Gina Rinehart’s Hancock Prospecting and Chris Ellison’s Mineral Resources strike $1.13b WA oil and gas deal

Mineral Resources’ ailing balance sheet will get a huge boost after Gina Rinehart agreed to pay potentially more than $1 billion for its WA energy interests. Mrs Rinehart welcomed the opportunity to work with her “friend”, the under-fire MinRes boss Chris Ellison, and took a swipe at the Federal Government’s gas strategy. MinRes is set to rake in up to $1.13b for its oil and gas projects in the Perth Basin, as well as exploration acreage in the Carnarvon Basin. Mrs Rinehart’s investment flagship, Hancock Prospecting, will pay $804 million by the end of the year for the Lockyer gas and Erregulla oil projects in the Perth Basin. The remaining $327m will be handed over “subject to meeting certain resource thresholds and classifications for the Moriary Deep prospect, and Lockyer gas and Erregulla oil discoveries”. Moriary Deep is also located in the Perth Basin. The all-cash deal will see Hancock continue to expand its existing footprint in the Perth Basin, which includes 50 per cent of the adjacent West Erregulla gas field it bought last year via Warrego Energy. MinRes chief financial officer Mark Wilson told analysts the deal structure “was changing right until the last minute”. Investors lauded the imminent cash injection, with MinRes shares surging 15 per cent in early trade on Thursday. The stock price pared back slightly to a gain of just above 10 per cent by the afternoon. MST Marquee senior energy analyst Saul Kavonic said MinRes “achieved a full price tag, and with a rapid timeframe” in a note to clients about the Hancock deal. Hancock will now become the largest domestic gas focussed player in WA off the back of the deal but will need to build operating capability from scratch, according to Mr Kavonic. MinRes and Hancock will also pursue an equal joint venture to hunt for more oil and gas in the Perth and Carnarvon Basins. Mrs Rinehart, Hancock’s executive chair and Australia’s richest person, said she “welcomes the opportunity to work alongside my friend Chris Ellison and his MinRes team”. “Gas is critical to underpin base load power requirements and support local industry with the provision of reliable energy,” she said. “Indeed, it is essential, for the nation to be able to function, given solar power is only effective some 10 to 25 per cent of the time, and wind power approximately one-third of the time.” MinRes first flagged the potential sale of its WA gas assets last month to provide a much-needed cash injection for the debt-burdened company. It had $900m of cash and $5.3b of debt by the start of this financial year. While most of that debt is not due until May 2027, MinRes still had nearly $2.5b of current liabilities at 30 June — mainly associated with the construction bill for its Onslow Iron project. This debt pressure comes amid a backdrop of weak prices for the iron ore and lithium MinRes produces. But there was some relief last month when $1.1b was banked from the $1.3b sale to Morgan Stanley Infrastructure Partners of a 49 per cent stake in the private Onslow haul road. MinRes Energy chief Darren Hardy said the company and Hancock “have a long history built on a strong relationship”. “I’m excited that we are again deepening our ties, this time in energy,” he said. “This transaction maximises the value of our exploration success for shareholders and again showcases our ability to unlock significant capital from MinRes’ portfolio of assets.” A cloud still hangs over MinRes with Mr Ellison currently embroiled in a scandal about alleged financial misconduct and tax evasion. The MinRes board said they will determine his fate by Monday, based on the findings of an investigation led by Herbert Smith Freehills. Mrs Rinehart also used the MinRes deal to call for a policy environment conducive to greater gas supply in Australia. “The federal government’s Future Gas Strategy and policies should be changed to enable more gas supply. Currently, policy has been set up by the government to disincentivise investment in natural resources projects, including gas,” she said. “The West Australian State Government has made some efforts to reduce tape and duplication, and encourage more investment through policy changes allowing some onshore gas to be sold into higher price export markets to encourage additional gas developments and supply in WA.” “With the Collie coal power station closure having been announced by 2030 gas generation will become more critical to keep the lights on in WA.”