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5 stocks to watch in the Cooper Basin gas development

The Cooper Basin is one of the energy regions in Australia that has attracted a lot of business and media attention, with new discoveries of unconventional gas brought to light, because of the growing concern that gas prices will be rising over the next several years. What are some of the companies operating there and how is business performance?

Santos Limited (ASX: STO) announced in late December that one of its shale gas wells was now flowing 3-million standard cubic feet per day. It is located within 2km of existing infrastructure and can be tied in easily to its production network. It has a majority stake within a joint venture, with Beach Energy Limited (ASX: BPT) and Origin Energy Limited (ASX: ORG).

Beach Energy owns a minority interest in the Moomba gas plant, which is majority owned by Santos, and has its own development and exploration programs. Last February, US oil producer Chevron Corporation (NYSE: CVX) entered into a deal with the company to fund two exploration projects with US$349 million.

Over the past two years, revenue has risen from $524 million to $729 million, and NPAT climbed 115% from $65 million to $140 million.

Cooper Energy Ltd. (ASX: COE) has a market capitalisation of $155 million, and its core business is in the Cooper Basin, producing about 500,000 barrels of oil pa. It is expecting to expand oil production in 2014. In addition, it’s increasing its exploration in the region to develop more unconventional gas sources.

Strike Energy Ltd (ASX: STX), a $74 million company, announced this month that it has put together an agreement with the newly listed Orora Ltd (ASX: ORA) packaging company to supply 30 petrojoules of gas. In the form of 3PJ annually for 10 years, starting in 2017.

Orora has agreed to pay an option fee, and Strike Energy will use the fee towards proceeding on the exploration and development work program. Also funding this project will be Orica Ltd (ASX: ORI), which entered into an agreement in July, for 150 PJ to be supplied over 20 years.

Senex Energy Ltd (ASX: SXY) has increased production over the past three years by 793%, and NPAT has risen from $2.4 million to $63.3 million. Having zero debt, and a net profit margin of 46.1%, it’s in a position to fund further expansion.

It proposed a merger with AWE Limited (ASX: AWE), a gas and oil producer, in December, but the offer was knocked back immediately because AWE felt there was not a sufficient premium for its value. Senex withdrew the offer consequently.

Foolish takeaway

Keeping up with the news coming out of the Cooper Basin may take time for an investor, but your investment in time could pay off handsomely as this regional story develops. Soon LNG exports will be flowing out from QLD, and expected supply and price concerns for domestic customers may drive business harder, as well as start a round of M&A activity.

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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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