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 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.
“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.”
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