There’s more to Australia than Kangaroos and Koalas such as 50 relatively under-explored sedimentary basins. Of those, only 12 are producing oil and gas while 4 have been confirmed to have non-commercial reserves. The remaining 34 basins have seen very little exploration if any as they have not been drilled to any significant extent.
Australia’s 30 on-shore drilling rigs are dwarfed by a fleet of more than 800 rigs in Canada. The bulk of petroleum spending in OZ is directed offshore leaving only 13% for onshore exploration. Australia is an LNG exporter but imports 55% of its domestic oil demand. It is a supportive & stable economic, fiscal and political environment akin to Canada so it makes perfect sense for Canadian companies to deploy their expertise hunting shale oil and conventional reservoirs down under.
We are looking for international oil and gas exploration and production companies based in Calgary, Alberta with world-class assets in Australia. The following 3 oil stocks offer tremendous upside to unconventional and conventional resources thanks to massive tracts of land:
Bengal Energy bng.to $0.11 [-0.02]
Bengal Energy holds 62% working interest in 1.6 million acres in the Cooper Basin, Queensland and a 100% working interest in a 3,485 km² offshore block in the Bonaparte Basin located in the Timor Sea, North Western Australia. The Cooper basin is a proven, producing and underexploited basin which contains by far Australia’s largest onshore hydrocarbon projects with more than 190 gas fields and more than 115 oil fields on production. The company currently produces more than 100 barrels of oil per day from an initial oil discovery on ATP752P – Barta Block (25% Working Interest). Unlike its peers, Bengal is not a pure play on Australia as it holds onshore and offshore assets in India. Bengal plans to resume drilling and completion operations in Q3/12.
Rodinia Oil roz.v $N/A [+0]
Rodinia Oil enjoys an extensive land base in Australia’s Officer Basin with 23 million acres at 85% working interest. According to Ryder Scott, Rodinia has 126 billion bbls of estimated unrisked prospective resource (P50) in up to 5 different formations on its land base*. P50 indicates there’s a 50% chance of these reserves being real. Rodinia’s massive land base offers the potential for large oil and gas fields which the company believes are comparable to world class oil fields. However, Rodinia Oil is not for the faint of heart especially that it drilled and abandoned its first 2 wildcat exploratory wells where even though encouraging signs of hydrocarbons showed up, it was not in commercial quantities.
Financially, ROZ exited 2011 holding in the range of $5-$9 million in capital depending on whether it will be able to recover $4 million from its JV partner. The company has entered in arbitration with its JV partner for failure to pay its part of the wells. Rodinia also holds 2 Million shares in Petrofrontier Corp. At $7 million per well, future drilling is on hold as ROZ cannot afford to proceed with drilling its 3rd well. However, the company’s High working interest on its massive land base offers options to lower working interest through potential farm out. The uncertainty lies in the timing and the makeup of the joint ventures and farm-in arrangements. The recent drilling results and the company’s balance sheet certainly put it at a disadvantage in any type of negotiations. ROZ is a speculative stock with a high risk rating with the potential to payback handsomely if it is able to secure a JV partner at fair terms and unlock a small part of its resource base.
*Rydor Scott are Petroleum Consultants that evaluate oil and gas properties and independently certify petroleum reserves quantities in the U.S. and internationally. Prospective resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective resources have two risk components, the chance of discovery and the
Petrofrontier Corp pfc.v $0.105 [+0.000]
Petrofrontier Corp enjoys a high 86% working interest in 13.6 Million acres located in the Georgina Basin, Northern Territory. PFC offers investors a high risk speculative opportunity to invest in an early stage exploration play that could potentially turn out to be very rewarding. According to Ryder Scott, Petrofrontier’s conventional and unconventional resource exposure exceeds 27 billion barrels of oil on a P50 basis. The company’s majority of lands in the Southern Georgina Basin cover an unconventional oil rich shale zone known as the Arthur Creek “Hot Shale” play. Petrofrontier has identified 13 old wells prospective for oil rich shale zones with thickness ranging from 5-45 meters. Furthermore, the company identified 7 potential untested bypassed conventional carbonate zones in at least 11 vintage wells on their lands with oil shows in core with some background gas encountered while drilling.
Financially, PFC exited 2011 with about $25 Million in capital which should enable them to complete the 2011 drilling program with its first 2 wells. PFC’s first well encountered wet gas to oil in the majority of the wellbore and will require fracking to assess its commerciality while the second well recorded hydrocarbon shows the Arthur Creek “Hot Shale” and will be completed by drilling the horizontal leg and fracking the well. Petrofrontier expects to complete these wells in Q2/12 and is first to horizontally drill and multi-stage frac the Arthur Creek “Hot Shale”.
In January of 2012, Heritage oil announced it has acquired 15% or 9.4 million common shares of Petrofrontier. The company is currently in the process of seeking a JV partner meeting considerable interest from the industry. Taking on a JV partner would certainly reduce financial risk but not engineering and geological risks.
The 3 companies above offer investors with exposure to several underexplored Australian basins. The potential for significant rewards lies in the discovery of conventional reservoirs comparable to oil and gas fields in North America and in unlocking massive shale oil resources. Even though the size of the prize is huge, make sure you can stomach the risk.
Disclaimer: the information presented above is only for informative purposes; it’s meant to serve as a starting point to carry your own due diligence. It is in no way an encouragement to buy or sell the aforementioned securities. If you find any errors in the data please do not hesitate to contact us.