rigzone article

When we fly we will fly high!

http://www.rigzone.com/news/article.asp?a_id=114774

American oilman J. Paul Getty famously had a simple recipe for success: 'Rise early. Work hard. Find oil'.

Decades later, little has changed. Today, just as 100 years ago, a successful oil and gas discovery can create a fortune overnight.

It's no surprise, therefore, given Western Australia's entrepreneurial streak, that Perth is home to a large number of companies betting big on making the next substantial oil and gas discovery.

The majority of oil and gas exploration wells - around 80 percent, as a rule of thumb - end in failure. Despite those odds, such are the huge rewards that come with success that there is always a solid queue of companies looking to drill the next great prospect, and an equally solid queue of investors willing to back them.

This year is shaping up as a particularly active one for a number of junior exploration companies that have spent the past few years identifying promising oil and gas prospects.

WA Business News has identified six junior companies that, if all goes to plan, should be drilling substantial prospects over the course of this year.

If they succeed, they can expect to see their share price rocket upwards. Failure will generally equate to a similarly steep fall in the opposite direction.

The following companies have all studied structures within their acreage and, with the help of consultants, come up with estimates of how much oil and gas those structures could contain. The big question for all the companies, however, is whether the structures will end up containing any oil and gas at all - a question that can only be answered through expensive exploration drilling.

Investing in speculative oil and gas explorers is a very risky business and is not for the faint-hearted. Just maybe, however, one of the following stocks is on the cusp of striking it rich in the coming 12 months.

Neon Energy
Recent discoveries off the coast of Vietnam by the likes of ExxonMobil, Petronas and Premier Oil have been great news for Neon, which has been sitting on a 50 percent interest in two promising exploration blocks.

Respected industry consultants Netherland Sewell & Associates have identified 19 targets, with Neon's Block 105 estimated to be capable of hosting around 165.5 million barrels of oil and 5.6 trillion cubic feet (Tcf) of gas, while the best estimate for block 120 suggested it could host 1.9 billion barrels of oil and 2.6 Tcf of gas.

Under a recently struck agreement, an as-yet unnamed third party will fund seismic surveys and drill a well in Block 105 in exchange for a 25 percent interest in the two blocks. The partner will also pay Neon up to $US5 million in cash.

Neon's shares have already rallied to around 45 cents on the back of the building excitement in Vietnam, but analysts are tipping the stock to go even higher as drilling nears.

Bell Potter has a price target on Neon of $1.07, DJ Carmichael is tipping Neon to go to 74 cents, while both Patersons and RBC have 73 cents as their target prices.