OPERATIONS

Central focused on gas expansion

CENTRAL Petroleum's swerve to focus on gas developments in central Australia is gathering steam, with the company seeking approvals from the Central Land Council and Northern Territory government for its gas acceleration Project, starting with a deep exploration well in the Palm Valley gas field.

Central focused on gas expansion

The company will probably seek to fund the well with a farm-out.

Palm Valley-12 will drill down into the Arumbera Sandstone which is an established gas bearing reservoir in the Dingo field some 100km eastwards.

Given the formation has a similar area to the existing gas pool in the Pacoota Sandstone any success in the well would be a game-changer for the Palm valley field.

Likewise, the company has defined an untested intra-salt target has been identified beneath the existing Pioneer Sandstone gas discovery at Ooraminna.

Given the Gillen Formation comprising carbonate and salt is a target in the Southern Amadeus area, and is known to be present at Ooraminna it represents a promising target, although additional technical work is required to firm up a location before seeking funding.

While it has modest production, Central actually managed to increase its cash holding for the past quarter by a slim margin, up from $5.5 million to $5.8 million thanks to a $3.2 million research and development related tax refund.

Cash received from oil and gas sales for the quarter totalled $1.7 million.

The company also drew down $3 million from its financing facility with Macquarie Bank and interest amounting to $2.7 million was capitalised into the facility during the last quarter.

Central says the Dingo gas field was completed on time and under budget and is performing well since its start-up on April 1.

Once in full operation, the total sales of gas from Palm Valley and Dingo should reach over 3.3 petajoules per year providing an operating profit before interest and taxes of over $5 million annually, although the company is seeking to expand sales further.

Central boss Richard Cottee is banking on the NT's proposed North East Gas Interconnector, which the NT chief minister Adam Giles describing it as "almost certain".

A shortlist of four developers has been defined.

"Should NEGI be developed, access to the high priced East Coast gas market will cause a major re-rating of the company and make our exploration acreage even more attractive. NEGI overcomes the tyranny of distance for Central," Cottee said.

The Surprise oil field continued to produce steadily averaging 137 barrels of oil per day in the quarter, while Palm Valley produced 249,019 gigajoules in the quarter, including 123,400GJ of early delivery gas into the Dingo contract. Work has defined that the Palm Valley field can deliver at 8 terajoules per day.

"With the Dingo revenues yet to impact our results and a continued ramp up of gas sales volumes from Palm Valley to full contracted quantities, the financial health of the company continues to improve vindicating the company's strategic shift to gas some 18 months ago," Cottee said.

Central and its 10% partner, Total, intend to core the Whiteley- 1 during the next drilling campaign in the Southern Georgina Basin, while work continues to integrate the pair's Gaudi -1 data with the surrounding existing wells.

Likewise, with Santos, Central is still trying to assess the results of the Mount Kitty-1 well, primarily to determine the source of the hydrocarbons and helium recovered in samples.

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