MATT CHAMBERS THE AUSTRALIAN JANUARY 30, 2014 12:00AM
CENTRAL Australia's Cooper Basin continues to surprise energy companies, with Drillsearch upgrading expected oil production from the Bauer field by more than a million barrels of oil equivalent.
Drillsearch, which shares ownership of the Bauer field on the basin's Western Flank with Beach Energy, boosted full-year petroleum production guidance because Bauer is bigger than previously thought.
The news lifted the share prices of Drillsearch and Beach yesterday, as well as their neighbour, Senex Energy, which also produces from the Western Flank region.
Drillsearch, which owns 60 per cent of Bauer, yesterday raised 2013-14 guidance to between three and 3.3 million barrels of oil equivalent, up from 2.3-2.5 million.
This means Drillsearch's record 2012-13 production of 1.1 million barrels could triple this year.
RBC Capital analyst Andrew Williams said more wells planned to be tied in to Bauer meant there was the potential for production to hit the upper end of the guidance range.
"We believe there is a significantly bigger oil play to be won in the Cooper-Eromanga basins than is represented in reserves and resources statements or is being ascribed by the market," Mr Williams said. "The significant 2013-14 production guidance upgrade supports this view."
Drillsearch shares rose 9c, or 6.3 per cent, to a one-year high of $1.52 yesterday. Shares in Beach, which operates Bauer and owns the remaining 40 per cent, ended 5 per cent firmer at a two-month high of $1.44. Senex rose by the same amount to 70c.
"The way production is coming from the Western Flank oil fairway exceeding expectations in every respect," Drillsearch managing director Brad Lingo said.
"It continues to indicate the discoveries we have out there are bigger than we've estimated."
The previous production guidance had counted on production of 10,000 barrels a day from Bauer. But production had been as high as 14,000 barrels per day, Mr Lingo said.
The Drillsearch chief said a series of appraisal wells had continued to extend the boundaries of the field, which was producing more oil and less water than expected.
The increased production guidance is expected to result in increased reserve numbers for the field.
Drillsearch's fourth-quarter production record of 914,000 barrels of oil equivalent, up 8 per cent from the previous quarter, beat expectations and delivered revenue of $111 million, up on both the previous quarter's $86.7m and RBC estimates of $79.3m.
On top of its conventional assets, Drillsearch is exploring for shale gas with Britain's BG Group in the Cooper Basin.
It said it had started drilling three wells, with a testing and evaluation phase from the middle of this year.
"Drillsearch is indicating a six-well follow-up program leading to pilot testing -- this project appears to be moving apace," Mr Williams said.
RBC left its Drillsearch target price unchanged at $1.75 but boosted full-year earnings expectations by 37 per cent to $148m.
AQO Price at posting:
18.5¢ Sentiment: ST Buy Disclosure: Held
