Leon Devaney, CEO and Managing Director, updates us on how Central Petroleum has progressed in its mission to secure a reliable gas supply for Australian users over the past year.
AT THE CENTRE OF GAS SUPPLY
When we last spoke to Leon Devaney, CEO and Managing Director of Central Petroleum, in October 2024, there was much anticipation that new gas contracts would prove pivotal to the company’s future.
Now, the strategic work conducted in recent years is beginning to yield tangible results, positioning it for long-term growth and resilience.
“The catalyst for our transformation has been the successful gas marketing initiatives undertaken in 2024,” Devaney informs us.
Central Petroleum’s landmark, multi-year gas agreement with the Northern Territory (NT) government, which Devaney previously described as the most transformative in the company’s history, is already delivering significant benefits.
These include the successful drilling of two new production wells at Mereenie and significant increases in its gas revenues, cash flow, margins, and profits.
The agreement has also helped Central Petroleum with the mitigation of risks related to Northern Gas Pipeline (NGP) closures, extension and restructuring of its debt facility, and launch of its inaugural share buy-back programme, marking the company’s first return to shareholders.
“Our new gas agreements enable nearly all anticipated firm gas production from existing wells to be delivered into the NT market, independent of NGP availability, through to 2027,” outlines Devaney.
“The resulting sales portfolio is now more robust, less vulnerable to pipeline disruptions, and commands a significantly higher average price compared to legacy contracts that expired this year.”
The impact of this initiative is directly reflected in the financial performance of Central Petroleum, whose revenues increased by 17 percent year-on-year and underlying earnings before interest, depreciation, amortisation, and exploration (EBITDAX) rose by 43 percent.
“We achieved an underlying profit of AUD$6.5 million – a significant turnaround from last year’s AUD$1.4 million underlying loss,” Devaney acclaims.
MEREENIE INVESTMENT
The NT gas market remains finely balanced – the NGP was closed for three quarters of the financial year, whilst Central Petroleum’s Amadeus Basin fields continue to supply approximately half of the NT’s gas needs, with the remainder sourced from offshore, including gas diverted from liquefied natural gas (LNG) exports when necessary.
Looking ahead, supply outlooks for the NT market are evolving. The well-publicised Beetaloo Basin shale gas projects continue to progress and could contribute to supply as early as next year, subject to ongoing appraisal results.
These market dynamics naturally create uncertainty regarding the long-term supply landscape.
“We are proactively engaging with the market for both short and long-term contracts, including for potential output from future wells at Mereenie and Palm Valley,” Devaney notes.
“Whilst we have advanced preparations and approvals for new wells, any future production investments will be contingent on securing suitable long-term offtake agreements.”
Central Petroleum’s biggest investment this year is the two new wells at its Mereenie field, totalling approximately AUD$30 million between the joint venturers.
The company’s objective in 2025 was to increase its production capacity to supply gas to customers in the NT, and this has now been successfully achieved.
Having secured long-term offtake commitments from customers on attractive terms, the company was able to move quickly to drill these wells as it had already pre-invested in securing long lead items and the necessary landholder, environmental, and regulatory approvals.
“Mobilising the equipment and various contractors to execute each stage efficiently is critical,” he emphasises.
“The logistical challenges of drilling in such a remote location shouldn’t be underestimated, and it was a great effort from our team to drill those wells safely, ahead of schedule, and under budget.”
“Our new gas agreements enable nearly all anticipated firm gas production from existing wells to be delivered into the NT market, independent of NGP availability, through to 2027”
Leon Devaney, CEO and Managing Director, Central Petroleum
EXCEEDING EXPECTATIONS
Central Petroleum tailored the design of the two new wells at Mereenie after taking previous drilling results in the field into account.
As a result, they have performed above pre-drill expectations, providing much-needed gas into the NT.
“There is a lot of planning that goes into selecting well locations and target formations,” Devaney insights.
“The wells were designed to maximise the production rate potential by applying air drilling techniques in a highly deviated well bore at crestal locations. We knew from previous wells what could be achieved, so an initial aggregate flow rate of about nine terajoules per day was a great success.”
The gas resources that lie within Central Petroleum’s portfolio of permits in the Amadeus Basin in Central Australia, where the Mereenie field is located, are potentially much larger than its three producing gas and oil fields.
Its exploration permits are relatively underexplored and have the potential for significant additional gas resources, including helium and naturally-occurring hydrogen.
The company is committed to unlocking value from this exploration portfolio through targeted activity, funded where possible through the introduction of new co-venturers.
“We are actively pursuing a restart of sub-salt exploration, with a priority on drilling an appraisal well at Mount Kitty, given its world-class helium and hydrogen concentrations,” affirms Devaney.
“Additionally, there is renewed industry interest in conventional exploration across the western Amadeus Basin, specifically targeting our Mamlambo oil prospect and EP115, which sits on trend with Mereenie and Palm Valley.”
“We are proactively engaging with the market for both short and long-term contracts, including for potential output from future wells at Mereenie and Palm Valley”
Leon Devaney, CEO and Managing Director, Central Petroleum
RELATIONSHIPS FOR REMOTE OPERATIONS
Central Petroleum’s operations in the Amadeus Basin are as about as remote as you can get in Australia – literally thousands of kilometres from the country’s capital cities.
Relationships with contractors, service providers, and logistics operators are therefore critical for safe, reliable, and efficient operations.
“The personnel that work at our production facilities at Mereenie and Palm Valley are reliant on our partners and suppliers, who provide all the food, equipment, parts, and consumables required to keep gas flowing to customers across the NT,” Devaney notes.
“This involves a dedicated supply chain for day-to-day operations and is particularly evident for major projects, such as the recent drilling campaign which required over 60 trailers of equipment for the drilling rig to be mobilised to Mereenie.
“Similarly, even relatively routine operations and major overhauls of processing plants require precise coordination between contractors and suppliers to minimise downtime,” he adds.
Beyond its production operations, Central Petroleum is open to new opportunities that align with its objective of delivering lower-risk, high-impact growth.
The company’s stronger balance sheet provides it with the flexibility to consider a range of capital allocation options, including share buy-backs, investment in new production capacity, early debt repayment, exploration, merger and acquisition opportunities, and potential dividend distributions.
“Each option offers distinct advantages and, collectively, they underscore the substantial transformation we have achieved in the past five years, providing multiple pathways for near-term value enhancement,” Devaney closes.
