This part of bulletin articleFurther west, on the Otway basin...

This part of bulletin article

Further west, on the Otway basin below the South Australian-Victoria border region, eight offshore wells are scheduled for the 2004-05 summer season, compared with just one in the previous year. The new program will result in exploration spending of about $120m. Leading the charge will be Santos following up on the major gas discoveries of Geographe and Thylacine. Santos plans up to four exploration wells and two appraisal wells. One of the exploration wells due to begin in October-November is the Callister 1, a gas play in Vic/P51 and another is a deep but large oil hope in Amrit 1 in Vic/P52.

Amrit is a wildcat beyond the edge of Australia’s continental shelf in a water depth of more than 1000m. It will be drilled by the high-specification rig, Jack Bates, now being piggy-backed all the way from Norway on another ship, Might ­Servant 1. Santos is targeting a prospect with an assessed potential to host more than 700 million barrels of oil with a gross value of more than $40bn at today’s oil prices.

Santos, with a share price around $7.50 and a market capitalisation of $3.85bn, is not the kind of stock the Speculator meddles in – too big and too pricey. There is, however, an opportunity in a diminutive neighbour, Melbourne-based Essential Petroleum Resources (ASX code: EPR) trading at about 14¢ with a market capitalisation of $22m and $6m in cash reserves.

EPR, while not drilling any wells itself this season, holds permits adjoining the Santos blocks:

Vic/P50, adjoining the Amrit 1 play in Vic/P52, in which Essential claims its Currie lead identified from reprocessing existing seismic is an oil play on the continental rift margin in similar depths of water to Amrit, and;
Vic/P46, in which Essential’s undrilled Kepler-Bernoulli prospect is claimed to be a gas play with a close analog to the Callister prospect where the next Santos well is planned.

As Essential’s managing director John Remfry correctly forecast last week: “Discoveries will have a huge impact on the prospectivity of the Otway basin.” Punters are almost queued up to put money into plausible hydrocarbon plays. Any success for Santos will ensure that Essential will be able to raise any necessary funds for its own planned two-well program in the new year.