Central Petroleum Locks in Multi-Year Gas Deal and Boosts Palm Valley Output by 40%

• Binding gas sales agreement for up to 21 PJ through 2034
• Two new Palm Valley wells to start drilling mid-2026
• Production capacity expected to rise by circa 40%
• Expanded $15 million loan facility to fund drilling and exploration
• Replaces earlier Power and Water Corporation letter of intent

Firm Gas Sales Agreement Secures Palm Valley Expansion

Central Petroleum (ASX:CTP) has taken a decisive step to accelerate its Northern Territory gas production by signing a binding multi-year Gas Sales Agreement (GSA) with the NT Government. The deal commits to supply up to 21 petajoules (PJ) of gas through to the end of 2034, with Central’s share at 10.5 PJ, effectively underwriting the drilling of two new wells at Palm Valley. This contract replaces the previously announced letter of intent with Power and Water Corporation, streamlining Central’s gas sales arrangements.

Drilling Accelerated with Production Capacity Set to Jump

The Palm Valley Joint Venture has made a final investment decision to fast-track drilling, with preparations well advanced. Drilling is scheduled to commence mid-2026, supported by contracted rigs, key approvals, and near-completed civil works. If the new wells meet their target production rates, Central expects an initial 40% increase in gas production capacity from Palm Valley alone, a significant boost for the company’s output profile.

This development aligns with Central’s broader strategy to expand its footprint, complementing its recent acquisitions and exploration plans in the Cooper and Otway Basins. Earlier this year, Central secured a long-term gas supply contract and expanded its exploration portfolio, setting the stage for multiple new wells and production growth long-term gas deal.

Financing the Growth with Expanded Loan Facility

To support the $26 million estimated cost of drilling and completion, including contingencies for elevated diesel prices, Central has increased its loan facility with Macquarie Bank by up to $15 million. The company expects to draw only $8 to $10 million of this facility, which is repayable in equal quarterly instalments from March 2027 through December 2029, with flexible early repayment options. This financial maneuver ensures adequate working capital during the drilling phase and exploration activities planned in other basins.

Strategic Shift Away from Mereenie Gas Field Volumes

Notably, the new GSA excludes gas volumes from the Mereenie Gas Field, which were part of the earlier Power and Water Corporation letter of intent. Central intends to market these volumes separately to customers seeking reliable long-term supplies backed by proven reserves, indicating a more segmented sales strategy that could affect future revenue streams depending on market demand and contract negotiations.

CEO Highlights Growth Potential and Market Timing

Leon Devaney, Central’s CEO, emphasised the significance of securing a substantial GSA that underwrites accelerated investment at Palm Valley. He pointed to the replication of successful extended lateral well designs from previous drilling programs, which bodes well for the new wells’ performance. Devaney also highlighted the timing advantage of entering the market now, with sales revenue expected to flow from later this year, alongside exploration efforts in the Cooper and Otway Basins targeting oil and gas opportunities.

Bottom Line?

Central Petroleum’s binding gas sales agreement and accelerated drilling plans position it for a meaningful production uplift, but the success of new wells and separate marketing of Mereenie volumes will be critical to watch.

Questions in the middle?

• Will the new Palm Valley wells achieve their target production rates to justify the 40% capacity increase?
• How will the exclusion of Mereenie Gas Field volumes from the GSA impact Central’s overall gas sales and revenue?
• What progress will Central make on its exploration campaigns in the Cooper and Otway Basins during 2026 and 2027?