Wildcat explorers take a few hits

PERTH Basin oil explorers are hoping to avoid a hattrick of offshore disappointments next week.

Results onshore and offshore in the past 18 months have well and truly beaten the industry average for wildcat exploration. The first offshore well of the season, an appraisal well on the Cliff Head structure, came up trumps with a better-than-expected test flow.

Over the past three weeks, however, results from the first wells in the nearby Twin Lions and Mentelle structures have been disappointing.

Twin Lions 1 was dry, while weekend investigation of oil shows in Mentelle 1 revealed the structure had been breached and the oil had gone.

Investors have punished those companies with little other positive portfolio activity, how-ever some analysts say the market is over-reacting and that some of these companies remain ‘unloved and undervalued’.

Hogan & Partners resources analyst Adam Conigliaro said it could take some time for some of the smaller companies to regain the highs of a month ago.

Euroz Securities resources analyst Ollie Foster said that, without further success, prices for those companies were likely to remain depressed until Cliff Head started commercial production.

“They’re going to have to raise more money, or they might sell out of their positions,” he said.

Mr Conigliaro said Cliff Head was no longer speculative blue-sky exploration – it would be a producing asset.

“But people wanted to see new discoveries from this

program,” he told WA Business News.

“There’s only one more chance now, and the prevailing market sentiment is magnifying any non-positive news.”

However, Paterson Ord Minnett oil and gas analyst Russell Languish said the market interest would pick up again following just one more success.

“There’s oil in the basin,” he said.

“It’s unlikely it was a fluke that the only oil there was drilled first (Cliff Head).”

Mr Foster said there obviously was oil in the system.

“And there’s not usually just one oil field on a trend. It’s a case of putting more holes down – just a case of finding a valid trap,” he said.

Mr Foster said the market had found the results of the past three weeks a reality check after an exciting 18 months in the basin.

“But that’s the game,” he said.

“If it was easy to find oil, everyone would be finding it.”

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