Oil exploration minnow IPB Petroleum has picked up the pace in its grand plan to get noticed by large producers.
Oil exploration minnow IPB Petroleum has picked up the pace in its grand plan to get noticed by large producers.
Managing director Brendan Brown visited Perth this week to meet corporate finance brokers for the first time as the company, which has a farm-in agreement with Berkshire Hathaway subsidiary CalEnergy Resources, gears up to begin drilling.
IPB has exploration permits covering 140,000 square kilometres in the Browse Basin.
"We have a large foothold," Mr Brown said.
He said IPB, which is based in Melbourne and listed on the ASX mid last year, was pursuing a strategy he learned while working as an engineer on oil field developments at BHP Billiton.
“The strategy is that you need to build something that eventually is worth more to a big company than it is to yourself,” Mr Brown said.
“And if you can do that and make something that is strategically material to a bigger company it gives you one of your ultimate value exit events for your shareholder.
“I don’t think there are any other companies that have this type of strategy in terms of offshore massive potential, shallow water, shallow reservoir depths and oil.”
He said the company, which has a market cap of $35 million, had been fairly low profile.
Mr Brown said IPB had secured a rig from AGR and signed a contract with Stena Drilling to start drilling in October at its Pryderi-1 exploration well in its WA-424-P permit.
WA-424-P also includes an existing oil and gas discovery, Gwydion-1, drilled in 1995.
CalEnergy Resources is financing the drilling, estimated to cost $15 million, in exchange for 25 per cent interest in the permit, which can be extended to a 60 per cent interest.
Mr Brown said if the drill was successful, IPB Petroleum stood to make $300 million from what would become its 40 per cent share.
“So there’s substantial uplift to the value of the company just on that discovery,” he said.
“The independent expert has given unrisked best estimate net to IPB of 619 million barrels of oil in two of those permits, that’s our share.”
Drilling has already been delayed by more than 12 months, in part due to it taking 18 months to get environmental approvals.
If drilling Pryderi-1 goes well Mr Brown said the company would need more finance and would consider further farm-ins and/or seek to issue more shares.
IPB would then look to develop further parts of its three assets in the Browse basin.
It’s original asset, acquired from a Nexus Energy subsidiary, was secured in exchange for the granting of a royalty.
Now that Nexus has gone into administration, Mr Brown said it was possible IPB may try to buy the royalty rights.
“The idea has entered our mind. I’ve contacted the administrator...who knows, we might be the natural owner to buy it back,” he said.
Meanwhile, Mr Brown said the company was focused on what could be the game-changing moment – striking oil at Pryderi.
“Exploration is by definition risky, but in exploration terms Pryderi has a lower risk exploration target," he said.
"It’s been rated independently of having a 45 per cent chance of being an oil discovery. Normally it’s 10 to 25 per cent.
“The upside case is we have a commercial oil development that’s worth many hundreds of millions of dollars and we have another couple of discoveries within our permits that could also be worth hundreds of millions of dollars.
“People will go these guys are onto something and they’ve got the whole play tied up.”
This week IPB’s share price varied between 30 and 35 cents. At 2.52pm WST today it was down 6.25 per cent at 30 cents.