an interesting read

Not for two decades have we seen so many wells planned involving junior explorers on the Bass Strait, Gippsland and Otway basins of Victoria and South Australia.
Since we go for the low-priced counters (and with it leverage), our main punt is Eagle Bay Resources (B, August 31), with confirmation last week that the Moby 1 well will spud on or about September 28 on the northern platform of the offshore Gippsland basin in permit Vic/P47. Eagle Bay (ASX code: EBR) retains a 25% interest in this block, having farmed out to the recently floated Bass Strait Oil and Gas (40%) and Moby Oil and Gas (earning 35% by meeting the first $3.75m of the well cost). We picked Eagle for all the money others will spend on its permits.

The Moby prospect, while not immense, is just 10km from an under-utilised gas pipeline to the mainland. It is assessed as having potential for net recoverable reserves of 24 million barrels of oil and 28 billion cubic feet of gas.

Moby Oil and Gas (ASX code: MOG) confirmed last week that the semi-submersible drill ship Ocean Patriot, now on location off New Zealand, should arrive in the Bass Strait to begin the Moby 1 well before the end of September. Moby’s managing director, Geoffrey Albers, told The Bulletin: “The approaching drilling program heralds the beginning of a concentrated program of drilling in the offshore Gippsland Basin, an intensity not seen for more than 20 years.”

Apart from the Moby well, the Vic/P47 joint venture has booked three additional ­drilling slots later in the program, including one in an area within Vic/P47 excised from the joint venture known as the Gilbert block. Eagle Bay retains a 10% interest in this block where Lakes Oil is due to drill a well in the new year.


Albers believes there will be three and possibly four sea-going drilling rigs operating in offshore Victoria over the next few months. At the same time the Moby prospect is being drilled, a sister rig, the Ocean Bounty, will be drilling 10km to the west on the Patricia Baleen gasfield for the Santos-OMV joint venture. Already underway is the rig Ensco 102 drilling the Yolla development wells and it is scheduled to be used by Esso-BHP Billiton on the northern platform of the Gippsland basin to follow up prospects defined in a significant 3D seismic survey.

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.