Smallcaps weigh in: Cooper prefers domestic investment to reduce gas prices, but says cap no risk to 2023 sales

Mon 12 Dec 22, 1:06pm (AEDT)
A row of gas storage tanks are photographed in an unknown location
Source: iStock

Key Points

  • JP Morgan has concluded a $12/GJ price cap will make gas fracking operations in Queensland unviable as Cooper calls for domestic investment push
  • Company highlights AEMO’s forecast of a shortfall in gas supply in 2025
  • That shortfall is expected to get worse following 2025, bringing into question how long the government intends to keep the cap in place

Cooper Energy (ASX:COE) on Monday reassured its shareholders that the gas price cap introduced last week by the Albanese government is unlikely to impact its 2023 sales figures as the company’s performance continues to slip on a persistent downtrend. 

Cooper says its recently executed gas sales agreement with AGL will not be affected by the price cap decision, where the two collaborate on the emerging OP3D project. 

Cooper Energy shares are down -11.9% over the last month and down -29.45% since the beginning of 2022. 

Regardless, Market Index’s scan of broker consensus reveals no less than 11 brokers still rate Cooper Energy a buy. 

The company continues to operate its projects targeting the Otway and Gippsland gas basins in south-east Australia. 

Government should look inward: management 

“To maintain reliable supply and mitigate against interruptions and/or much higher prices due to dependence on imported LNG, the government must focus on supporting domestic gas suppliers,” Cooper chief David Maxwell said, also highlighting Cooper as being among those domestic suppliers. 

“The logical path to reducing the supply deficit and managing gas prices…is to develop new competitively priced gas supply.” 

Cooper highlights AEMO’s stats forecasting a supply shortfall in south-east Australia equivalent to 35% of forecast annual supply in 2025, which Cooper predicts will lead to further pressure on gas prices, regardless of the cap legislated last week. 

The company also comments its views the levels of investment in exploration and development needed to reverse the trend on the forecast shortfall is inadequate in volume.

JP Morgan quietly spells trouble 

Investment bank JP Morgan on Monday noted in one brief paragraph the Albanese government’s gas price cap threatens the viability of CSG development in the northeast of Australia. 

“Our study of field development costs suggests cap prices [between $11/GJ and $13/GJ] would make much of QLD’s future CSG fields uneconomic, assuming that field productivity continues to decline,” the bank wrote. 

That note went to private clients late last week; in the ~72 hours since, the price cap has indeed come to land at $12/GJ.

Cooper's one year charts show the company is not necessarily ending off 2022 on a high note
Cooper's one year charts show the company is not necessarily ending off 2022 on a high note


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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