IMO the sp will double once the farm in partner is announced.
IMO the following article further illustrates why AQO will be $1 one day.
Beach Energy to sell $1.5bn of natural gas to Origin Energy
by:Matt Chambers From:The Australian April 11, 201312:00AM
Source: The Australian
BEACH Energy will sell up to $1.5 billion of central Australian natural gas from the Cooper Basin to Origin Energy in the biggest east coast domestic gas deal.
The agreement captures the higher prices for gas being driven by Gladstone, Queensland's LNG boom.
Origin, who is a partner in the only one of three Gladstone coal-seam gas export plants not looking for more gas, beat out LNG rivals Santos and BG Group for the gas, as well as domestic retailer AGL Energy.
Origin's head of energy markets, Frank Calabria, said the gas was not earmarked for the Australia Pacific LNG project it is building with ConocoPhillips, but was likely to go to domestic users or other projects. "This deal has been done in the context of a market where we continue to see strong growth in demand in eastern Australia," Mr Calabria said.
The Australian last week flagged that Beach was close to sealing a deal for its gas at a good price. Origin, which has recently sold gas to both the Santos and BG LNG projects, being the buyer surprised many, although the company's domestic business was known to need gas in the latter part of the decade.
The gas sales agreement, which is conditional on the approval of Cooper Basin gas joint venture operator Santos, is due to start sometime in 2014-15. It is for eight years with an option to extend for a further two years.
Neither Beach nor Origin, who are both members of the joint venture, would comment on the gas price, other than to say it had been linked to oil prices, just like LNG.
The contract, for up to 17 petajoules of gas a year delivered to the Moomba gas plant, is understood to be in the $7-$9 per gigajoule range that the gas industry has generally flagged prices will head to when the LNG plants triple east coast gas demand.
The deal was presented as being both at the low and high end of the range, illustrating the different ways buyers and sellers can view a deal.
"It comfortably sits within our expectations given the current market," Beach managing director Reg Nelson said.
"You've had (Santos chief) David Knox talking around $7 to $9 and we're very comfortable with where this sits."
If all of the gas is taken for 10 years at $9 a gigajoule the deal would be worth about $1.5bn.
The gas will come from an infill drilling program Santos has been conducting in the Cooper to bolster production there, Mr Nelson said.
Beach shares rose 5.5c, or 4 per cent to $1.475 yesterday, while Origin rose 7c to $12.76.
Deutsche Bank analyst John Hirjee said the oil-linked pricing appeared to be a move by Origin to introduce oil-linkage to the domestic markets.
"The inclusion of an oil-linkage further confirms upward pressure on east-coast domestic gas prices and is supportive for other Cooper Basin gas participants like Santos, Senex and Drillsearch," Mr Hirjee said.
He said Santos's approval was understood to be a formality.
While Santos has sold much bigger volumes from the Cooper to the Gladstone LNG project, the potential 173 petajoules of gas this deal could involve makes it the biggest gas sale at high prices and not earmarked for export.
AGL has sold smaller volumes of gas to Xstrata for post-2015 at high prices and Origin has done similar to MMG.
AGL chief Michael Fraser said, following early talks, the company thought developing its own NSW coal-seam gas would be a better option.
"We weren't seriously in the market for it," Mr Fraser said.
"I think Santos thought it was going their way, we thought it would go to QGC (BG), but it's ended up with Origin."
AQO Price at posting:
25.0¢ Sentiment: ST Buy Disclosure: Held
