Nexus, Santos Amend Longtom Agreement (Australia)

Nexus Energy Limited today announces that it has reached a binding agreement with Santos Limited (Santos) to amend the Longtom Agreement relating to Nexus’ 100% owned Longtom gas production asset. 

The agreement is subject to certain conditions being satisfied or waived by 30 June 2013. These include Nexus obtaining funding for the required work program to satisfy the supply requirements (which may be satisfied or waived by Nexus), and Santos confirmation of the capacity to accommodate Longtom-5 into the existing subsea infrastructure (which may be satisfied or waived by Santos). The amendments to the Longtom Agreement, which take effect from 1 July 2013, provide for a revised production profile and pricing structure for delivery of a remaining aggregate contract quantity of 83PJ of gas for the period to 31 December 2018.

Consistent with the amended production profile, Nexus plans to drill the Longtom-5 well in late 2014, with increased deliveries to Santos under an accelerated production profile from early 2015. The required work program also includes a workover of the Longtom-4 well to access previously unexploited sands. Under these arrangements, a strong business case for the development of the Longtom asset has been achieved and underpins the revised supply requirements under the Longtom Agreement in full.

The amendments also provide contractual arrangements for additional production from the Longtom area to be processed through Santos’ Patricia-Baleen processing plant should further quantities be available for sale from the Longtom area prior to 31 December 2018.

Lucio Della Martina, Managing Director and Chief Executive Officer of Nexus Energy, said, “This is a positive commercial outcome for both Nexus and Santos with the production profile re-aligned to meet future gas supply and demand. The amended agreement increases the value of Longtom and a strategic review of the asset including growth options has been initiated. This represents important progress towards achieving Nexus’ strategic objectives, one of which is to optimise the value from the Longtom asset.”

Nexus, the operator of the field, signed gas sales agreement for Longtom with Santos in December 2005.