Carnarvon Energy Ltd (ASX:CVN) has completed divesting a 10% portion of its Bedout assets to OPIC Australia Pty Limited, a subsidiary of Taiwan’s national oil and gas company CPC Corporation (CPC) in a deal described as transformational.
Divesting these assets means that Carnarvon is now holding approximately $319 million in financial liquidity comprising ~$181 million in cash and ~138 million future contribution to its Dorado Project development costs.
Completing the transaction positions the company to realise the value of its high-quality portfolio, including the development of the world-class Dorado and Pavo fields as well as unlocking the considerable exploration potential across its Bedout assets
“Crucial funding milestone”
Carnarvon managing director and CEO Adrian Cook said, “Completion of the CPC transaction is a crucial funding milestone for Carnarvon and a key piece in the company’s transformational journey to delivering high-quality, low-cost production for shareholders.
"Following receipt of an adjusted payment of US$58 million (equivalent to ~A$89 million) from CPC at completion, Carnarvon’s cash reserves now stand at ~$A181 million, with total financial liquidity of ~A$319 million.
"Critically, the deal with CPC provides Carnarvon with substantive funding for development of the world-class Dorado and Pavo fields, the largest undeveloped oil field offshore Australia.”
Bedout sale agreement
Under the sale agreement with CPC, Carnarvon was to receive total cash consideration of US$146 million comprising an upfront payment of US$56 million on completion of the transaction and a further carry of US$90 million towards Carnarvon’s share of the future Dorado development costs once a Final Investment Decision is taken.
With completion occurring, the company has received a payment of US$58 million (~A$89 million) from CPC. The increase is due to the adjustment process under the sale agreement, with the effective date of the sale being August 31, 2022.
Immediate focus
"With CPC formally joining the joint venture, Carnarvon’s immediate focus is on working with it, and Santos, to achieve a final investment decision (FID) on the Dorado development as soon as possible.
"I welcome CPC to the joint venture and thank it for the constructive way it has worked with Carnarvon to finalise the transaction.
"Carnarvon’s position is unique among mid-cap energy stocks in terms of its resource base, sizeable financial liquidity and the unrivalled exploration potential across its Bedout assets.
"I look forward to providing shareholders with further positive news about the progress of the Dorado development, and wider Bedout exploration, in the coming months."
Dorado plans
The JV plans to produce the significant volume of high-value hydrocarbons in the Dorado and Pavo fields offshore Western Australia over several stages, with the Phase 1 Dorado development involving the extraction of the liquids (oil and condensate) resource.
Phase 1 development plans consist of a single Wellhead Platform (WHP) in 90-metre water depth, connected to a nearby Floating Production Storage and Offloading (FPSO) vessel via sub-sea flowlines and control lines.
Gas and LPG from the Dorado field will be re-injected before being assessed for subsequent production in a second Phase 2 development.
The reinjection of gas during Phase 1 is expected to considerably enhance the recovery of liquids from the field(s).
Two phases
The Phase 1 development will be designed for liquids handling of up to 100,000 barrels per day, with the Pavo field to be tied back to the Dorado facilities once production from the Dorado field begins to naturally decline to ensure production rates are maintained.
The future Phase 2 gas export project to either domestic and/or LNG facilities will be subject to the volume of discovered gas resources in the Bedout Sub-basin at that time.
Debt process
Carnarvon is continuing the formal process to part-fund its remaining share of the Dorado development using a broad range of potential capital sources, including:
- traditional reserve-based, non-recourse senior debt facilities; and
- alternative funding options (including junior or subordinated debt, offtake prepayment and royalties).
Azure Capital acted as Carnarvon’s adviser on the transaction, as well as advising on its ongoing debt financing process for the Dorado development.