Allright time to play for that $10 dollar question. (Trust me this is good, actually better then abusing strangers, double agents, traders, punters etc on HC, more fact then fiction) ----------------------------------------------------------- Trivial Fact: What do Hess & Hosking have in common!!
Answer: Right after the break.... ----------------------------------------------------------- Apart frm being Oil Exploration companies & starting with 'H', Leon Hess was the founder of Hess & was followed by his son John Hess as CEO & Chairman of Hess Corp (second highest paid CEO in the Forbes list for 2009, for Oil & Gas Explorers, Jim Mulva (COP) is ranked ovreall 132)
Rob Hosking current CEO of Karoon Gas, Scott Hosking CFO (sorry Timmy), for now these remain our favorite Marthians!!
------------------------------------------------------------ Here's the complete transcript frm the ABC interview with Alan Kohler. ------------------------------------------------------------
ALAN KOHLER PRESENTER: While the coal seam gas players in Queensland have been exciting a lot of interest lately over in the west, off Broome in the Browse Basin, arguably the best performing new company in the past five years has been quietly going about its business and now stands on the threshold of becoming a major energy player.
Karoon Gas listed five years ago at 20 cents a share and on the back of some leases it snuck from under the noses of the oil majors it touched $9 recently.
I spoke to Karoon's founder and CEO Bob Hosking just ahead of a new drilling program which may define his company's future.
Bob Hosking, you used to be a steel merchant, how did you get into gas and then decide to look at gas in the Browse Basin?
BOB HOSKING, CEO, KAROON GAS: The biggest trader in steel in Australia was BHP and they were making more money out of oil and gas than steel so I thought that was a very good industry to have a look, a very good commodity to have a look at. So that's how I starred and I got some leases and eventually that resulted in Nexus being listed in the year 2000 and that was the first public company I'd been involved in.
ALAN KOHLER: But how did you sneak under the guard of all of the majors to get that acreage?
BOB HOSKING: In the Browse?
ALAN KOHLER: The Browse?
BOB HOSKING: I think they were really taking a stand back approach. The gas market had really arrived in about 2003 and 2004. Before that, the Browse had been sitting there, it was Woodside's first discovery ever and so they discovered it in 1971 and it had been sitting there for 40 years.
It was only the emergence of the world LNG market that then took a lot of activity around the area with... I mean Woodside went and ran 3D and drilled 5 wells. We're about two years behind what Woodside have done to confirm their resource in the Browse, because there'd been no... really the active LNG market they'd had troubled getting the markets organised. You saw through 2002 where they sold LNG to the Chinese for a fifth of what they've been selling or a quarter of what they've been selling their LNG to the Asian market or the world market now.
ALAN KOHLER: Now Karoon's market capitalisation has gone from about $4 million to $1.4 billion in a matter of four years or something. Where to from here? I mean when are you going to know exactly what you've got in the Browse Basin?
BOB HOSKING: Yeah, well, the last well was 200 or 300 metres of pay, gas pay and possibly heavy, in other words oil content. We don't know how much because it didn't test because we had problems with the testing tool at the time. We can see a lot of it on 3D but we need more wells. So the rig is about to recommence shortly, that's probably in the next week or two and it will drill another structure and then come back and test the Poseidon structure. So more wells are needed, Alan, to come up with a statement of fact.
ALAN KOHLER: The chief executive of ConocoPhillips, Jim Mulver, who's your partner, says there's at least 16 to 20 trillion cubic feet of gas there, do you think it's more than that?
BOB HOSKING: Well, no, we would hope we could get to that sort of...
ALAN KOHLER: He says at least that much.
BOB HOSKING: Well he wouldn't know unless he's got some communication with some ethereal beings because it would be pretty hard to confirm all that with one well, but you know they're very bullish, it looks really positive but we need more wells to make a few statement of facts.
ALAN KOHLER: How do those indications compare with the original north west shelf discovery that Woodside found?
BOB HOSKING: They are comparable, yeah.
ALAN KOHLER: Because some people calling Karoon the new Woodside?
BOB HOSKING: Yeah, well we would hope that we've got that potential, Alan, yeah.
ALAN KOHLER: There's actually about four or five LNG plants proposed for WA and another four or five or four in Queensland, do you think anything like that number will actually get up?
BOB HOSKING: In time they will. I think the reason that all the coal bed methane projects have been bought into by the international people is that they saw it as a way to get in to take a physical position on delivering LNG 10 to 25 years off.
ALAN KOHLER: But do you think there will need to be some sort of consolidation, not only in Queensland but also WA?
BOB HOSKING: Well you can't have consolidation amongst big oil companies, you're talking companies that are bigger than BHP, you know they don't want to consolidate with each other. The LNG market is gigantic. Europe, if I can remember quickly, they're moving from importing 3 TCF [trillion cubic feet] of gas to 10 TFC of gas.
ALAN KOHLER: That's trillion cubic feet of gas.
BOB HOSKING: Yeah trillion cubic feet of gas. America uses 23 TCF of gas a year. Australia uses one. Just Europe itself will eradicate what Woodside have got next door in one year.
So the market is... and this is not China, China's got very big problems with pollution and they're moving into taking a position on importing LNG now things have steadied down and the market moving forward because it takes a lot of money to put into having unloading terminals for LNG.
I think at the moment there's 40 unloading terminals for LNG in the world about. I think in the '80s when Woodside started there were four. You know, so you can say it was R&D in the '80s. Now it's moving; I think in the next 20 or 30 years there will be 200.
So it's a big market. So, you know all this coal bed methane, all these guys have come in and just bought a physical for the future and, you know, I really don't think they've paid that much.
ALAN KOHLER: Right. What about Karoon, can you remain independent? I mean you've got an open...
BOB HOSKING: Well that's our aim, that's the game, you know, it gets us out of bed in the morning.
ALAN KOHLER: But your total cost of staying in with your share of the liquids and the LNGs over $3 billion, I mean you've just raised 150 through a placement, that's petty cash.
BOB HOSKING: Yeah, that's right but see normally what happens is that the buyers like to buy into the project so they like to buy what's in the ground, part of the installation. So we'll be using the buyers to fund the project.
ALAN KOHLER: But someone's going to take you over, aren't they?
BOB HOSKING: Well, maybe, maybe not. We'll see how the game goes.
ALAN KOHLER: Do you think your shares are undervalued?
BOB HOSKING: Yeah. Grossly.
ALAN KOHLER: By how much?
BOB HOSKING: Well, I don't know, you know.
ALAN KOHLER: What does the share price value a conservative estimate of your reserves at?
BOB HOSKING: Well take a company like Hess, do you know Hess at all? They tendered 18 months ago off Western Australia, they've got reserves of over one billion barrels of oil equivalent. Their market cap's 18 billion. If the Browse comes in we could have similar reserve figures within 6 to 8 months. Our market cap's 1.5 billion. There's a big difference.
But we target the European and American market and they realise that and we've always done that for the last 3 or 4 years. So our rating's gone up and a lot of that's because of European and American interests in our company and also because of our Brazilian and Peruvian assets that they've, you know, been very heavily involved in. And so they've got a big education in Brazil and Peru where Australia lacks that education in Brazil and Peru.
ALAN KOHLER: We'll have to leave it there. Thanks very much Bob Hosking.
BOB HOSKING: Okay. Thank you.
KAR Price at posting:
$9.79 Sentiment: Hold Disclosure: Held
(20min delay)