Western Australia's Unconventional Energy Players Excel

This is the year for gas, especially shale and other unconventional gas sources, and the excitement surrounding it has had a positive impact on companies with such assets in onshore Western Australia.
 
Western Australia has three primary petroleum regions, the Canning, Carnarvon and Perth basins.
 
Of these, the Canning and Perth basins are better known for their shale potential with the United State’s Energy Information Administration estimating the Goldwyer Shale in the Canning Basin containing recoverable resources of about 229 trillion cubic feet (Tcf) of gas while the Carynginia and Kockatea shales in the Perth Basin could hold 59Tcf of gas.
 
While possessing the larger resource, the Canning Basin is also considerably more remote than the Perth Basin. However, the entry of Mitsubishi Corporation and ConocoPhillips into separate ventures with existing explorers has inflamed market interest in the region.
 
The players

Buru Energy has arguably taken the early lead in the Canning and its performance on the ASX is just evidence of this. Shares in the company have jumped 156% since the beginning of this year to close at A$3.18 last night.
 
The company has enjoyed successes with its Valhalla wells, which have proven the ability of the Laurel tight gas system to produce both gas and liquids, the Pictor East-1 discovery and the Ungani conventional oil discovery.
 
Looking ahead, Buru will shoot seismic to identify new play types, prospects and leads; drill conventional oil prospects in the Acacia province; test and develop at least one of the three additional major unconventional play types on Buru’s permits; and further delineate the extent of the Laurel unconventional wet gas play.

These include the Cyrene-1 well that Buru is drilling as part of its farm-in to EP 438.
 
All these are carried out in conjunction with partner Mitsubishi, which is earning interests in Buru’s exploration permits by carrying up to A$62.4 million of exploration for conventional hydrocarbons in 2010 and 2011, and A$40 million exploration for unconventional hydrocarbons this year.
 
Mitsubishi, an experienced liquefied natural gas player, will also take the lead role in commercialising all LNG options for the joint venture.
 
Fellow Canning Basin acreage holder New Standard Energy has also enjoyed strong performance on the market with its shares up about 130% to A$0.695.
 
The company has been steadily getting its 3 well Goldwyer shale exploration program into place in the first quarter of this year and expects to kick-off the campaign in the middle of this year.
 
Successful delineation of a liquids rich hydrocarbon resource at Goldwyer could result in a project with attractive economic parameters that are similar to the North American Bakken and the Eagle Ford shales.
 
Like Buru, New Standard has a major partner in ConocoPhillips standing in its corner with the supermajor is taking up to 75% in the Goldwyer project under a 4 phase program.

The company is also planning to drill 2 wells at the Merlinleigh project, which targets the Wooramel shales in the Carnarvon Basin.

Oil Basins has being another favourite of investors with its shares rising 228.6% to A$0.069.

While the company is focused on its Backreef Area oil play, it is exposed to unconventional gas in the Canning Basin through its 50% operating stake in the coal seam gas and unconventional gas plays in 5/07-8EP.

In addition, Oil Basins has an agreement with Liquefied Natural Gas Limited to evaluate and develop a liquefied natural gas project in the Canning Basin.

Green Rock Energy’s initial 15% stake in EP 417 has also kept the company on the investment radar.

Shares in the company have grown by 37.5% since the beginning of this year to A$0.011 last night.

Meanwhile, the market is clearly in favour of Key Petroleum’s transformation into a Western Australia shale gas player with its shares up 133% to A$0.042.

Most of this increase has occurred since the appointment of Kane Marshall as its chief executive officer (and now managing director) and the acquisition of Gulliver Productions and its portfolio of Canning Basin permits from Empire Oil & Gas.

The third largest net holder of acreage after Buru and New Standard, Key is free carried through drilling of Cyrene-1 in EP 438, and has identified large unconventional oil shale leads in the Goldwyer Formation in EP 448.
 
Key also holds a 22.5% interest in EP 437 in the Perth Basin, which holds the Triassic aged Kockatea Shale.

Shale plays in the Perth Basin are also considered by AWE to be one of its key focus areas, a sentiment that is shared by investors who have sent shares in the midcap up by 39.3% to A$1.88.

AWE holds a large tract of shale acreage in the Perth Basin and is moving ahead with a 3 well fracture stimulation program there.

These consist of the Senecio-2 fraccing to test the potential for improved production from the Wagina/Dongara tight gas reservoir and fracs to test the Kockatea, Carynginia and Irwin River Coal Measures at both its Woodada Deep-1 and the Norwest Energy operated Arrowsmith-2 well.

Norwest Energy itself has been attracting investors, sending its shares up 122% to A$0.071 last night since the beginning of this year.

Fraccing equipment for the Arrowsmith well are set to arrive in June and the frac will give Norwest the data to high grade target intervals for subsequent development; scale up results to predict production rates for horizontal wells; design an appropriate program for the next phase; and estimate contingent resource volumes.

Success would ultimately contribute to the development of what is expected to be a significant shale gas industry in Western Australia.

Source: Proactive Investor Australia