Cue Energy Locks in 0.37 PJ Gas Supply Contract with McArthur River Mining

• New gas supply agreement signed with McArthur River Mining
• 0.37 PJ firm volume net to Cue plus ‘as available’ gas for 2026-2027
• Take-or-pay provisions ensure revenue stability
• Pricing indexed to Consumer Price Index (CPI)
• Cue holds 7.5% interest in Mereenie Joint Venture

Cue Energy’s Strategic Gas Supply Agreement

Cue Energy Resources Limited (ASX, CUE) has announced a significant new gas supply agreement with McArthur River Mining Pty Ltd (MRM), securing a firm volume of 0.37 petajoules (PJ) of gas net to Cue, alongside additional ‘as available’ gas volumes. This contract covers supply during 2026 and 2027 and is sourced from the Mereenie joint venture, where Cue holds a 7.5% interest.

Contract Terms and Market Implications

The agreement includes take-or-pay provisions, which obligate McArthur River Mining to pay for the contracted gas volume regardless of actual consumption, providing Cue with a stable revenue stream over the two-year period. Pricing is indexed to the Consumer Price Index (CPI), allowing for inflation adjustments and protecting Cue’s margins against cost pressures.

This deal fits into a broader context of tightening gas markets in Australia, where securing long-term supply contracts is increasingly critical for producers and consumers alike. For Cue, this agreement not only guarantees sales volumes but also strengthens its position within the Mereenie joint venture, alongside partners Echelon Resource Limited, Horizon Oil Limited, and Central Petroleum Limited, the operator.

Operational and Financial Outlook

While the announcement does not disclose detailed pricing or the full extent of ‘as available’ gas volumes, the take-or-pay nature of the contract suggests a degree of revenue predictability that investors will welcome. Cue’s FY2025 revenue stood at $54.8 million, derived from multiple production fields including Mereenie, and this new agreement is poised to contribute positively to the company’s cash flow in the coming years.

However, the company also cautions that exploration and production remain subject to risks such as fluctuating production levels and reserve estimates. The partnership structure of the Mereenie joint venture means that operational decisions and outcomes will continue to be influenced by all participants.

Looking Ahead

As the energy landscape evolves, Cue Energy’s ability to secure firm contracts with reputable customers like McArthur River Mining will be critical to sustaining its growth and navigating market uncertainties. The CPI-linked pricing mechanism also reflects a pragmatic approach to managing inflationary pressures in the energy sector.

Bottom Line?

This agreement marks a steady step forward for Cue, but the real test will be in execution and market conditions over the next two years.

Questions in the middle?

• What are the specific pricing terms and how do they compare to current market rates?
• How will production levels at Mereenie impact Cue’s ability to meet contract obligations?
• What potential risks could affect the delivery of ‘as available’ gas volumes?