With 116 oil and gas exploration and production companies listed on the ASX, Petroleum Deals in Play analyses their regional focus.
Australian versus International Assets
Over 50% of ASX-listed oil companies focus solely on their international oil and gas projects, whereas only 24% concentrate all their efforts on Australia. 22 companies are advancing projects both domestically and internationally. Surprisingly in this category, there are a high number of small-caps including Pancontinental, and Bounty Oil & Gas, alongside the larger players such as Woodside and Santos.
Australia Onshore versus Offshore
Partly due to the lower cost of exploring and developing oil and gas fields onshore, over 60% of the Australian focused ASX E&P companies concentrate only on onshore. Senex Energy with an A$600M market cap is the largest of the onshore focused juniors and mid-caps. Whereas offshore exploration specialists such as Carnarvon Petroleum make up only 14% of the 28 Australian focused offshore ASX companies.
North America versus Rest of the World
North American onshore seems to be a destination of choice with 26 of the 61 internationally focused ASX E&P companies choosing to concentrate all their efforts in the US or Canada. This may be explained by the large availability of low-cost acreage relative to Australia. It may also be due to a more oil and gas friendly regulatory environment, where approvals take weeks not months. With more infrastructure and a larger service provider market, the cost of exploring and developing is also lower in North America, although infrastructure has been failing to keep up with the increasing production. While infrastructure bottlenecks continue to suppress North American prices, East coast gas shortages and sweeter crude means Australian focused players are realising greater margins.
Outside of North America, ASX oil companies tend to focus on nearby Asia, although at 18%, it is a relatively low percentage, especially compared to the 48% for North America. Notwithstanding country risk, Asian assets are often underappreciated. ASX-listed explorers and producers often trade at a considerable discount, making it difficult to raise capital which could be an explanation as to why fewer oil companies focus on Asia despite the natural geographical fit. A prime example of underappreciation of Asian projects is ASX-listed Lion Energy. It recently announced it had secured 100% working interest in the East Seram PSC, Indonesia containing an extension of the Lofin Gas and Bula Oil fields and in excess of 700 mmboe of unrisked mean potential in exploration leads. Despite this potential “game-changer,” there was no uplift in Lion Energy’s share price.
ASX E&P Company Focus – International – North America versus Rest of the World
Disclaimer: The author does not own any shares in the companies mentioned in this article.