Australis Oil & Gas reported steady production in Q4 2025 despite lower oil prices, completing key transactions that bolster its financial position and development prospects in the Tuscaloosa Marine Shale.
- Stable Q4 production volumes at 48,900 barrels despite lower WTI prices
- Development partner to invest up to US$46 million for new wells, earning 80% interest
- Sale of 90% producing well interests to EQV for US$16.9 million, enabling debt repayment
- Year-end 2025 reserves updated, 124 Mbbls proved developed producing, 62 million barrels 2P+2C resources
- Cash balance surged to US$14.2 million post-transactions, with no outstanding debt
Quarterly Performance Amid Market Challenges
Australis Oil & Gas Limited (ASX, ATS) closed out 2025 with production volumes holding steady at 48,900 barrels working interest, mirroring the previous quarter. However, the company faced a 12% decline in West Texas Intermediate (WTI) oil prices, which, despite modest hedge gains, led to a 9% drop in sales revenue to US$3.0 million. Operational costs increased by 20% quarter-on-quarter, primarily due to four workovers conducted in October, though these were executed at costs approximately 30% below budget, reflecting operational efficiency.
Strategic Transactions Strengthen Financial Position
Australis made significant strides in its corporate strategy by securing a development partner; an established US-listed independent oil and gas company with multi-basin operations; who will deploy up to US$46 million in development capital. This partner will earn an 80% working interest in Australis’s undeveloped Tuscaloosa Marine Shale (TMS) core acreage, while Australis retains a 20% interest carried through the initial drilling program. Concurrently, Australis monetised 90% of its producing well interests through a US$16.9 million sale to EQV Group, which also assumed operatorship. Proceeds from this transaction enabled Australis to fully repay its Macquarie credit facility, eliminating debt and boosting its cash reserves to US$14.2 million by quarter-end.
Reserve and Resource Update Reflects Portfolio Changes
Independent engineering firm Ryder Scott updated Australis’s year-end 2025 reserves and resources, reflecting the recent divestment and market conditions. Proved developed producing (PDP) reserves stand at 124 thousand barrels, a significant reduction from the prior year due to the sale of interests and lower oil price assumptions. Meanwhile, the combined proved and probable reserves plus contingent resources (2P+2C) remain robust at 62 million barrels, underscoring the substantial undeveloped potential within the TMS core. Minor adjustments to contingent resources reflect disciplined acreage management and unchanged subsurface assumptions.
Operational Outlook and Hedging Strategy
Australis continues to focus on its core TMS acreage, holding approximately 47,200 net acres with 85% held by production. The company has extended leases on nearly 3,200 net acres to maintain its position. Hedging arrangements remain in place for early 2026 production, with collar hedges protecting a floor price of US$60 per barrel on 1,000 barrels per month through April. The development partner’s carry program and leasing initiatives are expected to drive future drilling activity, with Australis positioned to fund its share of subsequent wells once the carry period concludes.
Navigating a Transitional Phase
The transition of producing well operatorship to EQV and the partnership with a well-capitalised US operator mark a pivotal phase for Australis. While near-term earnings metrics such as field netback and adjusted EBITDA declined due to lower prices and increased workover costs, the company’s strengthened balance sheet and strategic alliances provide a platform for growth. The market will be watching closely how the carry program unfolds and whether Australis can translate its substantial contingent resources into producing reserves under improved market conditions.
Bottom Line?
Australis’s strategic partnerships and financial restructuring set the stage for renewed development momentum in the Tuscaloosa Marine Shale despite near-term price headwinds.
Questions in the middle?
- When will the development partner commence drilling under the US$46 million carry program?
- How will Australis manage its 20% working interest funding obligations post-carry period?
- What impact will EQV’s operatorship have on production efficiency and future reserve upgrades?