Cue Energy has entered into a $7 million, two-year unsecured loan agreement with New Zealand Oil & Gas.
The agreement was executed in a bid to further support Cue’s existing exploration and development activities as well as to ensure sufficient working capital remains available during expected periods of high expenditure in the near term.
Cue has exploration and development plans at its Amadeus Basin, Mahato PSC and Sampang PSC production assets underway, and over the subsequent 12 to 24 months, to increase oil and gas production.
While revenue is anticipated to remain strong at all assets throughout this period, significant forecast expenditure, risks of cost overruns and the expected timing of expenditure has led Cue to seek short term funding.
The exploration and development plan for the Amadeus Basin is currently underway, with the PV-12 exploration well being drilled. Central Petroleum, the operator of Cue’s Amadeus Basin assets, forecast $3.1 million in additional costs for the PV-12 and Dingo-5 wells.
Moreover, drilling of PV-12 has been slower than anticipated which could result in further cost increases. As part of the sale and purchase agreement with Central Petroleum, Cue is obligated to pay the company’s share of certain exploration and development costs up to a $12 million cap.
Additionally, development and exploration plans for the Mahato PSC project have fourteen more wells planned to be drilled in the oilfield over the following 12-14 months, with extra processing facilities also undergoing construction. Twelve of these are oil production wells which are anticipated to deliver revenue; however, the timing of costs and revenue is under consideration of this financing.
The exploration and development plans for the Sampang PSC project indicated that the Paus Biru Final Investment Decision (FID) is expected to be made by the joint venture in the upcoming months. If and when it’s approved, the FID is anticipated to be incurred over the subsequent 24 months before first gas production.
The purpose of the loan is to provide funds for the continue development of Cue’s aforementioned assets and working capital. The loan is unsecured, with an interest rate of 10 per cent per annum fixed for the term of the loan and featuring an establishment fee of 1.5 per cent of the loan amount.
The term of the loan is two years and early repayments are allowed with no penalty.
CEO of Cue Energy, Matthew Boyall, said that while continued strong revenue is expected from all its existing production assets, the current inflationary environment has the potential to impact planned costs.
“This loan will ensure Cue retains the financial strength to participate in not only our committed projects but any other proposals which arise to increase production at our assets. The terms of the loan are structure to provide flexibility for the loan amount to be reduced as outcomes of individual projects becomes clearer.”
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