New gas isn’t igniting this old flame today…
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At the time of writing, shares in the energy company are down 1.06% to $6.04. However, the AGL share price clocked in its unceremonious 52-week low milestone at $5.97 apiece just after midday today. The lacklustre performance puts the AGL share price at a loss of 50.25% year to date.
New gas deal fails to ignite AGL share price
AGL investors are facing yet another disappointing share price move on Monday. Unfortunately, the market has not met AGL’s latest announcement with enthusiasm.
According to the release, Cooper Energy and AGL have entered into a new Otway Basin gas sales agreement (GSA) for all developed and uncontracted volumes. The new agreement covers output from Cooper Energy’s Casino, Henry, and Netherby wells in the Otway Basin.
Under the agreement, pricing will be consistent with the Australian Competition and Consumer Commission’s (ACCC) July 2021 gas inquiry interim report range of $6 to $8 per gigajoule for contract gas supply.
Additionally, the existing Sole GSA has been amended. As a result, the annual contract quantity has been reduced from 12 petajoules to 6 petajoules worth of gas supply per year (1 million gigajoules in 1 petajoule). At the same time, the agreement will extend a further 2 years. This takes it out to 31 December 2030 under the new terms. Unfortunately, the increased visibility hasn’t done much for the AGL share price today.
Importantly, the amendments made to the Sole GSA allow the energy company to increase the annual quantity by a maximum of 6 petajoules per year. However, the ceiling on these annual increases is capped at 30 petajoules. Meanwhile, pricing and other terms have remained unchanged.
Both the new and amended gas agreements will come into effect from 1 January 2022.
Despite the changes, AGL Energy remains Cooper Energy’s largest customer by annual contracted gas volume. Following behind is Energy Australia with 5 petajoules per year, and Alinta Energy with 2 petajoules.
Cooper Energy’s perspective
Commenting on the new gas sale arrangements, Cooper Energy managing director David Maxwell said:
We are pleased to be working closely with AGL and look forward to ongoing collaboration. The new gas sale arrangements are a further illustration of Cooper Energy taking decisive action to increase certainty and position the company for further growth.
The gas company also narrowed its sales volume guidance for FY22 on the back of the announcement. Originally, FY22 guidance was for 3.7 to 4.3 million barrels of oil equivalent. Now, the company expects somewhere between 3.7 million and 4.1 million barrels of oil equivalent.
AGL share price snapshot
The AGL Energy share price has been a major underperformer on the Australian indices this year, having posted a loss of 49.2% since 1 January. This extends the loss over the last 12 months to 58.88%. In the past month alone, AGL shares have slipped a further 18% into the red.
AGL Energy has a market capitalisation of about $3.78 billion, and has 623 million shares on issue.
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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.