Australian investors are falling in love with these gas stocks
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The Australian oil and gas industry is centred around gas. While earnings from crude oil, condensates and liquefied petroleum gases hit $10.1b in the 2018-2019 financial year, Australian liquefied natural gas exports were worth nearly five times that amount at $50b.
Production and export of the supercooled gas may generally be the purview of major oil and gas companies, but smaller players have also benefitted from their gas discoveries thanks to growing domestic demand and declining production from gas fields not earmarked for LNG.
This is especially true in the eastern states where the Australian Energy Market Operator has forecast that a gas shortfall is likely in 2024 without new commitments to develop existing reserves and resources, increased pipeline capacity from Queensland, or further investment in alternative infrastructure development.
The situation is a little less dire in Western Australia, where the state’s domestic gas reservation policy — which locks away 15 per cent of its gas production for domestic use — ensures there is plenty of gas for local use.
However, there is still scope for new gas supplies to replace or supplement reserved gas with discussions already underway into potential opportunities.
So what are some of the gas-focused small cap companies that have really set investor pulses racing?
Strike Energy (ASX:STX) and Warrego Energy (ASX:WGO) have arguably made the most waves with their ground-breaking West Erregulla-2 exploration well in Western Australia’s Perth Basin.
Not only was the well one of the deepest onshore wells in Australia, it also confirmed that the target Kingia and High Cliff sandstones, which have produced gas in the nearby Waitsia field, may be commercial elsewhere in the Perth Basin.
To top it off, the discovery appears to be, at the very least, comparable to Waitsia, which is itself believed to be Australia’s largest onshore conventional gas find in 40 years.
Results from flow testing West Erregulla-2 are expected soon, which will determine if the discovery is commercial.
Fellow Perth-Basin focused explorer Norwest Energy (ASX:NWE) has also benefitted from the attention on gas plays.
The company’s Lockyer Deep and North Erregulla gas prospects are located to the north and on trend with West Erregulla-2 and also target the same sandstones that have proven so lucrative for Strike and Warrego.
Red Sky Energy (ASX:ROG) also grabbed the headlines when it managed to snag major player Santos (ASX:STO) as the partner for its Innamincka Dome projects in the Cooper Basin, South Australia.
Santos can earn an 80 per cent interest in the mix of oil and gas projects by spending up to $9m in exploration and appraisal work.
Energy World Corporation (ASX:EWC) also captured some hearts after revealing in August that it had completed initial well rehabilitation and confirmed gas flows and pressures at its existing wells within the Eromanga gas fields in Australia.
These efforts are aimed at starting commercial production from these gas fields.
Coal seam gas player State Gas (ASX:GAS), which has former Queensland Gas Company managing director Richard Cottee as its chairman, was recently successful in its court action to secure the remaining 20 per cent of the Reid’s Dome joint venture.
While an appeal by former joint venture partner Dome Petroleum Resources is still winding its way through the courts, the company said that it would proceed with its drilling and production activities.
The company has since drilled the Aldinga East-1A well to investigate the gas potential of the Reid’s Dome Beds coal measures.
This is how some of Australia’s gas-focused companies performed in the past three months:
|Code||Name||Price [Friday intraday]||Total 3 Month Return %||Market Cap [$AU]|
|ROG||RED SKY ENERGY||0.003||50||$4.7M|
|BUY||BOUNTY OIL & GAS||0.004||33||$3.8M|