core sector communique

WestSide Corporation Limited [WCL] - WestSide strikes flexible gas market swap deal

WestSide Corporation Limited (ASX Code: WCL) and Meridian SeamGas joint venture partner Mitsui E&P Australia Pty Ltd (Mitsui) have today executed an agreement to fast-track access to gas to aid fulfilment of existing contracts and reduce payments to remedy shortfalls.

Key Points

• WestSide has entered into a flexible gas market swap agreement to aid fulfilment of existing commitments to supply 25 Terajoules a day from its Meridian SeamGas business

• The swap agreement will enable WestSide to reduce payments remedying supply shortfalls factored into the original Meridian SeamGas purchase price

• Swap volumes are flexible and the gas loan is to be repaid by the end of 2015.

The agreement with a leading market participant provides the Meridian SeamGas joint venturers with flexibility on borrowed gas volumes during 2012 to complement increasing production.

Under the agreement, WestSide will purchase gas to help meet demand from existing customers supplied by Meridian SeamGas. WestSide will subsequently sell the same volume of gas back to the supplier by the end of 2015.

WestSide Chief Executive Officer Dr Julie Beeby said the agreement enabled the Meridian SeamGas joint venturers to fast track access to gas to help meet two sales contracts to supply an aggregate total of 25 Terajoules a day (TJ/d).

“By bringing forward this capacity to meet our gas sales commitments, WestSide is also positioned to reduce the payment of remedies factored into the price the Company originally paid for its 51 per cent interest in Meridian SeamGas,” Dr Beeby said.

Under the inherited production rate, Meridian SeamGas has been unable to supply its gas sales agreements in full. A balance sheet provision in Westside’s 2011 accounts covering this liability was based on the conservative assumption that the shortfall would remain for the life of the contract.

Dr Beeby said completion of the gas swap at the end of 2015 was timed to match the potential commencement of many opportunities for gas sales to domestic customers and Liquefied Natural Gas (LNG) export projects being developed at Gladstone in Queensland.

“This flexible gas swap arrangement will help Meridian SeamGas ramp up production to match requirements to secure larger volume, long-term gas supply contracts,” Dr Beeby said.