PERTH (miningweekly.com) – Australian energy company Beach Energy has struck a deal with O.G Energy to sell 40% of its Victorian Otway assets for A$344-million in cash.

The Otway parcel includes the Otway gas plant, the existing Geographe, Thylacine, Hallandale, Speculant and Black Watch gas fields, as well as exploration prospects Enterprise and Artisan.

Beach would remain the operator of the assets, the company told shareholders on Friday.

“We are delighted to have O.G Energy join us in our Victorian Otway assets,” said Beach CEO Matt Kay, adding that the transaction aligned perfectly with the company’s ambitions.

“This transaction introduces a fully-aligned partner to support the rapid exploration and development of our offshore Victorian acreage. Securing an excellent development partner for the Otway gas fields is a pivotal step towards creating new supply to Australia’s East Coast gas market.”

Kay noted that Beach had previously stated its intentions to sell down its interests in the assets, and would be applying the sales proceeds to reduce debt and fund a portion of its future capital expenditure (capex) programme.

The transaction would also reduce Beach’s share of future expenditure in the Victorian Otway basin, he said.

Plans for the Victorian Otway assets remained unchanged, with the work programme unaffected in the lead-up to the completion of the transaction.

“We will commence our investment programme with the drilling of the Black Watch gas development well in late 2019, followed by the Enterprise 1 exploration well in 2020,” Kay said.

“Both wells will be drilled from an onshore location using extended reach drilling technology. In 2020, our focus turns to offshore drilling, with plans to drill seven wells including the Artisan 1 exploration well.

“Our plan is to bring more gas supplies into the east coast gas market, achieved by keeping the 205 TJ/d Otway gas plant as full as possible, prioritising the development of the lowest unit technical cost gas first,” Kay added.

The sale will be effective from July 1, 2018, and the completion of conditions precedent is expected by the end of the third quarter of 2019. On the completion of the transaction, four new joint ventures (JV) will be formed covering all the gas fields, with Beach to maintain a 60% holding in each JV.

Beach on Friday also adjusted its 2019 production guidance following the sales agreement. The ASX-listed company now expects to produce between 25-million and 27-million barrels of oil equivalent in 2019, compared with the previous estimate of between 26-million and 28-million barrels of oil equivalent, while capex guidance has been reduced from the initial A$460-million to A$540-million, to between A$440-million and A$520-million.

The company’s expected earnings before interest, taxes, depreciation and amortisation for the full 2019 have also been adjusted from between A$1.1-billion and A$1.2-billion, to between A$1.05-billion and A$1.15-billion.

In the five year production outlook to 2023, Beach has reduced its output expectations from between 34-million and 40-million barrels of oil equivalent, to between 30-million and 36-million barrels of oil equivalent, while capex this time has also been reduced by about A$100-million.