Value of Oil & Gas Upstream Independents fares better than average despite ongoing challengesDOWNLOAD
27 February 2012: The combined market capitalisation of the top 25 Australian Upstream Independents declined by 14% in 2011, however the industry fared comparatively well in the face of prevailing market uncertainty given the value of the ASX top 25 companies declined by around 21% during the same period, according to the Upstream Independents League Table released today by professional services firm Deloitte.
Deloitte’s National Oil & Gas Leader, Stephen Reid said that while onshore activity in the Australian oil and gas industry had edged back towards pre-GFC levels during 2011, there were still a number of challenges that had affected the performance of many upstream operators.
“Pressures including the strong Australian dollar, ongoing global uncertainty and the skills shortage are all likely to have contributed to a heightened risk of increased project costs and extended timelines on some major projects.”
“Unusually, the performance of the top four Upstream Independents delinked from the oil price during the second half of 2011, perhaps reflecting a combination of the fact that oil prices are climbing above US$120 for the first time since 2008 and a possible decline in market confidence that major projects can be delivered on time and on budget,” Mr Reid said.
There is still a strong appetite for ‘unconventionals’ according to Reid, with many of the top performers holding shale gas or coal seam gas interests either here or in the United States.
“Interest in unconventional assets grew during 2011 and generated the majority of onshore M&A activity in the Australian upstream sector during this time, particularly from a number of international players keen to secure an early interest in Australian shale assets.”
“Aurora Oil & Gas, the only new entrant to the top five, moved up from ninth place after seeing its value increase by more than 60% from $850M to nearly $1.4B, primarily as a result of its liquids rich shale gas assets at Eagle Ford in the US and the successful development of its Sugarkane Field.”
“However, while investment in the long term potential of shale gas has delivered strong results for operators like Aurora, its future in Australia remains untested and will depend on the industry’s ability to monetise those assets economically,” Mr Reid said.
“Companies exploring in regions such as the Cooper Basin, where the necessary infrastructure is already well established, will enjoy a distinct advantage as the shale gas industry develops.”