Sole passes FID

AFTER multiple delays Cooper Energy has finally locked in the debt financing needed to push the Sole gas field development in the Bass Strait with a positive final investment decision this morning.
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Ocean Monarch.

Haydn Black


With the successful FID Cooper has announced that its 2P reserves have increased by 362%, or 43 million barrels of oil equivalent to 54MMboe.
The Sole debt package will be provided in the form of a $250 million debt facility fully underwritten by ANZ and Hong Kong's Natixis, a further $15 million working capital facility provided by ANZ, plus a fully underwritten accelerated non-renounceable entitlement offer to raise a further $135 million.
The finance package will fund the remaining Sole gas project capital cost, as well as provide additional funding and liquidity requirements associated with bank finance and capital expenditure identified for the company's offshore and onshore Otway Basin and Cooper Basin operations, and maintenance of the offshore Gippsland Basin facilities.
The 100%-owned Sole project involves development of the undeveloped field to commence supply of gas to southeast Australia by 2019. 
Under an agreement finalised in June APA Group will acquire the Orbost Gas Plant and undertake the $250 million plant upgrade and process gas from the Sole field and other fields.
That leaves Cooper with responsibility for the $355 million offshore development and shore crossing to the Orbost Gas Plant.
Passing FID means Cooper has satisfied a key outstanding condition precedent of the agreement with APA Group and Cooper Energy's gas supply contracts with AGL Energy, EnergyAustralia, Alinta Energy and O-I Australia.
"The package announced today allows FID for Sole and the pursuit of other near term gas opportunities at a time of great market need," Cooper managing director David Maxwell said.
"Our reserves have increased nearly four times and the development of Sole sets the company on a growth trajectory offering a five-fold increase in production in the years to 2020."
There is around 249PJ in Sole, and Cooper has around 112 petajoules of uncontracted gas in its portfolio, as well as the undeveloped 106PJ Manta opportunity adjacent to Sole, which it will now look to accelerate. 
Manta is expected to follow Sole into development into production, likely using economies available through integration with Sole and, potentially, the Patricia-Baleen gas field and pipeline.
Maxwell said that the project facilities had been selected after an extensive assessment of bank and non-bank debt financing options in Australian and international capital markets.
"We have chosen a debt finance option with a competitive interest rate, terms and flexibility for repayment, which is consistent with the quality of the Sole gas project," Maxwell said. 
"Together with the equity raising, this provides a finance solution which retains a prudently geared balance sheet, delivers superior outcomes for shareholders than non-bank debt finance options and gives the Company some capital flexibility for other commitments and opportunities within our asset portfolio."
The 2-for-5 entitlement offer is fully underwritten by Euroz Securities and Canaccord Genuity.
Institutional shareholders will be invited to participate in a bookbuild that is expected to close by tomorrow while retail shareholder have until early September. 
In terms of 2P reserves, they are now 11.7MMboe, while 2C contingent resources are 77.6MMboe.
Beyond conversion of contingent resources, the increases come from new drilling at Callawonga and the identification of additional development opportunities at Butlers and Parsons in the Cooper Basin, the acquisition of Santos' offshore Victoria assets, and the exit of Beach Energy from the BMG joint venture in the Gippsland Basin.
Cooper also released its 2016-17 financial results, posting a statutory loss for the period of $12.3 million, of which $3.6 million is due to significant items, mainly impairments recorded against Indonesian assets held for sale and penalty provisions associated with the company's exit from Tunisia.
Its underlying loss was $8.7 million.
After what could be a lean 2017-18 as the focus is on development, Cooper is hoping the developments of Sole, and later Manta, will turn around the company.
It will drill three Cooper Basin wells this year and the two Sole development wells, with the latter using the Ocean Monarch semi-submersible rig.