CHEVRON, the biggest oil major in the Cooper Basin, needs to...

CHEVRON, the biggest oil major in the Cooper Basin, needs to decide in the next six months whether it continues its plan to spend up to $US349 million ($398m) farming into Beach Energy’s unconventional ground.

To date, results have been inconclusive (partly because of drilling problems that have resulted in a new contractor, Condor Energy, being brought in to replace Haliburton) and speculation the oil major may not move to stage two of its Beach farm-in is growing.
Beach is not commenting on what Chevron will do, leaving that up to the oil major, which has not indicated its intentions.

Citi analyst Dale Koenders says there is a risk Chevron will not move on to a second stage and that if this happens it will be negative for “the entire space”.
“Beach has discussed the potential for a Chevron exit and we see a genuine risk of this if upcoming production testing disappoints, particularly given global majors are prioritising capital returns over spending cash on long-dated resources,” Mr Koenders said in a note to clients.

The note was sent after a site tour but it should be noted not all analysts on the tour came away with a view that there was heightened risk Chevron would walk.
The company has another analysts’ tour coming up this week.

Another analyst said Chevron leaving the joint venture was seen as a risk and that trolling through Chevron’s public recent announcements found scant mention of the Cooper Basin, which was not seen as a good sign.

Mr Koenders said if Chevron did not participate in phase two of the Cooper Basin unconventional appraisal by its March 31 deadline, Beach would regain 100 per cent of the interests and look for another partner. “From our discussions with Chevron we understand it wants to see positive results from upcoming production testing prior to committing to phase 2,” he said.

The results in question are from the Hervey-1 well and are expected next month.
If Chevron does leave, the talk is there would be the potential for a sub-$100m pilot plant targeting high-quality tight sands, which has been producing better results in the Cooper than shale, near the previously drilled Boston well.