Australia Surges Ahead in the Shale Boom Source: Kent Moors, Oil & Energy Investor (3/7/13)
"Today, small-cap companies are controlling access to some of the biggest shale projects on the planet."
A few years ago, I was working with Chevron on the massive Gorgon and Wheatstone natural gas projects in Western Australia.
In those days (and we are only talking back about four or five years), the top international majors would call the shots on these mega billion projects.
Today, small cap companies are controlling access to some of the biggest shale projects on the planet, requiring the big boys to rethink their strategies.
Over the past few days, I have released a major investment opportunity in what could be the largest shale oil find ever recorded—one having as much as 233 billion barrels (or more) of recoverable shale oil. Linc Energy controls what is shaping up as the biggest project worldwide to hit in decades.
But the real investment play is with the companies coming in to provide the essential working capital for field development and provide the field services essential to pull it off. This has gone out exclusively to my Energy Inner Circle subscribers.
The discovery at the Arckaringa basin is already prompting some observers to begin talking about energy self-sufficiency for Australia in much the same way as American commentators did after the Bakken, Marcellus, Eagle Ford, and Utica basins came on the scene a few years ago.
That a small company is in the driver's seat is a new wrinkle in these mega projects.
But it is now occurring more frequently, especially in this part of the South Pacific. These developments provide some major opportunities for individual investors to buy into projects with small companies at low cost or ride in on the backs of the majors and oil field service producers coming in.
And if you learn the right way to invest, there is some serious money to be made down under.
The Shale Boom Continues Down Under
Both shale/tight oil and shale gas have significantly changed the hydrocarbon production landscape. Until recently, the emphasis has been on North American production.
However, studies from the U.S. Geological Survey, the International Energy Agency and even OPEC itself have all concluded shale oil and gas is prevalent elsewhere in the world.
And that has led to new targets for major development.
For example, a second event is unfolding just north of Australia where another small company just happens to control access to a massive project. This one is in Papua New Guinea, and it has some of the largest international majors just drooling over getting involved.
However, the parade of big companies seeking to farm in on significant projects controlled by much smaller operators hardly ends there, especially in this part of the world. Chevron once again made news early this morning (February 25) be announcing it had agreed to pay as much as $349 million to join Australian minnow Beach Energy in two separate projects.
Both are shale gas plays—one in South Australia and the other in Queensland. Now despite the huge projects Chevron already runs further west (the ones I know quite well from my work there), these two new concessions amount to the company's first foray into Australian shale gas. These are Cooper basin developments, where several projects are into producing shale gas. Chevron is likely to take over controlling interest (as much as 60% in the first), while settling for a bit more than a third in the second.
Beach is an Adelaide-based producer and does have depository receipts trading OTC in New York. However that issue has virtually no liquidity. No shares traded on Friday and the average for the past three months is 33 shares a day. Therefore, there will be a big bounce likely at
open today, but there will be no way to control the rapid price rise and subsequent difficulty in exiting a position. Beach has greater liquidity on the Australian Securities Exchange, but trading on the ASX remains difficult for many non-Australian investors.
Nonetheless, the parade of internationals moving into Australian projects continues. Chevron joins the likes of U.S. companies ConocoPhillips and Hess, Norwegian major Statoil and U.K.'s BG Group, a more liquid depository receipt opportunity.
To sweeten the pot, the Australian government has recently estimated there may be as much as 400 trillion cubic feet (11.3 trillion cubic meters) of shale gas in the country. So don't be surprised if there are more such announcements of more big projects controlled by small local companies coming in the near future.
Kent Moors Oil & Energy Investor
LNC Price at posting:
$2.68 Sentiment: None Disclosure: Not Held
