On 22 August 2013, ASX-listed Dart Energy announced an update to its ongoing business restructuring. Dart Energy has announced that its main focus will be to progress Scottish CSG projects to development, as well as to continue exploration activities in relation to shale gas in the rest of the United Kingdom. Dart Energy intends to exit, relinquish, sell or farm-out of assets which do not align with the company’s new focus, and that it will only retain several high prospect projects which entail low operating costs. In relation to Dart Energy’s Australian assets, the company has noted that due to the current New South Wales Government policy, the near term prospects for CSG development of the licences it holds have been materially adversely affected. Dart Energy intends to retain its Australian assets but on a care and maintenance basis without any field activities planned. Dart has also announced that it is continuing discussions with unnamed parties regarding potential sales or farm-outs of its non-core assets in countries including Australia.
ASX-listed Senex Energy announced on 19 August 2013 that it has reached agreement with the South Australian Government for a 15 year petroleum retention licence scheme covering approximately 10,000 square kilometres of its oil exploration permits located in South Australia’s Cooper-Eromanga Basin. Under the scheme, Senex will be able to convert its petroleum exploration licences to more secure petroleum retention leases, replacing expenditure obligations specific to each tenure with a combined, portfolio-wide exploration and appraisal expenditure target of approximately A$30 million annually, net to Senex. Petroleum retention leases granted under the scheme will be for an initial term of five years, with the opportunity of two additional terms of five years each.
On 6 August 2013, ASX-listed Blue Energy announced it has entered into a binding term sheet with Australian Oil and Gas in relation to nine large exploration blocks in the Northern Territory’s Wiso Basin, located northeast of Alice Springs. The nine contiguous blocks cover a combined 111,887 square kilometres in area, with conventional and unconventional oil and gas potential. Under the proposed three-stage farm-in agreement, Blue Energy will earn a 50% equity interest in each of the nine permits by making an undisclosed upfront cash payment to cover costs already incurred by Australian Oil and Gas, in addition to funding work programs across the three stages. At the commencement of the farm-in, Blue Energy will become operator of the permits.
ASX-listed Ambassador Oil and Gas announced on 5 August 2013 that it has entered into a binding heads of agreement with Outback Energy Hunter to negotiate a farm-out of a 70% interest in PEL 570, located in South Australia’s Cooper Basin. Under the agreement, Outback Energy Hunter will cover all exploration-associated costs for the first five year term of PEL 570, capped at A$50 million. The work program includes the acquisition of 500 square kilometres of 3D seismic and the drilling of three wells. The farm-out will be conditional on Outback Energy Hunter subscribing for a number of shares in Ambassador equal to the number of Ambassador’s listed options that have not been exercised by their expiry date in October 2013 (capped at 36.5 million shares or A$9.1 million). PEL 570 has an identified gas in place potential of up to 20 Tcf in coal seams, tight rocks and shale.
On 22 July 2013, ASX-listed MEO Australia announced that its wholly owned subsidiary Drysdale Offshore Exploration has executed a binding farm-out agreement with Origin Energy’s wholly owned subsidiary Origin Energy Resources in relation to WA-454-P. Under the agreement, Origin Energy will acquire a 50% interest in WA-454-P and become operator by reimbursing Drysdale A$5.6 million for costs already expended, as well as funding 80% of the drilling costs for an exploration well on the Breakwater-1 prospect. These drilling costs have been capped at A$35 million, with any expenses over this amount to be borne equally by both parties. The agreement is conditional on Australian regulatory approval being obtained, as well as the finalisation of a joint operating agreement.
On 16 August 2013, Finder Exploration announced it has entered into a farmout agreement with Shell Development (Australia) for AC/P 52 located in the Northern Browse Basin. Under the agreement, Shell Development will earn a 50% interest in AC/P 52 by making an undisclosed cash payment in addition to funding part of the drilling costs for the Cronus-1 exploration well, capped at an agreed cost. Following the receipt of required government approval, the remaining interest in AC/P 52 will be held by Finder Exploration (with a 20% interest) and Sasol Australia Petroleum (with a 30% interest).
ASX-listed Buru Energy announced on 8 August 2013 that it has secured a funding package in excess of A$100 million. This funding will be used to progress the development of the Ungani Oilfield to production, to complete an appraisal program of the Laurel Wet Gas Project, and to recommence active seismic and drilling exploration programs for conventional oil prospects. Mitsubishi Corporation will contribute up to A$27.5 million of this funding package towards drilling of the Ungani Oilfield, while Alcoa will contribute A$20 million for the Laurel Wet Gas appraisal from the release of funds held on escrow. Buru Energy also announced that it has secured a state-ofthe-art Huisman LOC 400 drilling rig to support its long term drilling program in the Canning Basin, which is expected to become available by the end of 2013.
Recently completed deals
ASX-listed Planet Gas announced on 19 July 2013 that is has obtained all required regulatory and government approvals in relation to its agreement with ASX-listed Senex Energy for future exploration of PEL 514 located in South Australia’s Cooper Basin. Under the agreement, Senex has acquired a further 10% interest in PEL 514 North and a further 30% interest in PEL 514 South by paying A$5 million to Planet Gas, as well as committing to fund Planet Gas’ A$9 million share of oil exploration. Senex will also pay Planet Gas a 2% royalty on oil produced from PEL 514, capped at A$7.5 million, as well as additional cash payments of up to A$10 million if 12 million barrels of 2P oil reserves in PEL 514 are certified. Following the completion of this transaction, Senex’s total interest in PEL 514 will increase to 80%.
On 25 July 2013, EnergyAustralia announced it has entered into a sale and purchase agreement with the State of New South Wales and Delta Electricity to acquire the Mt Piper Power Station (1,400 MW) and the Wallerawang Power Station (1,000 MW) for a net cash consideration of A$160 million. In 2011, EnergyAustralia entered into GenTrader Agreements with Delta Electricity under which it pays high, fixed costs for the right to trade the power stations’ output. EnergyAustralia’s Managing Director Richard McIndoe said the purchase of the power stations will relieve the company of the current high, fixed costs and with unrestricted access to the full combined capacity of the power stations, will enable EnergyAustralia to operate the stations more flexibly. The total purchase price of the power stations includes an additional A$315 million, representing the balance of prepaid charges on deposit with the New South Wales Government as part of the GenTrader Agreements.
Market rumours and opportunities
According to the Australian Financial Review, ASX-listed AGL Energy and ASXlisted ERM Power Limited are the frontrunners in the sale of the New South Wales state-owned electricity generator Macquarie Generation. Further to our story in the August 2013 edition of the Australian Energy Sector Update, New South Wales Treasurer Mike Baird called for expressions of interest for two of Macquarie Generation’s coal-fired power stations, Liddell and Bayswater. Reportedly, RATCH-Australia, GDF SUEZ Australian Energy and Alinta are also among the potential bidders, while Origin Energy and EnergyAustralia are reportedly unlikely to take part in the sale process. According to The Australian, the New South Wales Government is anticipating to receive in excess of A$2 billion from the sale.
Following the proposal put forward in mid July 2013 by ASX-listed APA Group to acquire all of ASX-listed Envestra Limited’s shares by scheme of arrangement, the Australian Financial Review has reported that APA Group is likely to hold off on any further proposals until after announcing its fullyear results. APA Group already owns 33% of Envestra’s shares and operates Envestra’s gas distribution networks and pipelines under a long term operating and management agreement. On 5 August 2013, Envestra announced it would not proceed with APA Group’s proposal for several reasons, including that it undervalued Envestra’s shares.
Following an investor update on 2 August 2013 by UIL Energy, the Australian Financial Review has reported that the company is intending to list on the ASX in November 2013 with a A$20 million float. UIL Energy has announced Bell Potter and Ord Minnett as joint lead managers, while Bizzell Capital Partners has been appointed as corporate advisor. Reportedly, a prospectus is due to be lodged by October 2013.
According to The Australian, ASX-listed Beach Energy is reportedly believed to be considering a takeover after recently securing a A$320 million debt facility. Mergermarket has reported that ASX-listed companies including Senex Energy, Icon Energy, Drillsearch and Cooper Energy all represent logical choices for takeover targets.
ENERGY EFFICIENCY OPPORTUNITIES AMENDMENT (ASSESSMENTS AND REPORTING) REGULATION 2013 (CTH)
The Energy Efficiency Opportunities Amendment (Assessments and Reporting) Regulation 2013 (Cth) commenced on 7 August 2013 and amends the Energy Efficiency Opportunities Regulations 2006 (Cth). The Regulation was implemented following an independent evaluation of the Energy Efficiency Opportunities program, which requires organisations that use over 0.5 PJ of energy annually to identify, evaluate and implement costeffective energy saving opportunities. Specifically, the Regulation allows more use of an organisation’s existing systems and processes that achieve the same outcomes as the assessment framework. Further, the Regulation also reduces the information required in public and government reports, allowing organisations to use data already reported through the national greenhouse energy reporting scheme.
CARBON CREDITS (CARBON FARMING INITIATIVE) AMENDMENT (ADDITIONALITY TEST AND OTHER MEASURES) REGULATION 2013 (CTH)
Commencing on 9 August 2013, the Carbon Credits (Carbon Farming Initiative) Amendment (Additionality Test and Other Measures) Regulation 2013 (Cth) amends the Carbon Credits (Carbon Farming Initiative) Regulations 2011 (Cth) to facilitate the implementation and administration of the Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth). The Regulation inserts additional projects that can generate Kyoto Australian carbon credit units, such as grazing land management, cropland management, and revegetation. Further, the Regulation also includes new abatement activities that are eligible to earn carbon credits under the Carbon Farming Initiative.
NATIONAL GAS (SOUTH AUSTRALIA) (GAS TRADING EXCHANGES) AMENDMENT BILL 2013 (SA)
The National Gas (South Australia) (Gas Trading Exchanges) Amendment Bill 2013 (SA) proposes to amend the National Gas (South Australia) Act 2008 (SA) by inserting a new gas trading exchange provision detailing the Australian Energy Market Operator's gas trading exchange functions. The proposed functions include establishing, operating and administering gas trading exchanges in accordance with rules made by the South Australian Minister. The Bill provides that a gas trading exchange is not a regulated gas market.
CONSTRUCTION TO COMMENCE ON AUSTRALIA’S LARGEST SOLAR POWER PROJECTS
On 31 July 2013, the Australian Resources and Energy Minister and the Climate Change Minister announced that construction of a A$450 million, 155 MW solar project in New South Wales is to commence in January 2014, after the Australian Renewable Energy Agency executed a funding agreement with ASXlisted AGL Energy Limited. AGL and solar developer First Solar will construct a solar power plant near Nyngan (102MW) and another near Broken Hill (53MW). The Australian Renewable Energy Agency will invest A$166.7 million in the projects, as well as a further A$40.7 million into the Education Investment Fund to enable the University of Queensland and the University of New South Wales to undertake research on solar power. The New South Wales Government has also committed A$64.9 million to the projects.
REVIEW OF QUEENSLAND’S STRATEGIC CROPPING LAND FRAMEWORK
The Queensland Department of Natural Resources and Mines has released for public comment a discussion paper summarising the legislation governing strategic cropping land and the issues raised during the legislation’s implementation. The Queensland Government is reviewing the legislation to evaluate and improve the effectiveness of the strategic cropping land framework, align it with regional planning processes and to protect priority agricultural land. The Government is seeking feedback from key stakeholders in the agriculture and resources sectors, local councils and the development industry, with comments on the discussion paper due by 9 September 2013. A copy of the discussion paper can be viewed here.
AUSTRALIAN GOVERNMENT APPROVES VARIATIONS TO BROWSE RETENTION LEASES
On 2 August 2013, Federal Resources Minister Gary Gray announced that conditions on five Browse retention leases held by the Browse Joint Venture will be varied to allow for timely development and commercialisation of the gas resources. The Browse Joint Venture has previously indicated that it did not consider development of James Price Point to be commercially viable and with the variation to its retention leases, the JV participants can now evaluate alternative development concepts and progress related design and engineering work. Minister Gray noted that the variation decision restored the Browse retention leases to ones consistent with other Commonwealth leases and that the revised conditions do not specify any particular development concept in line with the Government’s policy that this should be a commercial decision.
WESTERN AUSTRALIAN INQUIRY INTO FRACCING FOR UNCONVENTIONAL GAS
The Western Australian Legislative Council Standing Committee on Environment and Public Affairs has announced that it will commence an inquiry into hydraulic fracturing for unconventional gas, which will be the first inquiry of its kind in Australia. The Committee will report on how fraccing may impact land uses, the regulation of fraccing chemicals, the use of ground water during fraccing, and the rehabilitation of land that has been used for fraccing. With potential development of shale reserves in the Perth and Canning Basins, the outcome of the inquiry will be significant for Western Australia. The Committee’s Chairman has stated that the inquiry could take up to two years to complete. Comments on the inquiry are due by 20 September 2013.