A MONTH ago, the prevailing view on this central Australian oil and gas pioneer was that it was hiding its light under a mulga bush. But be assured that's no longer the case, thanks to A Current Affair.
In one of those shameless cross-promotion exercises (for PBL Media's Money magazine), the fearless exposer of dodgy realtors endorsed Central as one of three picks from veteran stock watcher David Hazelhurst.
The next day Central shares jumped as much as 40 per cent, or 5.5c, to a new high of 19.5c on stiff volume of 7 million shares, which proves that: (a) at least some Channel Nine viewers still exist and (b) they're just as receptive to a decent stock tip as a miracle fat cure.
In truth, your columnist is peeved he missed out on tipping the stock earlier, in that a couple of readers had sung Central's praises, but he was preoccupied with two-bit tiddlers elsewhere.
Central is an unusual play on three counts: its funding methods; its focus on the underexplored dead heart; and the intended exploitation of expected gas finds through a gas-to-liquids plant.
A fourth quirk is that, as a side play, it's exploring for helium, an abundant element that has become increasingly scarce in usable form. The Americans have been selling down their stockpiles of helium, prized not so much for party balloons but as a safer cooling agent in nuclear reactors.
Since listing in 1998, Central has acquired 250,000 square kilometres of acreage, the biggest onshore Australian tenement holding of any company. But it's what is under the crust that counts.
Central this month is due to embark on the first leg of a $30million, five-well program in the Northern Territory.
According to Central chief John Heugh, the turf has been "generally neglected" since the 1970s and 1980s -- and for good reason. Most of it is covered by the inhospitable Simpson Desert, which is more renown for camel power than manpower or infrastructure.
We're not sure how the rock kickers nut these things out without the benefit of a hole or two, but Central has reason to believe there's plenty of the slimy stuff below, as well as conventional and coal-bed methane gas.
The first effort, Blamore 1, targets 70 million barrels of "undiscovered oil in place". The second, Simpson 1, will target 190 million barrels. Then there's three wells to flow-test coal-bed sites known to contain gas.
Central is being helped by two farm-in buddies, Petroleum Exploration Australia (linked to chief backer Martin Place Securities) and the listed Rawson Resources, the latter through both farm-in and farm-out deals.
Central's grand plan is to quickly exploit any finds for cash flow, but its grand plan is to build a large-scale gas-to-liquids plant in Alice Springs.
Rather than selling stranded gas to the eastern seaboard at a relatively low price, the plant would convert the gas to ultra-clean diesel, jet fuel and naptha for export markets.
The idea is to ship the stuff to Darwin on that snazzy new rail line. What a fine idea: the rail line, which cost taxpayers $800million, would then be used for a purpose other than conveying travel writers on freebies on The Ghan.
To give a flavour of the economics, Heugh and co are eyeing CBM reserves of 44 to 77 trillion cubic feet, with "34 tcf would be sufficient for a 140,000 barrels a day plant over 70 years", Heugh says. "There's sound reason for looking at the viability of such a large-scale plant." On the flipside, development costs would amount to several billion dollars.
Funding-wise, Central has availed itself of a $80 million rolling bond arrangement, pseudo convertible notes, which can be drawn down in $1 million lots when the funds are needed.
Heugh says it's cheaper than going to the market for equity funding, while both the company and the bondholder, a hedge fund, enjoy the flexibility to walk away. "If we drill six dusters in a row and the share price is driven down to 15c, the thing will be terminated," he says. There's also protection mechanisms so the bondholder can't take control on the cheap.
We're reluctant to ascribe a speculative buy to Central -- "as seen on TV" -- Petroleum, given the share ramp-up over the past week. But if Central attains a fraction of its potential, the stock would be worth much more than its $30 million market cap, so we'll do so anyway.
Watch for the first drill results by the end of June.
