Talon Energy Ltd (ASX:TPD) and partner Strike Energy Ltd (ASX:STX) commenced the stabilised export of commissioning gas from the Walyering gas field into the Parmelia Gas Pipeline under an arrangement with Santos WA Energy Ltd on October 1, selling a gross total of 52 terajoules (TJ) of gas.
The operations team of the joint venture (JV), of which Strike holds 55% and is the operator with Talon holding 45%, sold the gas at varying rates during the start-up of the gas field in September, where the US dollar-denominated sales have now been invoiced.
The Santos gas supply agreement is for the supply of 36.5 petajoules (PJ) over a period of five years on a firm, take-or-pay basis at 20 TJ per day, with arrangements for the supply of additional gas on an ‘as available basis’.
High reliability
Condensate production has been within forecast rates of about 200 barrels per day since firm gas supply commenced and the first offloading of condensate to its point of sale at Port Bonython on 5 October.
With the gas supplied at an uptime rate of more than 97%, the joint venture partners will begin ramping up the field’s production rate towards its nameplate capacity of 33 TJ per day over the coming weeks.
The Walyering field is independently certified as having proved and probable (2P) reserves of 56 petajoules equivalent (PJe) and a further 33 PJe of 2C contingent resources in the western compartment of the field, where Strike and Talon have agreed to drill the Walyering-7 well in the first quarter of next year.
Higher cost of development
The final cost of Walyering’s development, including well completions, facility construction and commissioning costs was $30 million gross, with $16.5 million net to Strike.
This is higher than previously forecast due to the extended construction time, higher labour rates and additional manpower required.
That said, Strike expects to recoup its share of the construction cost from gas and condensate sales in about two quarters, which highlights the high returning nature of the project.
The company has provided a ‘letter of comfort’ to Talon to increase an existing financing facility under a binding arrangement related to Strike’s acquisition of all the issued shares in Talon, should Talon need to access additional funds to meet its commitments as a result of the increased Walyering final cost.
The additional funds will be provided on terms agreed under the acquisition arrangement.
