Q3 Oil Price Rise Lifts Value of Upstream Independents


30 October 2012:  The combined market capitalisation of the Top 25 Upstream Independents rose by 6% over the third quarter in line with an improvement in oil prices.

Deloitte’s National Oil & Gas Leader, Mike Lynn, said that even though the Tapis oil benchmark had lifted by 18% over the quarter, price volatility remained a concern for Australian upstream independents.

“The industry continues to face a challenging outlook on many fronts with an uncertain regulatory environment and ongoing cost pressures compounding the problems associated with pricing volatility.”

Mr Lynn said these challenges had been among the issues contributing to the decline in Origin Energy’s performance this quarter, losing almost $1 billion in market capitalisation.

“Origin Energy has seen a steady decline in share price over the last 12 months, but the biggest fall during the quarter followed the release of Origin’s annual results. However, Managing Director Grant King said the company’s focus was on getting the $23 billion Australia Pacific liquefied natural gas venture in Queensland to market – causing the company to reduce its capital spend in other revenue generating areas,” Mr Lynn said.

In contrast, a number of upstream independents posted significant increases in market capitalisation during the quarter:

  • Beach Energy’s market capitalisation increased by over 50%, from just over $1 billion as at 30 June to almost $1.6 billion as at 30 September, driven by a number of positive announcements, including new shale gas discoveries, outstanding 2012 results and forecasts of a “material increase” in profit for 2013
  • Drillsearch Energy was another big mover during the quarter, recording an approximate 80% increase in market capitalisation. The company raised $50 million during the quarter (up from the $40 million initially announced following demand from investors), with 9.4% shareholder BG Group committing to take up shares. Whilst the company is being cited as a potential takeover target as a result of its Cooper Basin interests, it was Drillsearch that subsequently launched an all cash takeover offer for Copper Basin conventional gas explorer, Acer Energy, in early October
  • Central Petroleum entered the top 25 this quarter with its market capitalisation increasing from $129 million to $187 million, as a result of an approximate 50% spike in its share price. In early October, the company announced a $150 million joint venture with Santos to facilitate exploration of the Amadeus and Pedirka Basins in central Australia.

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