oil duo reuniting for petrel's uruguay play

Oil duo reuniting for Petrel's Uruguay play

BY: PAUL GARVEY From: The Australian November 05, 2012 12:00AM


DAVID Casey and Stephen Mitchell can point to more than their fair share of success over the course of their careers in the oil and gas industry.

But, somewhat unusually, their biggest successes are also attached to a fair degree of controversy.

The pair, who first worked together at oil and gas explorer Molopo Energy in the mid-1990s, have reunited on the board of Petrel Energy, a junior company that has launched a promising early stage exploration play in Uruguay.

As it stands, both men are best known for their previous ventures rather than Petrel, which despite a 40 per cent share price surge in the past fortnight has a market capitalisation of just $17 million.

Mr Casey is undoubtedly best known for his role as the chief executive of Eastern Star Gas, a company that was at the forefront of the NSW coal-seam gas industry up until its sale to Santos last year for $924m.


But an otherwise classic success story was marred by controversy as the acquisition was concluded, with Eastern Star attacked over its environmental procedures.

Incidents at the company's flagship Narrabri coal-seam gas project became a focal point for community and environmental opposition to the fledgling industry, with the anger contributing to the introduction of a (now lifted) moratorium on coal-seam gas exploration in the state.

Similarly, Mr Mitchell's record as the head of Molopo was marred when he was voted off the company's board after an uprising by a high-profile group of Melbourne businessmen, including property developer Max Beck and former Woolworths chief and Fairfax Media chairman Roger Corbett.

It was a sour end to a stint that Mr Mitchell notes saw the firm grow its market capitalisation from $1m to $400m. (Shares in Molopo have almost halved since the coup, but that's likely to

be little consolation to Mr Mitchell.)

The pair is back on the horse in the form of Petrel, with Mr Casey serving as chief executive and Mr Mitchell taking an executive chairman's role. It represents the reformation of a professional association that dates back to the mid-90s, when Mr Casey joined Molopo under Mr Mitchell.

The two remained in close contact even when Mr Casey left to head up Eastern Star.

"I've got an enormous amount of respect for Stephen Mitchell and what he's done and what he did do with Molopo. It was just a matter of time," Mr Casey told The Australian.

While still heading up Eastern Star, Mr Casey and Mr Mitchell jointly invested in private company Petrel. Even after the sale of Eastern Star wrapped up and Petrel went public through a reverse takeover of listed group Orion Petroleum, Mr Casey was reluctant to commit to a formal role.

"It's fair to say towards the end of the Eastern Star transaction it was a fairly challenging proposition," he said.

"I probably wasn't keen to jump into a role the next day, but I was going to look at a role down the track."

Instead, Mr Casey spent some time reconnecting with his family -- he and his wife have two boys, aged seven and four -- and immersing himself in, of all things, canteen duty.

It was only in September, when the company came across some oil and gas exploration projects in Uruguay, that Mr Casey decided to get back into corporate life.

Uruguay is not exactly a hive of activity in the international oil and gas sector, but Mr Casey is convinced it has the attributes to become a significant new province.

Brazil to the north and Argentina to the south have both emerged as hotspots for exploration activity, while Uruguay has been largely ignored.

Mr Casey says a new interpretation of the country's geology has identified what he says is major potential comparable to the Narrabri acreage that helped transform Eastern Star.

"The resource potential, it will match the Narrabri acreage if not be better than it. That's not to say there's not a lot of work to do, and that's not to say that going forward we have a lot of challenges, but it is a terribly exciting opportunity."

Petrel will spend up to $US14m ($13.5m) over the next 18 months acquiring a 60 per cent interest in its Uruguay acreage.

First drilling is planned for early next year, after which time the company will have a much better sense of the acreage's potential.

"If this works and a few things go our way, this is a company-maker not just for us but almost any company," he says.

For Mr Casey and Mr Mitchell, both of whom hold stakes of 11.5 per cent of Petrel, success in Uruguay would have to go a long way to easing any leftover pain from their last ventures.

As it stands at this stage, Mr Casey isn't expanding on the Eastern Star controversies, except to say he stands by the work of his staff there completely.

He continues to hope that Narrabri will get developed by Santos.

"Narrabri is one of the best assets NSW has and it deserves to be commercialised," he said.