palmer the punter

QLD tycoon hopes gods smile on gas playBarry Fitzgerald
January 19, 2009
Clive Palmer has rolled the dice over Zeus, an infamously fickle deity.

MONEY begets money. It's an axiom that is about to be put to the test big time in the oil and gas sector by Queensland's richest man, Clive Palmer.

In an enormous personal gamble, Palmer has plonked down $46 million on a bet that the Zeus gas exploration well on the North West Shelf can live up to the awesome reputation of its namesake Greek god.

Flush with funds from his iron ore killings in Western Australia, Palmer's unlisted Resource Development International Limited is funding 80 per cent of the cost of drilling Zeus to earn a 35 per cent interest.

The $46 million "bet" he is making represents the capped cost of RDI's exposure to the well. Roman goddess Venus will be on hand to see what Zeus has got, with the Norwegian-owned "Songa Venus" semi-submersible rig due to have spudded in the well on the weekend.

Zeus is a structural/stratigraphic play estimated to contain 15 trillion cubic feet of gas in the Legendre sandstones and maybe another 3.7 Tcf in the overlying Forrestier sandstones. So we're talking about liquefied natural gas project-sized resources.

But there are no certainties with any of that, so it is a huge roll of the dice by Palmer. Having said that, if Zeus comes in, Palmer will gain J.R. Ewing-like status within the local oil and gas industry to add to his iron ore fame.

As mentioned in Garimpeiro on December 14, Zeus is also a potential game changer for Melbourne-based MEO. It is the operator of the well and a 35 per cent partner.

MEO shares were 11¢ on December 14. On Friday, the stock closed at 31¢. That's as good an example as you'll get of investing in the junior sector being all about stock selection, particularly during a raging global financial crisis.