M&A activity tipped for the Cooper Basin

Published at Sep 18, 2015, in Features

A leading oil and gas analyst has tipped merger and acquisition activity in the Cooper Basin on the back of ongoing strength on the east coast market.

EnergyQuest chief executive, Dr Graeme Bethune, said a drop in the share price in the companies in the basin had more to do with headlines about the oil price rather than market realities.

“The biggest falls have been for Cooper Basin players, averaging 70% and raising the likelihood of consolidation,” Dr Bethune said.

“This slump in share prices looks excessive.

“It is well ahead of the fall in oil prices of 42% in Australian dollars.”

He also noted that the east coast gas market was one of the few tight gas markets in the world with increasing prices.

The European gas market is in the doldrums, US gas prices have slumped to US$2.77 per million British Thermal Units (A$3.70 per gigajoule), and LNG spot prices in Asia have halved.

“However, Australian east coast gas prices are increasing and small Cooper Basin players are actively developing new gas supply projects to meet strong east coast demand,” Dr Bethune said.

Demand profile for east coast gas market

“This presents great consolidation and takeover opportunities for new players with stronger balance sheets,” Dr Bethune said.

A good time for a junior?

The analysis has the potential to spark speculation of an impending wave of M&A in the Cooper Basin, with smaller companies looking attractive to bigger fish.

One such company, Real Energy (ASX:RLE) is thought to be close to naming a hydraulic fracturing contractor to conduct a vital 5-stage frac on its Tamarama-1 and Queenscliff-1 wells.

RLE previously told the market that an earlier independent study on the two wells at ATP927P had found that a five-stage frac would be most effective for maxiumum flow from the wells.

It subsequently told the market that it had opened up a tender process for contractors to compete for the job, which could potentially see a further firming up of the resource at the permit.

Independent experts DeGolyer and MacNaughton, based on the drilling of the un-fracced wells, said that the permit had an oil and gas in place resource of 13.76 trillion cubic feet of gas, up 141% on previous estimates.

The experts also said the permit has a contingent resource of up to 672 billion cubic feet.

However, getting the gas to flow following a frac job at the wells would firm up the numbers further and show the market that the gas can be produced.

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of Maven Capital Pty Ltd (AFSL No. 418504). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

Publishers Notice

The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.

Facebook
Twitter
LinkedIn