humming

Going for gold — juniors are in if they can bring the land package to the party
By Barry FitzGerald
March 27, 2006

MELBOURNE-BASED Essential Petroleum has been one of the few junior oil and gas explorers to miss the boat in the boom oil market.

Shares in the Otway Basin specialist have done little more than drift along while the rest of the sector has run hot, as reflected in Anzon and its $195 million scrip-only bid for another Melbourne junior, Nexus.

Some indifferent exploration results, some management changes and a cash shortage were to blame for Essential's time out in the cold.

But Essential managing director John Remfry has got things humming again, with a resultant increase in investor interest in the stock.

On the weekend, Essential was due to start drilling the Pritchard 1 well in the onshore permit PEP 151, hard up against the border with South Australia.

The well lies about 60 kilometres north-west of Portland in the Tertiary Age depression known as the Portland Trough.

The trough has tantalised explorers for decades but has yet to come up with the goods in terms of a commercial oil or gas find.

Its potential to do so was Essential's reason for floating in the first place back in 1999. It has a 50 per cent interest while Bass Strait Oil and Inland Oil are earning the right to take a 25 per cent stake through the drilling of the well.

Essential reckons Pritchard has the potential for 4 million barrels of oil in an upper zone and 10 million barrels in a lower zone.

With a market capitalisation of a little more than $14 million (7.9¢ a share), just a sniff of oil could make things interesting in the stock.

Making sure it is not viewed as a one-well story, Essential has also cut a farm-out deal with Reg Nelson's Beach Petroleum.

Beach has agreed to increase its stake in the offshore Otway Basin permit VIC/P46 to 50 per cent, leaving Essential and Mittwell Energy with 25 per cent each.

Essential will be "substantially" carried by the joint venture, which could spend more than $20 million in seismic survey work and drilling in the permit area.

Targets there are similar to the big Geographe and Thylacine gas fields discovered in the Shipwreck Trough further to the east.