3 energy companies at the start of next Cooper Basin boom

Unconventional gas is in its infancy, but about to grow bigger.

As the controversy about coal seam gas development rolls on in New South Wales, unconventional gas exploration and first amounts of production are drawing more attention to the bonanza in the Cooper Basin. The area, straddling a region between South Australia and Queensland, has been producing oil and gas for decades, but with new technology and higher overseas demand, shale gas and coal seam gas resources are now economically feasible to extract.

The big oil and gas companies are already tapping this new energy source. Santos (ASX: STO) announced its first natural gas production in October 2012 from its site near Moomba. The development is a joint venture with Beach Energy (ASX: BPT) and Origin Energy (ASX: ORG). Santos will be upgrading its processing facilities there over the next four years to handle the gas that will be sent via pipeline to QLD for eventual export.

This is only the start. On the QLD side of the Cooper Basin, a joint venture between Chevron Australia, Beach Energy and Icon Energy (ASX: ICN) has completed five shale gas exploration wells to date, according to Gasfields Commission Queensland.

Chevron struck a deal with Beach Energy to buy 30% of its stakes in its permits in February, with the option of increasing the stake to 60% depending on the results. Together with the funds from the Chevron deal, Beach Energy will be spending up to around $500 million on exploration and development.

Beach Energy estimates that in the land that it holds the amount of gas may be over 300 trillion cubic feet of gas. For a comparison, annual gas consumption in the US in 2011 was only one-tenth of that. Overseas markets, especially Asia, will be needing more and more gas as they modernise, so Beach Energy and its partners will have waiting customers to take up supply.

Foolish takeaway

There will be many companies, big and small, positioning themselves in this new gas space. Western Australia has a lot of potential also, so you’ll be hearing more about that, in addition to the great wealth of offshore gas being produced there.

As smart investors, though, don’t get attracted by the minnow companies that may have exploration in the same areas, and are tipped to “double overnight”. Those are more of gambles, whereas you should look for definite production and revenues, adequate financing for production and development, and provable reserves from any company you invest in.

Think about your own total return and find out about companies with good dividends. 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.”

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

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