Shares in Beach Energy (BPT) and Icon Energy (ICN) will come under pressure this morning in the wake of a fall in oil prices offshore overnight Friday, and the more important news of Chevron walking away from the shale oil and gas projects in the Cooper Basin area of Central Australia.
The Chevron decision followed the move to quit its 50% stake in Caltex, leaving the US oil giant with major stakes in the Gorgon and Wheatstone LNG projects offshore WA, plus other exploration interests in the area.
Chevron entered the Cooper Basin area in a joint venture with Beach and Icon back in 2013 and could have spent well over $300 million on acquisition, drilling and other costs for the planned three stage project.
But as oil prices have slid, Chevron, like all its peers, large and small, has taken the axe to exploration and other spending and looked to generate cash by selling unwanted assets, raising questions about its involvement in Australia outside the WA LNG projects.
Rumours of its exit from the Cooper Basin project have risen in recent weeks and were confirmed late Friday in statements from Beach and Icon.
This means Beach will need a new partner to fund further drilling in the Nappamerri Trough, an area of the Cooper Basin in central Australia.
BPT, ICN 1Y – Chevron abandons Cooper Basin
Chevron’s decision, while not unexpected in the oil and gas industry, is nevertheless a blow to Beach and to Australia’s emerging shale gas exploration sector.
Beach’s areas were highly-rated by analysts and Chevron’s decision to joint venture in an exploration effort raised that rating.
In fact it was the most advanced of all ‘unconventional’ oil and gas plays in Australia as a result of Chevron’s participation – now its gone backwards.
Now the shale oil and gas sector has effectively been put on the back burner by a combination of the slide in oil prices and decisions by companies such as Chevron to scale down or quit the sector.
In a statement released late Friday night, Beach said Chevron told it that while extensive technical evaluation confirmed a large gas resource in the Nappamerri Trough, “at this time the opportunity does not align strategically with Chevron’s global exploration and development portfolio".
“Chevron’s spending on exploration is being high-graded and significantly reduced in response to market conditions,” Beach quoted Chevron as saying.
With Chevron’s decision, all the its equity interests in the joint ventures return to Beach at no cost. That leaves Beach with 100% of PRL 33 and PRL 49 permits in South Australia and 64.9% of ATP855 in Queensland, with Icon Energy holding 35.1% of that areas.
Both beach and Icon said in their statements the departure of Chevron means spending on the projects will be scaled back dramatically.
"Beach and its joint venture partner, Icon, are currently reviewing Stage 1 data and outcomes to determine scope and objectives appropriate for future activities. It is expected that further studies will be conducted over the remainder of FY15 and into FY16, with minimal spend anticipated over this period. In line with its original strategy, Beach will pursue partnering opportunities for the NTNG (Nappamerri Trough Natural Gas) project,“ Beach’s statement said.
"NTNG is a vast resource with potential to supply gas to Australian and export markets for decades to come,” the company added.
