- Majority of conditions associated with Carnarvon’s divestment of a 10% interest in its Bedout assets to CPC Corporation, Taiwan, for US$146 million now satisfied. Final condition progressing well.
- Pavo integration studies matured further, underpinning its low-cost compatibility with Dorado facilities.
- Exciting prospects identified on new 3D seismic in WA-436-P in the Bedout Sub-basin.
- Strong balance sheet with A$95m cash and no debt.
Managing Director’s comments.
There are at three compelling reasons that lead us to prioritise the Dorado development. First, its scale, with over 150 million barrels (2C, gross). Second, its low projected cost at less than US$25 per barrel. Finally, the proximity of a multitude of highly valuable near field tie-in opportunities such as the Pavo field that we discovered last year.
Independently, on 24 April 2023 the Offshore Magazine reported Dorado as one of the top five offshore developments to watch (refer to the news section of our website www.carnarvon.com.au for a link to the article).
During the quarter, the key area of focus on the Dorado development pertained to maturing the scope of work for integrating Pavo into the proposed Dorado production facilities, with this work now well advanced.
Another area of focus during the quarter was the planning for environmental approvals required for post FID activities. New procedures for these approvals were established following court action by a Tiwi Islands group in respect of Santos’ Barossa project. In short these now require more extensive stakeholder engagement procedures which we will factor into the Dorado development process.
The Company continues to progress the divestment of 10% equity in its Bedout Sub-basin assets to OPIC Australia, a wholly owned subsidiary of CPC Corporation, Taiwan (CPC). At this time, the majority of conditions required to close the transaction have been satisfied, with CPC working diligently to satisfy the final condition, being the approval of the Foreign Investment Review Board (FIRB). While this process can take several months, the parties are targeting satisfaction of this final condition, and completion of the partial divestment in the upcoming quarter (Q3,2023). In the meantime, Carnarvon has been working with our partner, Santos, in preparation for CPC joining the Joint Venture.
The Bedout Sub-basin more broadly is proving to be one of the best exploration positions in Australia. For this reason, the Company has been progressively high grading its portfolio, and unsurprisingly focusing increasingly on its Bedout Sub-basin assets. The technical work being undertaken in the Bedout Sub-basin, in particular interpretation work on new 3D seismic in Exploration Permit WA-436-P (Carnarvon to hold 20% post CPC divestment), has identified significant and particularly exciting new oil and gas prospects. While the Phase 1 development is focused on monetizing the liquids in and around Dorado, the Joint Venture remains attentive to the future Phase 2 gas development, and ideally enhancing the size of the already discovered resource with new gas discoveries. At this time, a number of key gas prospects are being assessed in Exploration Permits WA-435-P (Carnarvon to hold 10% post CPC divestment) and WA-436-P.
In relation to the Company’s progression of its renewable fuels venture, to date we see very strong interest domestically and internationally for biofuels, particularly in hard-to-abate sectors (like aviation and heavy transport). We have been focused on the technology required to process biomass into renewable fuels, and are continuing to maintain a disciplined investment approach by ensuring the technology is sufficiently mature before committing further material capital. Positive progress has also been made securing the necessary quantity of pelletised feedstock for the first project in Narrogin, with the foundation biomass supply near final.
Finally, in relation to financial management matters, this quarter we reported a strong cash balance at the end of the quarter of A$95 million and no debt. Closing the divestment to CPC is expected to increase our cash reserves to around A$178 million and bring an additional US$90 million (~A$129 million) carry towards funding the Company’s share of the Dorado development costs and other capital expenditures in the Company’s Bedout assets. Following completion of the CPC divestment, the Company will be in a very strong position with around A$310 million in liquidity (cash and development cost carry). Based on discussions with prospective financiers, we remain confident in the debt capacity for the balance of the Company’s share of development costs for Dorado based on the latest cost estimates.
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Source: Carnarvon Energy
