The Tale of (Australia’s) Two Coasts: Both are producing gas, but small cap explorers face different problems
Link copied to
Australia’s east and west coasts are both producing record amounts of gas, but that’s where the similarities end.
In the September quarter, the east coast produced a record 500 petajoules while the west produced 108.5 petajoules, according to new data from Australian energy advisory firm EnergyQuest.
Both were solid increases from the previous quarter of 4 per cent and 11 per cent respectively.
It was a particularly positive quarter for LNG, which reached a record 20 million tonnes — exceeding Qatar’s nameplate capacity on an annualised basis. EnergyQuest expects shipments for this financial year to be 82 million tonnes.
It was also a record quarter for coal seam gas (CSG) production – this reached 377 petajoules.
Australia’s largest oil producer was Beach Energy (ASX:BPT) with Woodside (ASX:WPL) nipping at its heels.
But small cap explorers in these states have different problems. While low gas prices are true across both coasts, it has hit small caps in the west more than the east.
“Markets are risk averse,” EnergyQuest CEO Graeme Bethune told Stockhead.
“You saw with Strike Energy (ASX:STX) and Warrego Energy (ASX:WGO) they made fantastic discoveries, but then the market went and focused on gas prices in Western Australia, asking what they’d do with the gas.”
“For gas prices it’s a lot higher on the east coast so that’s favourable for companies like Cooper Energy (ASX:COE).”
The east however faced exploration restrictions in New South Wales and Victoria. One company impacted by this is Gina Rinehart-backed Lakes Oil (ASX:LKO).
“It restricts you really to South Australia and Queensland,” said Bethune. “But certainly there’s continuing interest there by smaller companies.”
Both coasts also face slowing international energy prices. Spot LNG and coal prices have fallen, as have oil prices.
EnergyQuest said long-term contracts were quarantining local LNG producers from the glut.
Bethune told Stockhead the upcoming Organization of the Petroleum Exporting Countries (OPEC) meeting would also be an important factor as to whether or not they rolled forward or increased production cuts. He said the expectation was OPEC would increase production cuts.