Central Petroleum Locks in Long-Term Gas Deal to Drive Palm Valley Expansion

Key Highlights:

• Central signs multi-year gas sales agreement with NT Government
• Up to 21 PJ gas supply secured through 2034
• Two new Palm Valley wells to boost production by ~40%
• Drilling set to begin mid-2026 with accelerated timeline
• Expanded loan facility supports near-term growth plans
  
   

Central Petroleum has secured a long-term gas supply deal that could reshape its production profile, locking in demand while accelerating new drilling at its flagship Palm Valley asset.

The ASX-listed gas producer announced it has executed a binding Gas Sales Agreement with the Northern Territory Government, underpinning investment in two new wells and providing revenue visibility through to 2034  .

Shares in Central Petroleum rose 3.37% to 9.2 cents on Monday, reflecting steady market support for the company’s growth strategy.

Source: MarketIndex 

A Contract That Anchors Growth

At the centre of the announcement is a multi-year agreement to supply up to 21 petajoules of gas, with Central’s share at 10.5 PJ, on a firm basis beginning in the second half of 2026.

The agreement includes a fixed market price with CPI-linked escalation and take-or-pay provisions, offering a level of certainty that is increasingly valuable in volatile energy markets.

The deal ensures that gas produced from Palm Valley will have a committed buyer, reducing commercial risk and supporting investment decisions.

That certainty has already translated into action.

Drilling Fast-Tracked as Demand Builds

The Palm Valley Joint Venture has taken a Final Investment Decision to drill two new wells, with activity expected to commence mid-2026.

Preparations are already well advanced. Key approvals are in place or underway, long-lead equipment has been ordered, and a drilling rig has been secured.

If delivered as planned, the wells are expected to increase Central’s gas production capacity by around 40%, a meaningful step-up for a company of its size.

This accelerated timeline is notable. By bringing production online earlier, Central aims to capture current favourable gas market dynamics while generating revenue sooner than initially planned.

Funding the Expansion

To support the drilling program and maintain balance sheet flexibility, Central has expanded its existing loan facility with Macquarie Bank.

The revised facility provides access to up to $15 million, with the company expecting to draw between $8 million and $10 million, leaving additional capacity as a contingency buffer.

Central’s share of the Palm Valley drilling and completion costs is estimated at approximately $26 million, including allowances for potentially higher diesel prices.

The structure reflects a measured approach. Rather than overextending, the company is aligning funding with project milestones and maintaining optionality as conditions evolve.

CEO Perspective: Timing and Execution

Central’s Managing Director and CEO Leon Devaney emphasised the importance of securing the right commercial framework before moving ahead with development.

“It has taken time to get the settings right, but we now have a significant GSA for the Palm Valley Joint Venture. Importantly, it underwrites an investment in two Palm Valley appraisal wells on an accelerated basis,” he said.

He added that successful delivery of the wells is expected to generate strong returns and increase free cash flow from later this year, while positioning the company for further growth across its broader asset base.

Industry Context: Gas Back in Focus

The deal comes at a time when domestic gas supply is once again in focus across Australia.

Ongoing concerns around energy security, coupled with global supply disruptions, have reinforced the importance of reliable, locally produced gas.

Palm Valley’s ability to quickly bring additional volumes to market makes it strategically relevant, particularly as industries and governments seek stable long-term supply.

Central also retains exposure to future upside through exploration programs in the Cooper Basin and Otway Basin, targeting both oil and gas in FY2027.