Central Petroleum (ASX:CTP) is preparing to drill two new wells at the Palm Valley gas field in the Northern Territory later this year, according to a Wednesday filing with the Australian bourse.

The wells will support a recent gas sale agreement with the Northern Territory government and, if successful, are expected to boost Central's total gas production and revenue by around 40% when they are commissioned in the second half of the year.

Site preparation is complete, and the first well is expected to spud in mid-July, the company said.

Central Petroleum added that it has fully repaid the liability for previously over-lifted gas from the Mereenie gas field, also in the Northern Territory, through 2 terajoules per day of its gas production. The company has effectively received nil net revenue for this volume since 2020, but will now receive net cash proceeds under existing contracts for the volume, resulting in an incremental increase in cash flow of more than AU$7 million per year, it said.

It plans for at least three oil and gas exploration wells in the Otway and Cooper Basins and is targeting the start of drilling in the first half of 2027.