AGL puts $37m into Galilee Email Print Normal font Large font AdvertisementJamie Freed July 12, 2008
QUEENSLAND'S Galilee Basin is shaping up as the next hot area for coal-seam gas exploration, with AGL Energy yesterday agreeing to invest up to $37 million to farm into half of one of the permits in the basin, owned by Galilee Energy.
Galilee Energy is an unlisted public company with about 25 shareholders, but its major holder is the listed explorer Eastern Corp, which has a 68 per cent stake.
AGL will fund the first production testing on Eastern's ground. Eastern drilled a successful exploration well last year, but has yet to determine flow rates it could achieve.
Eastern's business development manager, Sam Aarons, said coal seams in the Galilee were deeper and a bit further from pipelines than those in the Surat and Bowen basins, and so had been overlooked in the past.
"It's a pretty exciting area because it is so under-explored," she said.
Eastern will keep full control of another permit in the region and might bid for more permits in a Queensland Government tender round that closes next month. But it estimates it has 20 trillion cubic feet (TCF) of gas in place at its present holdings.
Eastern shares closed 10.5c higher at 38c on the news, which came just one day after Britain's BG Group highlighted the prospectivity of the basin, west of Moranbah, in a discussion about its bid for Origin Energy. In a recent reserves update, Origin said its Galilee Basin permits had the potential for about 17.9 TCF of "prospective resources".
But BG's chief executive, Frank Chapman, said on Thursday he believed all Origin's ground in the basin was subject to "reversion" - which meant the original owner, Tri-Star Petroleum, would eventually regain rights to 45 per cent of the permits. An Origin spokeswoman confirmed the Galilee permits were subject to reversion of of this scale.
BG accused Origin of not properly disclosing the reversion rights, which have the potential to cut Origin's resources in the future. But details describing which permits would eventually see interests revert to the original owners were given in the target's statement for Origin's 2003 acquisition of the remainder of Oil Company of Australia.
Origin's interest in the Santos-operated Fairview field is expected to increase to 25.4 per cent from 23.8 per cent following the recovery of costs. But that increase is the exception - after reversions, Origin's interest in its Spring Gully field will be reduced.
A Credit Suisse analyst, Sandra McCullagh, said she would prefer to see an independent assessment on the impact of the reversion rights, which on her estimates could reduce Origin's value by 68c to $2 a share. She has valued Origin at $21.24 a share without counting the reversion rights, but acknowledged that was at the "top of the market".
ECU Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
