punters ignore cooper basin riches Punters ignore Cooper Basin...

punters ignore cooper basin riches
Punters ignore Cooper Basin riches
By ANTHONY KEANE
26apr03
A FRESH oil and gas hunt in the Cooper Basin is about to start, but the share market has ignored the excitement.

Twelve months ago an oil strike in South Australia's Cooper Basin sent share prices soaring and fuelled a wave of excitement throughout Australia's petroleum industry.

Adelaide companies Stuart Petroleum and Beach Petroleum found oil in the first well they drilled in the area. Stuart's share price almost doubled to 69c in one week and Beach shares also climbed.

The initial success, Acrasia-1, was followed up with more oil discoveries.

Income from Stuart's Acrasia field helped the company to post a maiden profit earlier this year, while Beach's Sellicks discovery last July is also producing oil.

Within weeks both companies plan to start new exploration programs in the Cooper Basin and are confident of more success.

Santos, the region's biggest player, will also drill eight exploration wells there this year as part of its $146 million global exploration program.

But while industry interest in the Cooper remains strong, the share prices of the companies are not.

Stuart shares closed at 28c on Thursday, down from 70c on April 26 last year.

Cooper Energy, a company which raised $10 million in a stock exchange float last year, has watched its shares tumble from a 20c issue price to 11c on Thursday. The free option attached to each Cooper share closed at 2.6c.

Beach shares have remained virtually flat, as have Santos shares.

Santos, however, has outperformed fellow Australian energy major Woodside Petroleum, which has fallen 12.3 per cent during the past year.

Brokers say the lack of interest in oil and gas stocks is caused by the overall share market weakness and a lack of activity in the Cooper Basin over the past few months.

"In the investment climate we find ourselves in, when there is no activity and no drilling reports, the market gets bored with the story," Tolhurst Noall director Brian Dunn said.

"Without an intimate knowledge of what's happening, people may be selling out too early and doing themselves an injustice."

He said there was more drilling happening in the Cooper Basin than "probably anywhere else in Australia".

"What's happening in the Cooper Basin over the next few months is very exciting. Success in drilling up there should see a recovery in the share prices.

"Any drilling program is speculative. However, the Cooper Basin is very fertile ground and success with drilling – while not assured – is very probable."

Baker Young Stockbrokers research manager Duncan Gordon said general weakness in equity markets made it "especially tough for smaller companies to show gains".

He said while Beach Petroleum had "graduated" into the producers' league with several sources of oil revenue, companies with a sole focus on the Cooper Basin would have a mixed outlook. "If you look back over history, when you have a number of junior explorers and producers occupying a similar field there's scope for some consolidation," Mr Gordon said.

"History also shows not all of these companies have success.

"It's not going to be rosy for all of them, but the potential for growth in this area is such that we think they are going to have a pretty strong following."

Stuart chairman John Branson said the company was committed to drill another three exploration wells by the end of this year.

Stuart, which posted a maiden profit of $362,000 for the six months to December 31, says it has at least eight years of profitable production ahead at the Acrasia oilfield.

"We're trading at about 15c less than last year when we hadn't found anything or done anything," Mr Branson said. "I find it galling that we are in a position of producing and selling oil, making a profit, and the market's saying `tough'." Mr Branson said Stuart's share market capitalisation was well below the value of the oil it believed it had in the Acrasia field.

He said Stuart expected to lift its production at Acrasia from 900 barrels a day to up to 1200 barrels a day in the next few weeks.

Beach plans to drill at least eight wells and possibly 11, in its program expected to start on June 1. It expects its Aldinga-1 well will start production next week.

In March, Beach posted a 550 per cent rise in first-half net profit to $3.35 million, yet its share price of 31.5c is the same as a year ago.

Managing director Reg Nelson said this was "disappointing".

"Beach is now seen as both a yield stock and a growth stock and it's one of the very few Australian oil companies to be paying a dividend," he said. "We have got good growth opportunities in a proven oil production region."

SA Chamber of Mines and Energy chief executive Phil Sutherland said drilling in the Basin was still attracting a lot of interest in the industry.