the australian likes it

THERE'S a great deal riding on drilling off the NSW coast near Newcastle.

If there?s one play that, in terms of emails received from readers, is obviously occupying many investors? minds, it?s the drilling off the NSW coast. Clearly, hopes are riding very high.

In recent months several readers have chided Pure Speculation for not revving up the story. Call us old fashioned, but we always prefer to wait for the drilling results - especially when it is such a high-stakes game as offshore oil or gas drilling. (Just remember all the hopes that rode on offshore Mauritania a few years ago.)

Well, the story took a small step forward this morning - but there is still an awful long way to go.

The first well is in progress and this morning the various companies involved reported that Seaclem-1 has encountered a previously unknown tertiary sandstone formation that is greater than 40m in thickness and with high porosity. Interesting, we think, but still a way from taking something to the bank.



The companies involved are Bounty Oil & Gas which will see its interest reduce from 75 per cent to 15 per cent after this well is completed, while the consortium behind unlisted Advent Energy - MEC Resources, BPH Energy and Grandbridge, along with unlisted Talbot Group - will move to 85 per cent.

Just for the benefit of those who believe we have ignored or under-reported this story, one of the first editions of this column back in 2006 reported an item about a history of oil slicks off the NSW coast, and there was a suggestion that there was seepage from the seabed. BUY had become involved after the licence area had been dropped in the early 1990s by Santos, which, although it had found some gas, was too heavily focused on the Cooper Basin at that time. In 2009, we fleshed out the story with an item about MMR and Talbot?s involvement, and that MMR believed there could be more than 16 trillion cubic feet of gas.

A reader on Sydney?s North Shore points out that you could have picked up MMR back in early 2009 - when the gas story was widely known but largely ignored - for as low as 2.5c. It hit a high of $1.15 last month and last traded at 69c.

One reader likes the stock because of the prospect that a find of the size being hoped for would enable the owners to provide gas to the Sydney area for 20 years. ?Potential to be the Bass Strait of NSW,? he adds.