Central Petroleum has swung to a $4.9 million FY2026 statutory loss after writing down two Amadeus Basin permits, but its gas business generated higher revenue and margins. The company is now betting on Palm Valley drilling, long-term contracts and new east coast acreage to restore growth.
- $4.9 million statutory loss after $5.9 million exploration impairment
- Revenue rose 3% to $44.7 million despite lower sales volumes
- Two Palm Valley wells could lift group gas production by about 40%
- Gas overlift liability cleared, potentially releasing $7 million in annual cash flow
- Otway and Cooper Basin drilling planned during 2027
Central Petroleum Limited (ASX:CTP) has traded a clean statutory result for a more ambitious growth plan, reporting a $4.9 million FY2026 loss after abandoning two Amadeus Basin exploration permits while funding a drilling campaign that could lift gas production by about 40%.
The impairment was the most visible drag on the accounts. Central recognised $5.9 million after withdrawing from the EP82 and EP112 joint ventures, alongside $5.7 million in exploration and appraisal costs. The result compares with a restated $6.7 million profit in FY2025, although the underlying producing business remained profitable, with EBITDAX of $17.0 million.
Gas pricing offsets lower production volumes
Revenue increased 3% to $44.7 million even as natural gas sales fell 4% to 4,261 terajoules and oil and condensate sales halved to 14,773 barrels. The average realised gas price rose 10% to $10.10 per gigajoule equivalent, while Central’s operating margin excluding depreciation increased 5% to $4.96 per gigajoule equivalent.
The improvement came against a difficult operating backdrop. Pipeline restrictions, natural field decline and oil offtake constraints reduced volumes, while Mereenie oil sales were suspended indefinitely from mid-June after revised oil specification requirements. Central said it continues to seek alternative arrangements to commercialise that production, but oil contributed less than 10% of consolidated sales revenue in FY2026.
The cash-flow picture requires some care. The audited cash-flow statement reports $10.3 million of net cash from operating activities, down from $14.3 million, after including exploration payments. Separately, Central says production operations generated $19.9 million before capital expenditure, compared with $21.0 million in FY2025. The results release describes net operating cash flow after interest as $15.6 million, a presentation that is not directly consistent with the audited $10.3 million figure.
Palm Valley wells move from plan to production test
The central FY2027 catalyst is the two-well Palm Valley campaign. Drilling of PV14 began in late July, with gas observed and flared during air drilling of the target reservoir. First gas sales remain targeted for October 2026, subject to completion, tie-in, commissioning and satisfactory well performance. The rig is then expected to move to PV15.
If both wells perform as intended, Central says they could restore Palm Valley’s sales capacity to the facility limit of about 14 terajoules per day on a gross joint-venture basis and increase the group’s aggregate gas production capacity by roughly 40%. Actual output will depend on well performance and field decline, making the October target an operational milestone rather than a guaranteed revenue date.
The wells are supported by new Northern Territory gas contracts extending to 2034. Central says 98% of expected gas production is contracted for 2027, with 82% contracted across 2027 to 2029. The company also completed its final delivery against the long-running gas overlift liability in May, a change it expects will reduce operating cash costs by about $7 million a year from FY2027.
New acreage adds upside and funding demands
Central spent $11.2 million acquiring interests in the Otway and Cooper basins, helping push the exploration asset balance to $13.8 million from $7.7 million. It holds a 20% interest in Otway permit PEP 169, including the Enterprise North prospect, and a 49% interest in Cooper Basin permit PEL 677 and associated retention leases.
At least three exploration wells are planned across the new acreage in the next 18 months, including Enterprise North and at least two Cooper Basin targets. Enterprise North has an unrisked best-estimate prospective resource of 5.7 billion cubic feet net to Central, but the company stresses that no reserves or contingent resources have yet been attributed. Exploration outcomes, infrastructure access and market conditions will determine whether those prospects become commercial assets.
Central ended FY2026 with $20.4 million in cash, $25.5 million of borrowings and net debt of $5.0 million, after moving from net cash of $3.9 million a year earlier. Its expanded facility leaves $17.5 million undrawn until 31 December 2026, while principal repayments are not required before 31 March 2027. The balance sheet therefore provides room for the drilling program, but not without a sharper test of whether new production arrives on schedule.
For shareholders, the next evidence will come from PV14’s sustainable production rate, the timing of first gas and the progress of PV15. Beyond that, Central must show that its newly acquired east coast acreage can deliver discoveries without recreating the exploration-cost burden that produced this year’s impairment.
Bottom Line?
Central has secured contracts and cleared a costly gas-balancing liability, but the FY2027 investment case now rests on wells turning planned capacity into reliable cash flow.
Questions in the middle?
- Will PV14 reach first gas in October 2026 and sustain the production rates needed to support the 40% capacity uplift?
- Can Central fund Palm Valley and three east coast exploration wells while reducing net debt and meeting its exploration commitments?
- Will the company find commercial offtake for Mereenie oil, or will the suspended sales continue to constrain the portfolio?