas processing agreement with the Moomba infrastructure owners for the processing of Vali gas, and the execution of the gas sales agreement with AGL.
Vintage operates the Queensland permit ATP 2021 containing the Vali gas field with a 50% interest. Joint venture partners Metgasco and Bridgeport each hold 25% stakes.