Transcription of The Stock Network Interview with Echelon Resources (ASX:ECH), CEO & Managing Director, Andrew Jefferies
Lel Smits: Echelon Resources is an Australian energy producer with interests in long-life gas assets across Australia, New Zealand and Indonesia. Following the signing of non-binding term sheets and letters of intent supporting new drilling and long-term gas supply from the Marini and Palm Valley fields, Echelon is positioning to deliver increased gas volumes to the Northern Territory through to 2034. Ahead of presenting at the Stocks on Location Investor event in Sydney, I’m joined by Echelon CEO and Managing Director Andrew Jeffries to discuss what these agreements mean for growth, energy security and for shareholders.
Andrew, welcome to The Stock Network.
Andrew Jefferies: Well, thank you very much, Lel, it is wonderful to be joining you here.
Lel Smits: It’s a pleasure to have you on and I’m very keen to hear why the new term sheets and letters of intent matter for the long-term growth of Echelon Resources.
Andrew Jefferies: Look, these agreements that we’ve reached with the Power and Water Corporation, who are owned by the Northern Territory Government, cover both the Marini and the Palm Valley fields and they’re a step change for us. They lock in a firm supply of about 19.1 petajoules net to Echelon of gas and an additional 3.4 petajoules to our Q subsidiary and they run through to 2034 and that’s just the existing production. So more importantly, they enable us drilling another four wells, so two at Marini, two at Palm Valley and together they’re going to add about another over 13 petajoules of gas of additional supply.
So together that’s more than 5 million barrels of oil equivalent of sales. So the wells are relatively low risk in that they’re on proven reservoirs, they can be very rapidly tied back because we’ve got all the infrastructure out there and so they’re very quick to monetise and at a very low marginal cost. So for our shareholders, what that means is that we’ve got long-dated revenues with a very secure government-backed partner in Power and Water Corporation.
We’ve got accelerated growth, bringing those new higher volumes in. We’ve got better utilisation of all of the infrastructure that we’ve got out there in Central Australia and we’ve got improved margins. And finally, it gives us a really clear line of sight to additional value and these volumes are going to underpin the Northern Territory gas system and support what is a very tight market there.
So this is exactly the sort of near-term high return growth that I think investors are looking for.
Lel Smits: And Andrew, how do the new wells strengthen near-term production and Northern Territory energy security?
Andrew Jefferies: So we’ll be drilling two wells, two wells at Palm Valley, two wells at Marini. These wells can be drilled at a pace and they’re using known techniques into known rocks in really large fields and these fields have upside.
So we bought into them in 2021 and all of the wells that we’ve drilled using these techniques have outperformed initial expectations. So it’s really material additional supply of gas into the Northern Territory, which has some real gas difficulties at the moment. And that four well program is following a really tried and proven recipe.
So we’re using existing pipelines, existing processing, all of these things have capacity for more gas. And so there’s no new major infrastructure. That means that the gas can be online in days, not months, and that the additional operating costs are very minimal.
The immediate, it’ll then have an immediate impact on the market supply. And this is a time when, as I said, the Northern Territory is suffering a real deficit of gas for power production and for running all the processing that you need gas for. Merini and Palm Valley have been reliably supplying gas to the Northern Territory for decades and they continue to deliver.
This is domestically produced gas. It’s domestically sourced. It’s dispatchable.
So it’s there when you need it. And it’s essential, particularly as you start to build out renewables because they just struggle to make peak and even base load demand. And any alternatives are really very expensive and more polluting.
So for the Northern Territory, it’s about energy reliability for a growing market. And for Echelon, it’s about growing reliable production and revenues. So it’s a real win-win.
Lel Smits: Absolutely. And some very critical issues that you are tackling there. Thank you so much, Andrew, for the update from Echelon Resources.
Andrew Jefferies: Thank you for the opportunity.
Ends