Oil and gas explorers urged to ‘drill deeper and discover’ as sector turns the corner
There are opportunities in Australia’s oil and gas sector if explorers drill deeper.
That’s the message from stockbroking firm Argonaut Securities, which believes the sector has turned a corner in terms of investor interest.
Speaking to the Who’s Who of the oil and gas sector on the first day of the RIU Good Oil conference in Perth, Argonaut’s executive director of corporate stockbroking Kevin Johnson said there were opportunities flying under the radar after a prolonged downturn.
“I think we are at the bottom of the market now and the lack of investment and lack of drilling and the lack of activity that has been going on is now beginning to turn,” he said.
“There is a change underway in the sector and there is a change that many people have not seen because a lot of people had given up on these companies a year or so ago and that itself provides opportunities when investors give up on sectors,” he said.
Explorers should focus more on drilling at depth to find new deposits.
“What needs to happen is there needs to be a new way of thinking,” he said. “I think deep drilling is the key. We have the equipment in this state to do it.
“If you look at the history of the Perth Basin, the wells drilled are all quite shallow and all the deep wells — there has been four or five of them — have all found something.”
Mr Johnson highlighted Australian Worldwide Exploration’s (ASX:AWE) discovery of the Waitsia gas field in the Perth Basin in September 2014 while drilling the Senecio-3 well.
“Up until Senecio-3, there had been 19 wells drilled in the Dongara area and all of them had been terminated on the basis they had poor reservoir quality,” he said.
“When Senecio-3 was drilled, they were drilling down and the well was more successful than it was thought to be and it was under budget.
“They thought ‘what do we do now’ and so they continued drilling and a new discovery was made. That was tested and shown some very good results.”
Waitsia is considered the biggest onshore conventional gas discovery in Australia over the past 40 years.
The Waitsia gas fields lie on pastoral land about 14.5 kilometres east of Dongara and 367 km north of Perth
Waitsia has the ability to supply the domestic market with 100 terajoules per day for more than 10 years from conventional reservoirs.
The field lies onshore in the northern Perth Basin, one of Western Australia’s major gas producing regions for more than 50 years.Waitsia Stage 1A came into production in August 2016.
Meanwhile, West Texas intermediate crude oil for October delivery gained 16 cents, or 0.3 per cent, to settle at $48.23 a barrel after an OPEC report showed oil production from the cartel fell last month.