New Faces At Victoria Petroleum Signal A Shift Of Gear As CSG...

New Faces At Victoria Petroleum Signal A Shift Of Gear As CSG Drilling Ramps Up

September 15, 2010

It was the end of an era at Victoria Petroleum this summer as the ASX-quoted E&P appointed Ian Davies as its new managing director and his long-standing predecessor, John Kopcheff, stepped down. Davies? appointment is a signal that things are changing at Vic Pet, which in recent years has reinvented itself through a series of oil strikes in the Cooper Basin and a seat on the seemingly unstoppable coal seam gas bandwagon in the Queensland LNG feedstock corridor.
Kopcheff, who freely admits his nickname used to be ?Dry Hole John?, played no small part in positioning the company for this breakthrough, which has more than doubled its market cap in little over a year; it now stands at A$135 million. But as the stakes rise, with the company seeking to treble production from its Cooper Basin oilfields by the end of FY 2011 and coal seam gas drilling ramping up across its Queensland permits, it was time for a new face at the top.

And the calibre of the new management team is a signal of where Vic Pet is headed next. The new MD Ian Davies, a former investment banker, joins Vic Pet from Queensland Gas Company, part of the BG Group, which is driving the Curtis LNG project at Gladstone. Davies had been CFO of QGC since 2007 prior to its A$5.6 billion acquisition by BG and more recently was QGC?s general manager of business development and general manager of ports and infrastructure.

With Davies comes former QGC chief operating officer Mike Herrington, now Vic Pet?s general manager of production and operations, and QGC?s former general manager of exploration and technical services Steven Scott, now Vic Pet?s general manager of exploration. Davies? commercial acumen, and Herrington and Scott?s ?proven technical horsepower? (as described by Vic Pet chairman Denis Patten) could prove critical as Vic Pet moves into this new growth phase, with 11 CSG wells set to drill over the second half of 2010.

This ramp up in drilling activity comes as the project partners ? BOW operates ATP 593 & 771P and QGC operates PL171 and ATP 574 ? seek to develop their coal seam gas reserves ready for delivery to the A$20 billion Gladstone LNG plant, with initial sales to CNOOC and Tokyo Gas set for 2014. Vic Pet holds meaty equity stakes, ranging from 20 per cent to 45 per cent, in some of the upstream permits that will be feeding into this world-class project. To deliver the technical, commercial and financial resources to handle this scale of project, and extract best value for shareholders - who no doubt have one eye on the kinds of premiums some CSG plays have attracted in recent years, among them QGC - requires a particular skill set. Given that Davies and his team have done this before, shareholders will be hoping they can do it again.

However, Vic Pet isn?t dismissing Kopcheff?s 25 years as head of Vic Pet: the former MD remains on the Board as executive director responsible for business development and new projects. It makes sense for companies to retain experience, particularly when that experience has, at long last, started to yield success. It has been some time coming for a company that has long seemed to underperform ? and Kopcheff has faced down threats to his tenure from disgruntled shareholders in recent years, particularly when the small cap seemed slow to realize the value of its sleeping CSG acreage ? but it does seem that Vic Pet now has all the pieces to deliver value: the acreage, the production (albeit currently shut-in by the massive one-in-twenty-year floods that have blocked access to many of its Cooper Basin oilfields), the finances (A$33 million in cash plus some key strategic investors) and now the management. Little wonder the company, which is relocating to Brisbane from Perth, was awarded the 2009 Explorer Award from RIU Good Oil for being a ?25 year overnight success?.

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