KEY POINTS:
Contact Energy and its 51 per cent owner Origin Energy said today they will purchase certain of Swift Energy's New Zealand oil and gas assets for about $115 million.
They said the purchase, effective from December 1, would deliver a range of benefits and synergies to each company.
The assets include Swift's two main producing areas in the onshore Taranaki Basin, plus additional permits and inventory. Houston-based Swift, which controls Swift NZ, owns around 16 per cent of New Zealand's oil and gas.
The assets are:
- The Tariki, Ahuroa, Waihapa and Ngaere (Tawn) fields;
- Waihapa Production Station;
- Rimu, Kauri and Manutahi fields;
- Rimu Production Station;
- Separate oil and gas pipelines from Waihapa production station to New Plymouth;
- Offshore exploration permits; and
- Inventory of equipment and supplies.
Under a separate arrangement between Contact and Origin, Contact will contribute $54m to the purchase price for the right to own and develop the Ahuroa field as an underground gas storage facility and purchase the remaining gas and LPG reserves in the Ahuroa reservoir.
Origin managing director Grant King said the purchase would deliver greater operational synergies with the Kupe field, increase exploration opportunities and create valuable gas storage facilities for Contact. I
The assets will provide immediate production and earnings.
"The Tawn and Rimu/Kauri/Manutahi assets are an attractive mix of mature producing fields with prospects for in-fill drilling and potential oil and gas upside.
In addition Origin is acquiring two gas, oil and LPG production facilities and two strategic transmission pipelines connecting the Tawn assets to New Plymouth.
Gas from the Tawn fields and all LPG is contracted to Contact. The assets also contain a potential gas storage reservoir opportunity in the Ahuroa field.
Origin has also acquired a 50 per cent interest in two exploration permits, which lie immediately offshore from the Rimu production facility and adjacent to its Kupe gas field development.
Contact chief executive David Baldwin said the deal demonstrated the value of a close working relationship between Origin and Contact, giving Contact a much sought after potential gas storage option, delivering greater flexibility in managing its long-term natural gas supply options.
"Contact has been investigating natural gas storage options for more than two years, as the flexibility in natural gas supply contracts has been replaced with 'take or pay' contracts.
"The ability to develop a gas storage facility in the Ahuroa field will enable the company to use its gas-fired power stations as and when required, mitigating the financial consequences of not using natural gas under 'take or pay' contracts, and the costs of using gas when there are more cost effective generation options. Contact expects to have the Ahuroa field facility fully operational by mid-2010.
In certain parts of one field, Swift will have an option to take-up a 30 per cent working interest within 10 years. In some fields Swift will earn a 10 per cent over-riding royalty interest once a production volume threshold is exceeded.
In other fields Swift Energy will earn a 10 per cent over-riding royalty plus an option to convert this to a 30 per cent working interest within 10 years -- once again, if production volume thresholds are exceeded.
- NZPA