WESTSIDE ACQUIRES CSG FIELD
Written on the 3 August 2010
WESTSIDE Corporation Limited (WCL) has finalised a $26.8 million acquisition of a Bowen Basin coal seam gas (CSG) field, in partnership with Japanese company Mitsui.
WestSide CEO Angus Karoll says the acquisition of the Dawson CSG fields, to be renamed the Meridian SeamGas field, follows a supply contract signed with AGL Energy on Friday.
“We paid a good price and it stacks up financially based on our supply market with AGL, and adds value to our field next door where we’ve partnered with British Gas, so there’s significant export opportunities,” he says.
“We’re very excited by the CSG sector and an advantage of the acquisition for us is that the infrastructure, the pipelines, the compressors and the wells are all in place.
“We’re producing 12 terrajoules a day and while I can’t say the sales price I can say that indicative of the contracts in place we could sell up to $90,000 worth of gas a day. We’re not supplying that at the moment but there are opportunities in the existing contracts for $36 million a year.”
WestSide will own a 51 per cent operating stake in the field as part of a joint venture with Mitsui E & P Australia (MEPAU).
He says the deal sets WestSide apart from a lot of CSG players as it is no longer just an explorer, but a producer.
“Certainly once the gas field is at full capacity and we get increased sales, then the acquisition will pay for itself very quickly,” he says.
“These fields have been in operation for 10 years so there’s already been a lot of experience and learning, and we have our own drilling rigs as well.”
He says Anglo Coal was willing to sell its stake in the field as it was not a core asset and Anglo didn’t have the rigs needed to drill as extensively as WestSide.
“Anglo Coal gave it up because it’s not a core asset and they are in a legal dispute with AGL – it’s also fairly small on the Anglo balance sheet and it was causing them headaches.”
WestSide paid for the acquisition with capital raised through an entitlement offer in May, with New Hope Corporation Limited (NHC) and Infrastructure Capital Group Limited (ICG) as cornerstone investors through subsidiary entities.
“We raised $64.4 million and we had $15 million in the bank when we did that, so that puts us in a good position,” says Karoll.
“The ultimate goal for the joint venture is to export LNG and to supply new domestic contracts from 2015 when the current supply contracts that are in place will finish.
“This acquisition is the most significant ever since WestSide listed in 2007, transforming us from an explorer into a gas producer and operator in joint venture with Mitsui.”
He says the project lets off less drainage water than its Surat Basin counterparts, while calling for infant industry discussion about CSG and the Petroleum Resource Rent Tax (PRRT).
“Environmentally, we work within the regulatory framework, which is a little bit fluid at the moment and there have been responses to the overactive media - we are in the Bowen Basin which is different to the Surat Basin because we have different water rates,” he says.
“We’d be lucky to produce in an entire field of water what they produce in one well – our fields have very high gas content and low water content.”
“I still think the Petroleum Resource Rent Tax is much better than the super-profits tax but I think there are discussions to be had around rates there as CSG is still an infant industry. The PRRT didn’t come into place after the first few years of offshore gas drilling.”