Central Petroleum's Strategic Gas Supply Agreements Boost Future Cash Flow
CENTRAL PETROLEUM LIMITED (CTP) Share Update October 2024 Thursday 31st
Central Petroleum Secures New Gas Supply Agreements
Central Petroleum Limited (ASX: CTP) has announced new long-term gas supply agreements that promise to enhance cash flow stability and support future growth initiatives.
Instant Summary:
- Secured new gas supply agreements with Northern Territory Government and Arafura.
- Sales volumes increased by 6% to 1.1 PJe.
- Sales revenue rose by 6.7% to $9.0 million.
- Positive operating cash flow of $2.7 million before CAPEX and debt service.
- Loan facility extended with Macquarie Bank to December 2029.
New Gas Supply Agreements
Central Petroleum has successfully secured new gas supply agreements that are expected to provide a more reliable cash flow. These agreements include a firm base supply of up to 12.0 PJ of gas to the Northern Territory Government, effective from January 2025 to December 2030. Additionally, a revised agreement to supply up to 4.1 PJ of gas to Arafura's Nolan's rare earth project has been established, contingent upon project FID by December 2024.
Quarterly Performance
For the quarter ending September 2024, Central Petroleum reported a 6% increase in sales volumes, reaching 1.1 PJe. This reflects a tighter gas market in the Northern Territory. Sales revenue increased by 6.7% to $9.0 million, driven by higher production levels. The average realised gas price remained steady at $7.91/GJe.
Financial Position
Central Petroleum reported a positive operating cash flow of $2.7 million before capital expenditures, debt service, and exploration costs. The company's cash balance slightly decreased to $24.8 million, with net cash improving to $1.9 million due to operating cash flows and debt repayments.
Loan Facility Extension
In October, Central Petroleum secured a commitment from Macquarie Bank to extend and restructure its $22.3 million loan facility. The revised facility will have a five-year term, ending in December 2029, ensuring the outstanding balance is fully repaid by then.
The new gas supply agreements are expected to enhance Central Petroleum's cash flow stability, which could positively impact the company's stock price. The extended loan facility reduces refinancing risk and provides flexibility for future investments and shareholder returns.
Investor Reaction:
Analysts are likely to view the new agreements positively, as they provide a stable revenue stream and mitigate risks associated with gas supply interruptions. The loan facility extension further strengthens Central Petroleum's financial position.
Conclusion:
Investors should consider the potential long-term benefits of Central Petroleum's new gas supply agreements and loan facility extension. These strategic moves position the company for sustained growth and stability in a volatile market.