for the believers

Hi Guys,

I tried to post this earlier but there was a site error on HC. I hope it gets in this time as it is very interesting.

Regards M.

Cooper Energy was listed during 2002 as
an exploration play with a pure Cooper
Basin focus. The company assembled a
package of farm-in opportunities that provided investors
with an active drilling programme and good probability of
success. Cooper was successful in its initial exploration
programme, participating with a 25% stake in the
Sellicks-1 oil discovery that is now in commercial
production. Another major round of drilling is set to
commence in the Cooper Basin and the company will
participate in several of these wells. We recommend
Cooper Energy as a SPEC BUY for drilling activity.
Cooper Energy is involved in six separate exploration
permits within South Australia’s onshore Cooper Basin. The
basin has undergone a major transformation in recent years
following the offering for tender by the South Australian
Government of large amounts of acreage that was previously
held exclusively by Santos. Junior companies, including
Beach and Stuart Petroleum, have keenly bid this acreage.
This has in turn provided numerous farm-in opportunities
for companies like Cooper Energy, who are able to be
selective in terms of their equity participation.
Another crucial aspect of the Cooper Basin that has
contributed to the basin’s popularity and the subsequent
upsurge in exploration activity is that it is an
operationally-friendly place for junior companies to operate.
Because of its onshore location and the proximity of existing
infrastructure, the costs of drilling wells in the basin is
relatively low and the costs in terms of commercialising
discoveries are also relatively low. Thus, the NPV of oil and
gas in the Cooper Basin is relatively much higher than
elsewhere and compares favourably with another ‘junior
friendly’ location, the Perth Basin. We estimate oil from the
Cooper Basin would have an NPV of around A$20 a barrel.
The company participated in the successful discovery of the
Sellicks-1 oilfield in July 2002 in PEL-92, paying for 50%
of the wells costs to earn a 25% stake. Sellicks flowed oil
from the Permian-age Patchawarra Formation at a rate of
1,915 barrels per day (bopd), which was the highest rate of
flow from this formation anywhere in the Cooper Basin. The
well has since been placed on production and flow rates
have been gradually increased from 480 barrels to 630 bopd,
with a target of 800 bopd. A second, deeper reservoir sand
is likely to be brought into production in the future and
upon completion will potentially boosts output to 1,000
barrels per day, depending on reservoir behaviour.
Oil is currently trucked to Santos’ Moomba production
facility, but consideration is being given to the construction
of a dedicated pipeline to Tantanna. As we have indicated,
margins on oil from the basin are high and we anticipate a
margin of A$25 per barrel over the life of the field. Based on
current predicted recoverable reserves of 0.7m–1.2m barrels,
Cooper Energy’s 25% stake is worth between $4.7m -$7.5m. This
translates into total net earnings of between 9c and 14c per
share for Cooper over next couple of years.
The company will participate in an exciting series of wells
over the remainder of 2003, comprising four firm wells and
a possible fifth well. The first well, Christies-1, is
anticipated to spud on June 16th and will be drilled in
PEL-92, the same block that hosts the Sellicks-1 discovery.
Christies-1 will be drilled 11km to the south of Sellicks-1
and is considered to have potential for mean recoverable
reserves of 1m barrels, making it a similar target to
Sellicks. The company will fund 50% of the costs of the
well in order to earn a 25% stake and will complete its
required spending commitments with regard to the block.
The company will then participate in the Eucalyptus-1 well
in PEL-88, where it will earn a 40% stake by sole-funding
the well, and the drilling of the Semaphore-1 well, where
it will earn a 25% stake by funding 50% of well costs. Both
wells have similar potential to Christies and Sellicks. The
company may also benefit at no cost in Moana-1 drilled by
Beach Petroleum, which straddles PEL-92 and PEL-107.
INTERSUISSE