WESTERN Australian Entrepreneur of the Year finalist Paul Underwood heads the day-to-day operations of a WA company that has never traded below its 1996 listing price.
The trading record of that company, Tap Oil, is all the more impressive given that it has operated almost entirely offshore and in a comparatively immature oil and gas province in terms of exploration.
Last financial year the company raised $23 million in new capital and the company recently reported its third consecutive quarter of record revenues.
Towards the end of 2002 Tap was recognised by Asia Money magazine with a “Best managed company under $US500 million” title.
Last week’s entrepreneurs finalist list brought official acknowledgment for Tap CEO and managing director Mr Underwood, who has paired successfully with Tap chairman John Mumford since mid-1996.
The name Tap has long been associated with its 12 per cent interest in the Harriet joint venture, a very successful Carnarvon Basin oil and gas exploration and production partnership led by Apache Energy and operating from Varanus Island.
The venture is finalising Varanus upgrades that will ensure facilities can more than adequately handle a 25-year supply contract with Burrup Fertilisers, the pioneer of a series of major gas-based industry projects in the region.
This contract alone is expected to deliver an additional $8 million to Tap for each of the 25 years, underpinning capacity to fund further Harriet exploration and development.
The Linda gas field, the next development to be announced, will be the highest liquids yield Harriet operation to date.
Harriet gas also supplies other major industrial customers via the Dampier to Bunbury Natural Gas and Goldfields Gas Transmission pipelines.
One of the most recent contracts is a 15-year supply to the Burns & Roe Worley’s Esperance power project, through an extension of the GGT line.
The Harriet loss of the Alinta contract last September is now considered almost immaterial to Tap, given the company’s increased oil production.
Since late April Tap has more than doubled its oil production from the Woollybutt field 80 kilometres north of Onslow, in partnership with Eni and Exxon Mobil.
Tap’s high-profile name alliances do not stop there.
The company has new acreage with Santos and Apache around storage and offloading facilities on Airlie Island.
Airlie is 13 kilometres from Tap’s fully-owned Cyrano oil discovery and at least two developments are expected to be tied back to Airlie within the next 12 months.
Tap remains aggressive, continuing its annual 12-20-well drilling program this year.
However, some of this new drilling is in territory that does not quite fit the company’s historical focus.
Tap is farming into the northeastern tip of the Carnarvon Basin with Magellan Petroleum, and has onshore gas interests in New Zealand.
Demand currently outstrips supply in New Zealand and while any Tap development can be readily tied back to existing infrastructure, the company has not yet spent up big there.
Bell Potter Securities senior analyst Matthew Ward said this could be the first asset for Tap to offload, if needed.
Tap has a lot of money tied up in the Carnarvon Basin – considered by some as the best petroleum exploration address in Australia.
Mr Ward said increased ownership and operatorship in the region could offer Tap the best growth opportunities.
Takeover talk continues, particularly with Tap’s expanded portfolio in parts of the Carnarvon Basin considered highly prospective.
Fellow ASX-listed company Santos is one regional player reported to be interested but so are larger overseas companies that are already in alliance with Tap.
Of the company’s own interest in corporate or acreage acquisitions, last year’s failed Arc bid underscored Tap’s interest in prospective territory closer to WA’s south west.
It also emphasised that the company is strong on the “right-price” approach.
Apache’s move into the offshore northern Perth Basin is one avenue through which Tap could obtain some of the more southern action should Apache make a successful move for its junior Harriet partner.
Mr Underwood said he hoped Tap shareholders would not vote in favour of a takeover bid at this moment in the company’s history.
“It would be a shame at this point – there’s a lot of growth to add yet,” he said.
Of the company’s own acquisition aspirations, he will only offer the stock-standard: “There are always new venture targets around and always growth opportunities”.
Mr Underwood refused to prioritise areas.
And of his own recognition?
“It’s a credit to the company as a whole,” he said.
“Tap has been a leader in good corporate governance since 1996.
“And it’s good to see a less glamorous part of the corporate world recognised.”
Mr Underwood seems more excited, however, at expectations of announcing an annual profit double that of the 2001-02 year.
And at the realisation that oil production will be triple that of last year.
The company now has direct interests in 23 joint ventures and is indirectly linked to 200.
Mr Underwood is confident of further marked jumps in profit and production.
“Tap has an outstanding growth profile and a highly competent and professional geotechnical team,” he said.
Tap listed at 50 cents, with a market capitalisation of $55 million in September 1996.
It is currently trading at around $1.38 and has a market cap of $217 million.
Mr Ward said the company was going “cheap” at the current price.
Note: Norwest Energy has a 10 per cent interest in the permit containing the Cyrano discovery, but opted not to participate in Cyrano-1.
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