The Cooper Basin’s best value play right now

Four energy producers put head-to-head, but which one is the best?

a woman

The Cooper Basin, which has been described as the most important on-shore petroleum and natural gas deposit site in Australia, is showing renewed potential as significant, growing source of energy production recently.

The four most significant players in the region are Santos (ASX: STO), Beach Energy (ASX: BPT), Senex (ASX: SXY) and Drillsearch (ASX: DLS) and most have been chalking up big increases in reserves and production from recent drilling programs. But which company represents the best value for investors wishing to jump in and take advantage of the growth?

The companies can be difficult to compare given their different sizes and production levels. One simplistic way to cut through this is to use the EV/2P ratio. That is, a company’s enterprise value divided by its proven and probable oil reserves, expressed as 2P.

Enterprise value takes into account the amount of cash and debt a company has in addition to its market capitalization which helps level the playing field.

Of the four companies Drillsearch comes off looking like the most expensive. With a market capitalization of $565 million, total debt of $137 million, and cash reserves of $36 million, the company has an EV of $666 million. Drillsearch has rapidly increased its proven oil reserves (2P) over the last year and as of 31 December 2012 recorded reserves of 18.7 million barrels of oil equivalent (mboe). This puts the company on an EV/2P ratio of 35.6.

The next most expensive is Senex with an EV/2P ratio of 17.9. Senex has no real debt and cash reserves of $127 million, but has also announced growth in reserves this year to 37 million barrels.

Beach Energy, who last month took over from Santos as the Cooper Basin’s highest volume producer, comes in at third place with a score of 16.3.

Taking out the crown for ‘best value play right now’ in the Cooper Basin is Santos with an EV/2P ratio of 10.7. Santos has an enterprise value of $1.4987 billion and proven reserves of 1.406 billion barrels of oil equivalent. The reserves are spread across the globe and not confined to the Cooper Basin. This is a bonus for investors as it gives Santos a diversified portfolio that extends beyond the shores of Australia.

One reason for higher ratio of the smaller producers is likely that the market expects their exploration to uncover more reserves in the years to come. Indeed both Drillsearch and Senex announced significant increases in 2P reserves for the June quarter just gone, whereas Santos is expected to grow reserves at a slower rate.

Foolish takeaway

Santos may be slower to grow, but of the four key Cooper Basin operators it likely represents the best value right now when measured by enterprise value and proven reserves.

Interested in our #1 dividend-paying stock? Discover The Motley Fool’s favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of “The Motley Fool’s Top Dividend Stock for 2013-2014.

More reading


Motley Fool contributor Regan Pearson does not own shares in any of the companies mentioned in this article.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of January 12th 2022

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

asx share price competitions represented by businessmen arm wrestling
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

person reading news on mobile phone
⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »