This private explorer and investor has the goss on oil and gas investing

Investing in ASX listed oil and gas companies can be a challenge given that it is not just commodity prices that one must take into consideration but the whole morass of government regulation – especially in recent times – that really muddies the waters.

To give our readers a bit of help sorting things out, Stockhead has some pointers from family-owned resources exploration and investment company Tri-Star Group.

Who better after all than a company owned by the Butler family, who have over 40 years of experience in oil and gas exploration, development and production across Queensland, South Australia, the Northern Territory, and the Permian Basin in Texas?

Topping their list of achievement is drilling the first commercial coal seam gas well in Queensland, effectively kicking off the onshore CSG to liquefied natural gas industry that has now seen more than $100bn of capital investment.

This acreage – including such names as Spring Gully, Condabri, Combabula, Reedy Creek, Fairview, and Arcadia – were some of the best in the region and were farmed out to what is now APLNG and Santos, delivering royalties that Tri-Star has leveraged into further oil and gas as well as critical and precious mineral investments.

Oil and gas investments

Speaking to Stockhead, Tri-Star Australia country manager Andrew Hackwood said the company was focused on exploration – particularly in upstream oil and gas where the management could leverage its expertise.

“We like investments where we’re not just passive capital and we can add value technically,” he noted.

“Omega is a good example where we have a technical committee with them, we have a board seat and we’re able to assist them with our knowledge and experience as well as support their own experience that they have within the organisation.

“We’re long-term investors that are focused on realising long term value and – we think – plays where there’s an appropriate balance of risk and reward, which is what attracted us to Omega, the 3Tcf of potential resource.

“There’s a big prize there and we can take a long-term view on trying to unlock that.”

Tri-Star has a 15% interest in Omega Oil & Gas (ASX:OMA), which is focused on unlocking the Permian Deep Gas play in the Bowen Basin, Queensland.

Its first two wells, Canyon-1 and Canyon-2 have already intersected better than expected gas columns of 424m and 293m respectively while wireline logging at Canyon-2 also returned interpreted porosities averaging more than 9%, which Hackwood described as being better than the benchmark it would normally consider.

He added that Omega’s proximity to infrastructure and exposure to export markets through the LNG projects in Gladstone also played a significant role in Tri-Star’s investment decision.

Greater risk environment

Hackwood also warned that some caution is warranted, noting that there’s increased investment uncertainty at the moment.

“There have been delays with project approvals and challenges. There have been caps on pricing. There’s been intervention in terms of licences that are required to sell gas to export markets, there have been tax increases,” he noted.

This increases uncertainty around what could occur in the future.

“I think Australia needs to focus on long-term investment certainty and we’ve certainly taken a hit there in recent times,” Hackwood added.

“We’re also expanding our operations at the moment in the United States and some of that diversification is also driven by some of the factors that I mentioned earlier.

“There are pros and cons to all jurisdictions. Australia has been great for Tri-Star but some of the recent challenges that we’ve had in Australia don’t exist in in the US at the moment.”

Not all Australian states are the same though with Tri-Star noting that Queensland has been fantastic and has done a lot of the heavy lifting on the East Coast gas market. And South Australia remains very supportive of exploration and production, which creates royalty revenues and taxes that will support other government initiatives.

What to look out for

With that in mind Hackwood reckons the oil and gas investor should be looking at the long-term need for gas as it was needed to provide secure baseload power to support the transition to renewable energy.

“They should be looking at the potential upside from the particular player and they should be looking at proximity to infrastructure and for us, Omega ticked all of those boxes,” he noted.

He also noted that a lot of producers that have grown in Queensland have benefitted from the flexibility presented by the LNG industry in Gladstone.

“They have a lot more capacity to take flexible gas supply, which supports the growth of projects versus selling to users that have a fixed amount of supply as their requirement each and every day.”

At Stockhead we tell it like it is. While Omega Oil & Gas is a Stockhead advertiser, it did not sponsor this article.