Smallcap win: Talon Energy to supply Santos with natural gas in WA for 5 years

Wed 14 Dec 22, 9:54am (AEST)
A hand belonging to a man in a suit hands over hundreds of dollars of Australian cash to an unseen recipient
Source: iStock

Key Points

  • Energy smallcap Talon Energy proves itself as a cut above the rest with a gas sales agreement
  • Talon will supply Santos with 36.5PJ of gas from Walyering on a take or pay basis, providing surety for Talon and its shareholders
  • “Agreement is US-dollar denominated and linked to escalation in US CPI”

After patiently developing the play for years, energy smallcap Talon Energy (ASX:TPD) has today finally seen its hard work pay off as Santos (ASX:STO) agrees to take-or-pay 36.5PJ of natural gas from Talon’s huge Walyering gasfield in WA.

In short: Talon says its shareholders will start to see the cash roll in before very long. 

Santos, coming in as the little sister to Australian energy major Woodside, sees Talon saddle up with a relative giant of a partner commencing in Q1 of 2023. 

The deal expects production to commence in the first half of 2023. 

Santos’s established gas sales portfolio in WA is expected to bring in serious revenue for Talon; the 5-year agreement sees prices in “US-dollar denominated [payments] and linked to escalation in US CPI.” 

The contract is take-or-pay, meaning that any gas Santos decides not to take from Talon; the latter will receive a payment regardless of offtake. 

Santos eyeing WA domestic gas sales 

Santos on Wednesday said it will purchase the gas to sell into the WA domestic market through its existing infrastructure network, gas will be ported through the Parmelia pipeline

“We are delighted to sign this agreement with [Talon at] Walyering…and bring this gas to market in a timely manner,” Santos chief Kevin Gallagher said. 

“[This reinforces] our position as WA’s biggest supplier of domestic gas.” 

Talon continues to develop a second unrelated gas field nearby, called Ocean Hill, boasting estimated gas reserves similar to the scale at Walyering. 

“Momentous”: Management 

“This agreement with Santos is a momentous moment for Talon,” company chief Colby Hauser said. 

“The focus of activities at Walyering willl now be on the imminent construction and commissioning phase of Walyering’s development, followed soon after by strong cash flows underpinned by this agreement.” 

“The firm pricing secured in the GSA provides a high degree of certainty with respect to future gas sales income for Talon, and in conjunction with our recent capital raise, provides the Company with a strong foundation for its future project development and growth.” 

A look at Talon's three month charts as at pre-open Wednesday 14 Dec
A look at Talon's three month charts as at pre-open Wednesday 14 Dec
Disclaimer: Market Index helps small-cap ASX listed companies connect with Australian investors through clear and concise articles on key developments. Talon was a client at the time of publishing. All coverage contains factual information only and should not be interpreted as an opinion or financial advice.


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Written By

Jonathon Davidson

Finance Writer

Jonathon is a journalism graduate and avid market watcher with exposure to governance, NGO and mining environments. He was most recently hired as an oil and gas specialist for a trade publication.

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