Cue Energy Secures Multi-Year Gas Contract and Commences New Palm Valley Wells

Multi-Year Gas Sales Agreement Secures Future Revenue

Cue Energy Resources Limited (ASX:CUE) has cemented a binding gas sales agreement with the Northern Territory Government that covers up to 3.2 petajoules (PJ) of Cue’s share through to the end of 2034. The contract features a fixed price with annual CPI escalation and take-or-pay provisions, providing Cue with a solid foundation of long-term, inflation-linked cash flow.

This deal supersedes a previous Letter of Intent with the Northern Territory’s Power and Water Corporation, which had faltered over volume and pricing disagreements for gas from the Mereenie field. The new agreement instead ties Cue’s Palm Valley Joint Venture to supply up to 21 PJ of gas (3.2 PJ Cue share) from the Palm Valley field, reflecting a strategic shift in supply focus.

Final Investment Decision Drives New Drilling Activity

Backing the gas sales agreement, the Palm Valley Joint Venture has taken a Final Investment Decision to drill two new wells in the Palm Valley field. Preparations are well advanced with key approvals underway, long-lead equipment ordered, and a drilling rig secured. The first well is slated to commence drilling mid-2026, with production from the new wells expected to come online progressively in the second half of the year.

This move is expected to bolster Cue’s production profile and underpin near-term cash flow growth, as CEO Matthew Boyall highlighted, noting the agreement “materially increases Cue’s contracted gas position” and “adds long-term contracted cashflow.” The firm contract terms also reduce revenue volatility, a valuable cushion amid market uncertainties.

Joint Venture Structure and Market Positioning

The Palm Valley permit (OL3) is operated by Central Petroleum (50%), with Echelon Palm Valley (35%) and Cue Palm Valley (15%) as partners. Cue also holds a 7.5% interest in the Mereenie permits (OL4/OL5), alongside Central Petroleum, Echelon, and Horizon Australia Energy. The shift away from Mereenie gas supply under the previous Power and Water Corporation LOI underscores the evolving dynamics within these joint ventures.

Notably, this development unfolds amid ongoing corporate maneuvering, with Echelon Resources recently delaying acceptance of Horizon Oil’s takeover bid for Cue, a move intertwined with the company’s strategic outlook. The new gas sales agreement and drilling commitment may influence shareholder sentiment and Cue’s valuation in this contested environment, as reflected in the recent delayed takeover bid acceptance.