This ASX-listed gas producer has just started generating revenue

Only three years after discovering hydrocarbon deposits in the Vali gas field in South Australia, Vintage Energy (ASX: VEN) announced it has begun generating revenue on Wednesday. 

Where is that revenue coming from? None other than AGL Energy (ASX: AGL).

Vintage Energy has now become the freshest face on the Australian energy scene, with a new supplier now feeding into Australia’s east coast gas market. 

Prime digs 

Its flagship Vali field is located in South Australia, within the larger geological formation that is the Cooper Basin—a neighbourhood that attracted Santos (ASX: STO) years ago.

The Cooper is, for all intents and purposes, a bonafide (and massive) natural gas province.  

Vintage chief Neil Gibbins, remarking on the company’s first-ever stint in cash generation, was short and sweet. 

“Our expectation is [that] Vali, and the Odin gas field nearby, will be supplying gas to eastern Australia for many years,” Gibbins said. 

Revenue protected by long-term gas agreement 

Vintage currently holds a binding long-term supply agreement with AGL. 

AGL will purchase gas from Vintage for supply to residential and industrial end-users after initially funding the development of the Vali field to the tune of $15m. The initial payment by AGL represents a portion of the total contract volume and was designed to expedite first gas flows from the field.

“By pre-paying the joint venture $15 million, AGL enabled Vali to be brought online much earlier than would otherwise have been the case,” Vintage wrote on Wednesday.

The JV is broken down as follows: 

• Vintage Energy (ASX:VEN) - 50% (Operator) 

• Bridgeport Cooper Basin Pty Ltd - 25% 

• Metgasco (ASX: MEL) - 25% 

Making sense of volumes

The project boasts a 2P probable gas reserve of 101 petajoules (PJ) worth of natural gas. Nearly half of that gas belongs to Vintage under the JV breakdown. 

The scope of the deposit at Vali is hard to comprehend if you aren’t familiar with the often confusing world of energy measurement lingo. It may help to think of a petajoule as the sum of its parts: one quadrillion joules of energy. 

In other words, that’s approximately 95 billion cubic feet of gas. 

(Note that a 2P probable reserve is a mid-to-upper tier confidence read).

More to come 

So far, only three wells have been completed on-site Vali. And the gas Vintage has contracted to AGL represents less than 20% of the field's proven and probable reserves.

“Vintage has refrained from contracting the bulk of the field’s gas reserves, as it builds a thorough understanding of the field’s producing reservoirs from its three existing wells,” the company wrote on Wednesday. 

“The understanding acquired over the first 6 – 9 months of production will inform the preparation of a full field development plan and marketing of Vali’s uncontracted gas, which currently stands at 85 PJ (gross, Vintage share 42.5 PJ).”

Vintage Energy's six month chart