MEO holders can sit back and relax: MEO Australia (MEO) CRITERION: Tim Boreham From: The Australian April 15, 2010 12:00AM Increase Text SizeDecrease Text SizePrintEmail Share Add to DiggAdd to del.icio.usAdd to FacebookAdd to KwoffAdd to MyspaceAdd to NewsvineWhat are these?WITH a modicum of luck -- the most valuable resource in exploration -- MEO holders can sit back and enjoy their daquiris while Brazil's Petrobras funds its quest to be the next Woodside. As tipped by your columnist, Petrobras has emerged as the farm-in partner for the Artemis field, owned by MEO (70 per cent) Cue Energy (15 per cent) and Moby Oil & Gas (15 per cent).
The terms are more generous than Kerry Packer on a non-grumpy day: in return for a 50 per cent stake, Petrobras funds the first well for up to $US41 million ($44.4m), with $US7.5m reimbursement for MEO's past costs and a $US31.5m cash bonus on Foreign Investment Review Board approval.
FIRB assent should be a cinch because (a) Brazilians aren't Chinese and (b) the feds have made it clear they want untapped NWS deposits to be developed. "Petrobras is a leader in deep-sea drilling and will bring a lot of credibility," says Bahay Ozcakmak of energy-oriented consultancy Activated Logic.
In the event of a successful discovery, Petrobras carries MEO's costs for two more wells capped at $US62m each, with a further $US31.5m payable by January next year.
Petrobras's maiden foray into the local gas sector shows just how much the global big boys will fork up for a bit of gaseous action.
But the rewards are enormous: in return for a maximum $US235m, Petrobras gets a half share of a field that already has stated P50 (50 per cent probable) reserves of 12 trillion cubic feet, much bigger than those of geological neighbours Wheatstone and Pluto. As it happens, the Pluto project could do with more gas to reach its full potential.
MEO shares surged 9c (20 per cent) yesterday. We had them as a speculative buy at 37c on March 17, but there's potential for more gains pending the result of the first well, scheduled for later this year.
The announcement also benefits Moby and Cue.
MOG Price at posting:
17.5¢ Sentiment: Buy Disclosure: Held
