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Imperial's bid for deliveranceFont Size: Decrease Increase Print Page: Print Kevin Andrusiak | February 25, 2008
WHILE most of the drill rigs in the junior energy world are making a beeline for virgin territory in either Africa or Asia, there's one market minnow which reckons the best foundation for growth is to target historical, well-established areas.

Imperial Resources hasn't been on the radar much during the current frenzy on all things resources, but that hasn't stopped it dreaming of turning its $20 million market capitalisation into $200 million.

One of the keys for a big turnaround of Imperial's fortunes is the Appalachian Mountains - the geographical setting along the US eastern fringe which was the birthplace for the US energy industry.

And also home to cult movie classics like The Deer Hunter and Deliverance.

But the movie script that Imperial's managing director Bruce McLeod has been following has seen him beat the market downturn to raise $100 million last December - via the company's 75 per cent owned subsidiary Empire Energy, which will be the beachhead for the company's US energy dreams - and also secure a suite of producing wells and drill targets in the Appalachian basin.

As he puts it, the company is still "finding its feet" in the crowded energy sector.

That is where the long production profiles of many of the producing wells in the Appalachians come in.

McLeod says typical wells in the region have lifespans of up to 40 years.

"As opposed to taking a huge risk, in spending a large amount of money to drill two or three wells which could come up dry, leaving Imperial with nothing, the approach was to take controlled bites of risk with high probability of success," he says. "In the right areas there is very low risk and in fact some geologists will say that it is harder to drill and not find gas than it is to find gas.

"Obviously there is a trade-off - less risk, the less likely of hitting a company-transforming monster. We will not become an energy heavyweight with a couple of wells. But that was never the strategy. The growth strategy is one of aggregation and development over the next three to four years.

"Empire's strategy is simple, to seek opportunities to acquire small to medium-sized oil and gas independents and to build a business from that level. Empire is not only seeking to acquire production and development opportunities, but also drilling and well service businesses."

Empire made its first purchase last year for about $10 million. That gave it access to 134 producing wells and more than 50 drill targets and resources of 3.4 billion cubic feet in proved resources and another 7 billion cubic feet in undeveloped reserves.

Imperial Resources can trace its corporate history back to 1981, when it was known as Jason Mining and it went looking for lead and gold in northern NSW.

Along the way to becoming known as Imperial Resources it also tried its hand at internet technology, both in Australia and overseas, in what is a familiar tale for many junior resources companies listed on the Australian Securities Exchange.

Today it can also add some astute investments in other resources companies to its asset portfolio - a 4.9 per cent stake in mineral sands miner Bemax worth about $11.5 million and 600,000 shares in Central Rand Gold, worth about $1.4 million.

Small stakes in various other listed resource companies are worth about $240,000.