Company Overview: Cooper Energy Limited is an upstream oil and gas exploration and production company whose primary purpose is to secure, find, develop, produce and sell hydrocarbons. The Company's operations consist of oil production in the Cooper Basin (onshore Australia) and the South Sumatra Basin (onshore Indonesia); pre-development activities associated with the Sole and Manta gas fields in the offshore Gippsland Basin, and exploration for oil and gas in the Cooper, Otway and Gippsland basins. The Company's Australian Business Unit includes exploration and evaluation for oil and gas, development, production and sale of crude oil in various areas in the Cooper Basin, Gippsland Basin and Otway Basin. It holds interests in approximately three exploration licenses, over 30 retention licenses and approximately 10 production licenses in the South Australian Cooper Basin. The Company holds interests in over four exploration licenses and a retention license in the onshore Otway Basin.


COE Details

Cooper Energy is an ASX listed exploration and production company which generates revenue from gas supply to south-east Australia and low-cost Cooper Basin oil production. The company is an emerging player in the south-east Australian energy sector holding a portfolio of gas supply contracts and one of the most extensive portfolios of gas-focussed acreage and assets, including well located reserves, resources and processing plant, in the Otway and Gippsland basins. The new contracts, combined with the higher production delivered by the Casino-5 workover, can be anticipated to increase revenue generation in the June quarter and beyond. The Sole Gas Project has been taken to 38% completion, within schedule and budget. The shore crossing has been completed, wellheads received, and pipeline welding is underway. The Group together with APA Group, remains focused on delivering the project safely, responsibly and within its cost and schedule targets.

Project-wise Gas Production Outlook (Source: Company Reports)

Awarded the offshore exploration permit: Cooper Energy announced that it has been awarded the offshore exploration permit VIC/P72 located in the Gippsland Basin, offshore Victoria. VIC/P72 adjoins the company’s VIC/L21 licence which holds the depleted Patricia-Baleen gas field and its associated subsea production infrastructure. The exploration permit is located in close proximity to several Esso-operated gas and oil fields including Snapper, Marlin, Sunfish and Sweetlips and the Longtom gas field operated by SGH Energy. From a technical perspective, the permit is located in a proven gas and oil province, surrounded by producing fields, and is covered by high quality 3D seismic data and has identified prospects. The permit has been awarded to Cooper Energy for a six-year term, of which the first three years fall under a guaranteed work program consisting of 260 km of 3D seismic reprocessing and studies and the drilling of one exploration well. Cooper Energy has 100% equity in VIC/P72 and will assess involvement of joint venture partners according to value and risk management considerations.


VIC /P72 and other Cooper Energy Gippsland Basin permits (Source: Company Reports)

Update on Sole-3 production: The Group announced that the Sole-3 production well was spudded in VIC/L32 Gippsland Basin, offshore Victoria by the Diamond Offshore Ocean Monarch drill rig. Sole-3 is the first of two production wells to be drilled by the Ocean Monarch on the Sole gas field as part of the $605 million Sole Gas Project which is developing a new source of gas supply for south-east Australia. Cooper Energy, which holds 100% equity in the Sole gas field, is undertaking the $355 million offshore development, while APA Group is conducting a $250 million upgrade to the onshore Orbost Gas Processing Plant to enable processing of gas from Sole. The field is being developed to supply approximately 24 PJ of gas per annum from mid-2019, with approximately 75% of the field’s reserves contracted to a range of utility and industrial customers including AGL Energy, Energy Australia, Alinta Energy and O-I. Sole-3 completion will be followed immediately by Sole-4 which is similar in design, accessing a different part of the same Sole reservoir.


Location of Sole 3 and Sole 4 wells on Sole gas field (Source: Company Reports)

Minerva Gas Plant acquisition: Cooper Energy announced that it, together with AWE Limited and Mitsui E&P Australia Pty Ltd, has signed an agreement with BHP Billiton Petroleum (Victoria) Pty Ltd (“BHP”) for the acquisition of BHP’s 90% interest in the Minerva Gas Plant, onshore Otway Basin, Victoria. Cooper Energy currently holds a 10% interest in the Minerva Gas Plant. The agreement, which is conditional on completion of regulatory approvals and assignments, provides for the transfer of the plant and associated land after the cessation of current operations processing gas from the Minerva gas field, offshore Victoria. After completion of the transaction, Cooper Energy will hold a 50% interest in the gas plant and AWE Limited and Mitsui E&P Australia will each hold a 25% interest.


Cooper Energy Victorian Otway Basin petroleum titles and interests (Source: Company Reports)

Ownership of the offshore Minerva gas field and offshore gas pipeline will be unaffected by the plant transaction, remaining at BHP 90% (and Operator) and Cooper Energy 10%. The Minerva Gas Plant is located approximately 5 km north-west of Port Campbell. The plant, which was commissioned in January 2005 has gas processing capacity of approximately 150 terajoules per day and hydrocarbon liquids processing facilities. The Minerva Gas Plant is connected directly to the SEAGas Port Campbell to Adelaide pipeline and to the South West Pipeline, owned by APA Group. The Casino Henry joint venture has progressed preliminary engineering design work for processing gas at the Minerva Gas Plant, which will require the construction of a 0.25 kilometres pipeline tie-in together with modification of well control systems to connect the Casino Henry project.

Progressive Third Quarter (2018) Report: The Group’s workover of Casino-5 has lifted field productivity and COE is expecting its gas production to increase in the June quarter. The Sole Gas Project has been taken to 38% completion, within schedule and budget. Cooper Energy has contracted the semi-submersible drill rig Diamond Offshore Ocean Monarch to perform an offshore campaign comprising the workover of Casino-5, drilling of production wells for the Sole gas project and first phase abandonment of the BMG oil production facilities. Sales revenue for the 3 months to 31 March 2018 (the March quarter) was $15.8 million compared with $16.8 million in the previous quarter and $15.0 million in the March quarter 2017 (the previous corresponding period). The 6% reduction in quarterly revenue compared with the December quarter was attributable to lower production.


Key Measures of Quarterly Performance (Source: Company Reports)

Cash at 31 March was $254.9 million compared with $283.3 million at the beginning of the quarter. Borrowings increased from $89.6 million to $122.6 million through draw down of the company’s senior secured facilities. Cash capital expenditure of $54.2 million for the quarter compared with $47.8 million in the previous quarter and $12.9 million in the pcp. The increase was due to expenditure on the company’s gas projects in the Gippsland and Otway Basins. Production of 0.33 million boe for the quarter was 13% lower than the December quarter comparative of 0.38 million boe due to lower gas and oil production. Year to date production of 1.14 million boe was 93% higher than the previous corresponding year to date production due to the contribution from the Casino Henry and Minerva assets acquired effectively on 1 January 2017. The Casino Henry joint venture commenced supplying gas to Origin Energy from 1 March under the new sales agreements announced on 21 December 2017.

Indicative schedule for 2018 offshore campaign (Source: Company Reports)

Successful completion of Casino workover: The workover met all technical objectives of the work program. Gas production from Casino-5 resumed on 25 April 2018 at flow rates in line with expectations. The duration between rig arrival and departure at Casino-5 was 46 days, with operations interrupted on a number of occasions by unusually heavy ocean conditions. Gas production from the other wells in the field (Netherby-1, Henry-2 and Casino-4) has been ongoing during the workover operations. The Ocean Monarch will be towed to the Sole gas field in the Gippsland Basin offshore Victoria, to drill and complete the Sole-3 and Sole-4 production wells for development of the field as part of the Sole Gas Project.

Outlook: VIC/P72 fitted neatly within the company’s gas strategy and Gippsland gas hub.  The new exploration opportunity complements its existing project construction at Sole and the work it is doing to mature Manta as the next Gippsland Basin development. It clearly satisfied its screening criteria for likely competitiveness, foreseeable development pathway and capacity to add value. The Minerva Gas Plant is one of 3 gas processing plants located onshore Victoria that are currently processing gas from the offshore Otway Basin. Its analysis indicates that the plant can offer a highly competitive processing option for gas from Casino Henry and other gas fields in the region. Ownership of the plant has clear strategic merit and can significantly further enhance the economics of Otway Basin gas development and production. Despite few shortcomings, the company now aims to have full year production of 1.4 million boe to 1.5 million boe against the previous guidance of 1.4 million boe. This is at the back of contribution from its key assets.

Stock Performance: VIC/P72 is an attractive and logical addition to the company’s gas exploration portfolio on a number of counts. Potential benefits accruing from processing at the Minerva Gas Plant include increments to gas reserves and higher production rates enabled by lower plant inlet pressure and reduced processing costs. Completion of the transaction of the acquisition will secure a prime asset for the company and its fellow acquirers, who also hold interests in the Casino Henry gas project and the VIC/P44 exploration acreage in the offshore Otway Basin. Its third-quarter results reflected that the Group is on track for production and project targets, and is positioned for what is promised to be a momentous final quarter as it drills the production wells for the Sole gas project. The spudding of Sole-3 was a milestone for both the project and for south-east Australia as it drills and completes what will be the first offshore production well into an undeveloped gas field offshore Victoria in 6 years. ROE and ROIC as at December 2017 were up to 5.5 per cent and 3.9 per cent, respectively, against values as at June 2017 of (2.8 per cent) and (2 per cent). In the past six months, the stock climbed up by 12.3 per cent and by 19.6 per cent in the past one month. In the past five days, the stock was up by 5.8 per cent. We recommend to “Buy” the stock at the current market price of $0.360 by looking at the potential of the Company.

COE Daily Chart (Source: Thomson Reuters)

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