Sydney Gas upgrades Camden reserves, snubs QGC

SYDNEY Gas has reiterated its distaste for the Queensland Gas Company’s (QGC) takeover offer, following a reserve upgrade at its Camden coal seam gas project, south-west of Sydney.

The independent report, commissioned by Netherland, Sewell & Associates, boosted 2P (proved and probable) reserves at the Bulli Seam by 30% to 82.8 petajoules.

It also indicated a 12% increase in 1P (proved) reserves to 59PJ and 3P (proved, provable and probable) reserves of 108.8PJ.

“The increase in reserves and improved performance at Camden highlight the opportunistic nature of the offer from Queensland Gas,” Sydney Gas chairman Michael Norster.

Last week, Sydney Gas announced that production was ramping up at the project and was on track to meet the 14.5PJ per year supply agreement with Australian Gas Light Company (AGL). The company said the 10-year supply contract was expected to generate $A200 million in revenue to Sydney Gas.

Camden is currently producing 4PJ of gas per year, but this is expected to increase to 14.5PJ over the next three years, it said.

While the reserve upgrade was only based on the Bulli Seam, Sydney Gas said other seams were currently being analysed for additional gas reserves and production.

“Both the increase in reserves and improved production at Camden are a result of the very high success rate, running at around 88%, of the Sydney Gas drilling program,” Norster said.

The Camden joint venture – which comprises equal partners Sydney Gas and AGL – plans to spend $34 million on exploration at the project over the next three years.

In January, QGC made an $88 million off-market takeover bid for Sydney Gas. QGC’s bid would also resolve the question of how $30 million worth of convertible notes could be repaid to AGL by April and June.

Sydney Gas has since made several announcements to the ASX describing the offer as “opportunistic and highly conditional”, and saying QGC had made no secret of Sydney Gas’ high strategic value to the Brisbane-based company’s growth strategy.

Then late last month, the company lodged an application with the Takeovers Panel to temporarily stop QGC from despatching a bidder’s statement to shareholders until several alleged deficiencies were corrected.

The bidder’s statement has since been released to the ASX and shareholders.

Of the 67 wells drilled since August 2002, 56 have been put into production, with a further three about to come online.

“The expansion of reserves at Camden provides us with confidence that following the ramp-up of the project over the next three years, [the joint venture] will be able to meet the supply of 14.5PJ per annum under the gas supply contract with AGL,” Norster added.

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