The Cooper Energy Ltd. (ASX: COE) share price will be on watch today after the company announced a new contract.
This morning, Cooper Energy detailed a new gas supply agreement with O-I for the supply of 1 PJ per annum for two years commencing 1 January 2021.
Cooper Energy is an exploration and production company which generates revenue from gas supply to south-east Australia and low-cost Cooper Basin oil production. The company has a portfolio which includes selective acreage in the Cooper, Otway and Gippsland basins in Australia.
O-I is an industrial gas user and Australia's largest manufacturer of glass container products.
The Cooper Energy share price has increased by around 10% over the last 12 months. However, shares have lost some ground since January 23, 2020, decreasing roughly 11%.
What are the terms of the new gas supply agreement?
Under the terms of the agreement, the gas is to be supplied from Cooper Energy's equity share of production from its Casino Henry operations. The agreement also includes an option for an extension of a further 3 years. The contract is Cooper Energy's third gas sales agreement with O-I.
O-I noted that it is committed to the inaugural gas supply agreement for the Sole Gas Project (a life of field agreement for 1 PJ per annum) in 2015 and previously contracted gas supply from Casino Henry for the 2019 calendar year.
Impact on other Cooper Energy projects
Cooper Energy, in partnership with Mitsui, recently acquired the idle Minerva Gas Plant to establish a low-cost gas processing hub for its existing offshore Otway gas production and new discoveries such as Annie. The plant is expected to receive its first gas from Casino Henry in the first half of calendar 2021.
The new gas sales agreement with O-I will now provide for flexibility in processing arrangements and the provision of gas on a firm basis once supply from the Minerva Gas Plant is established. Prior to that date, processing of gas from Casino Henry will remain at the Iona Gas Plant.
The new contract was noted as consistent with Cooper Energy's gas contracting strategy.
The contracted volume is approximately 17% of Cooper Energy's share of Casino Henry 2020 gas production of 6 petajoules. Cooper Energy expects to initiate marketing for other volumes of Casino Henry 2021 gas production prior to 30 June 2020.
Cooper Energy Managing Director David Maxwell commented on the announcement, saying, "O-I were our first gas customer and we are delighted at the opportunity this contract has presented to deepen our commercial relationship. It is also the first agreement for supply in 2021 from our offshore Otway operations, where we are investing to build our gas business further."
