brief mention

Junior explorers attract interest with US drill stories Robin Bromby From: The Australian July 19, 2010 12:00AM

INVESTOR sentiment may be turning in favour of junior explorers' ventures in North America.

JUNIOR Australian explorers looking for oil and gas in the US now number at least a couple of dozen.

But, until now, the results have often been less than spectacular and consequently investor interest has remained low. The work has frequently involved resuscitating old or abandoned fields and sometimes required complex technology as well.

However, it seems that investor sentiment may be turning.

Over the past month we have noted some very heavy trading in Samson Oil & Gas (SSN). On Tuesday in our online capacity, we reported Hartley's analyst Dave Wall explaining the deal, which will see SSN acquire a large chunk of cash for part of its US acreage, money which will enable the junior to explore its remaining ground.

This, says Wall, is located in the Niobrara Shale, which has produced oil for decades but is now one of the hottest US plays due to horizontal drilling and fracture stimulation.

Well, SSN went up that day by 20.8 per cent and, in volume, was the second highest traded stock. Even more shares changed hands the following day.

Wall is also very bullish about Aurora Oil & Gas (AUT) and its onshore Texas operation; he has put a $1.64 a share valuation on the stock (against Friday's close of 85.5c).

So, because investors are obviously now listening to the US story, we felt we should tell you what else Wall has reported from his recent visit to various Australian operations in the home of the brave.

He puts a "speculative buy" tag on Entek Energy (ETE), which has recently reactivated work at its acreage in the Green River Basin in Colorado and Wyoming. ETE is after conventional oil and gas, non-conventional oil and coal-seam gas from the Niobrara Shale.

Sundance Energy (SEA) sold off gas assets at a time of high gas prices in the US and used that money to buy substantial acreage positions in the Bakken and Niobrara shales, says Wall. These were acquired for about $US100 an acre (0.4 hectare) but now range in value up to $US3200 an acre in the Niobrara Shale and up $US7500 an acre in the Bakken Shale.

Sundance will participate in up to 50 wells being drilled over 2010, the majority being development wells, which the analyst says would triple its existing production in the Bakken Shale.

He has a price target on SEA of 45c a share against Friday's close at 24c.

Wall puts a "buy" on Amadeus Energy (AMU) after a visit to its US office and was impressed by the company's cost-saving reorganisation and the new management's aggressive exploration plans, believing the latter is the start of a turnaround for the company now that it has operational control over most of its assets.

Strike Energy (STX) has interests in three producing Texan onshore fields and is drilling also.

Wall says he is often asked by investors the question "Why the US?"

He says the relationship between Strike and its American joint venture operator and partner, which has a drill record of two successes from three, provides arguably the best justification he knows for a US strategy.

There are a number of other North American stories we shall be following closely over the next few months. These include Eureka Energy (EKA), now raising $4.4 million for its exploration in Texas. There is also K2 Energy (KTE), which has restructured its Oklahoma acreage.

Golden State Resources (GDN) is moving towards gas production at the initial rate of one million cubic feet a day while Pryme Oil & Gas (PYM) has reported a substantial lift in oil and gas reserves from projects in Louisiana and Mississippi.

And Solimar Energy (SGY) has seen its share price losing ground, so we'll be awaiting news of its California progress.

Meanwhile, on Thursday we got a first look at the IPO prospectus for Maverick Drilling & Exploration (MAD), which is raising $5m. It has leases in the Blue Ridge Dome field south of Houston, Texas, where its proven reserves stand at 7.8 million barrels, and 25.6 million barrels if probable reserves are added.

The directors, headed by executive chairman Don Henrich, who has been in US contract drilling for 35 years, believe there are 400 drilling locations on their ground