Central Terminates Subsalt Permit Sale, Expects $1.7 Million Impairment

Central Abandons Subsalt Permit Sale Amid Unmet Conditions

Central Petroleum (ASX:CTP) has pulled the plug on the conditional sale of its Northern Territory subsalt exploration permits EP112 and EP125 to Georgina Energy after key conditions precedent failed to materialise by the deadline. The decision signals a strategic retreat from the high-cost Dukas prospect within EP112, following a reassessment of its commercial viability.

Withdrawal from EP112 Joint Venture and Financial Impact

In a decisive move, Central’s wholly owned subsidiary Frontier Oil & Gas has withdrawn from the EP112 joint venture with Santos. This exit is expected to hit Central’s FY26 financials with an impairment charge of approximately $1.7 million. The move underscores the company’s pivot away from the subsalt play, prioritising capital efficiency amid the challenging economics of deep drilling in the region.

Mounting Confidence in Mt Kitty Appraisal Prospects

Despite stepping back from EP112, Central remains committed to the Mt Kitty and Jacko Bore appraisal well in EP125, slated for drilling in 2027. The Mt Kitty discovery boasts 12 billion cubic feet (bcf) of 2C natural gas resources, augmented by an equivalent volume of helium and hydrogen, positioning it as a cornerstone asset for Central’s growth strategy. The company is actively courting partners to participate in the upcoming well, aiming to spread risk and capital requirements.

CEO Leon Devaney emphasised that capital previously earmarked for the Dukas prospect will be redirected towards "other value-accretive alternatives," highlighting a sharper focus on projects with clearer commercial upside. This recalibration aligns with Central’s broader portfolio expansion, which includes recent acquisitions in the Cooper and Otway Basins, setting the stage for a multi-well exploration campaign through 2027 and beyond.

Strategic Realignment Amid Growth and Contract Wins

Central’s decision to exit the EP112 JV and terminate the Georgina sale comes on the heels of securing a multi-year gas supply deal with the Northern Territory Government, underpinning a 40% increase in production capacity at Palm Valley. This contract, alongside expanded loan facilities, provides a stable revenue base and funding runway as Central prioritises appraisal and development projects with more immediate commercial prospects.

The company’s recent expansion into the Cooper and Otway Basins, confirmed in January, complements its Northern Territory operations and reflects a diversified growth approach. These moves collectively suggest Central is consolidating its portfolio around assets with clearer pathways to production and cash flow, while shedding higher-risk, capital-intensive ventures like the Dukas prospect in EP112.