As a result, the area is likely to see an increase in merger and acquisition plays, a prediction made by EnergyQuest in its analysis of the share price impact of the oil price rout on Australia’s listed energy companies.
At the same time, there is some good news for Australian stakeholders: in spite of the fall in oil prices, the Queensland Government is anticipating a yearly $500 million royalties boost from the state’s new LNG-linked gas projects.
According to EnergyQuest Chief Executive Officer Dr Graeme Bethune, global oil supply growth had continued to exceed growth in demand over the past 12 months, to the extent that, after reaching the recent nadir, there were no signs that oil prices would recover in the near future.
“The further fall in oil prices in recent months has added insult to injury for the share price values of Australia’s listed energy companies,” Dr Bethune said.
“In a comparison of oil and gas company share prices as of 11 September this year…compared with early in June 2014, prior to the oil price weakness, the only Australian company in the group which has escaped the
impact of lower oil prices is AGL, which has minimal oil price exposure.”
Cooper Basin players experienced the biggest falls, Dr Bethune advised, with an averaged downturn of 70 per cent in the value of their shares, well ahead of the fall in oil prices in Australian dollars, at 42 per cent.
The share price slump in the Cooper Basin looks excessive, Dr Bethune explained, because oil production in the area continues to perform well.
“Oil production in 2014-15 was 12.6 million barrels, less than in 2014-15 but still almost 30% higher than two years ago.
“Moreover, as a supplier of east coast gas, the Cooper Basin is supplying one of the few tight gas markets in the whole world with increasing prices. The European gas market is in the doldrums, US gas prices have slumped to US$2.77 per million British Thermal Units (A$3.70 per gigajoule), and LNG spot prices in Asia have halved.”
Dr Bethune anticipated that with small Cooper Basin players developing new gas supply projects to meet strong demand on the Australian east coast, which is seeing a rise in gas prices, the conditions will be favourable for companies looking to make acquisitions.
“This presents great consolidation and takeover opportunities for new players with stronger balance sheets,” Dr Bethune said.