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3 micro-cap shale oil companies exploring in Canning Basin

The eastern seaboard coal seam gas (CSG) developments that are regularly in the news are drawing attention away from the huge potential in shale gas and oil in the Canning Basin in Western Australia.

It’s not being overlooked by big oil players both domestic and international, though. BHP Billiton (ASX: BHP) stated recently that it is wanting to explore the unconventional gas and oil potential, and US Hess Corporation (NYSE: HES) as well as Apache Corporation (NYSE: APA) have interests in the area. Projected shale gas reserves suggest that this basin could be holding up to 235 trillion cubic feet of gas, or about 500 years of WA’s annual domestic gas supply in the state.

Here are three companies that you need to know about to follow this gas bonanza story.

Buru Energy (ASX: BRU) is a $445 million oil and gas explorer and producer. It has just announced that Apache will be joining its joint venture, and agreed to fund a $25 million exploration program in return for 50% interest in three of the company’s exploration permit areas, and potentially more in one other area.

Initially, the company will receive $7.2 million, and then will be assisted with 80% of the cost of exploration covered by the agreement. The company reported a net loss of $17.7 million for 2013, which followed a $10 million loss in 2012.

New Standard Energy (ASX: NSE) is an oil and gas explorer with three major projects in the Canning Basin, and has a market capitalisation of $40 million. In July, PetroChina Company purchased a 29% interest in the company from ConocoPhillips (NYSE: COP). At the time of the transaction, the ownership structure became 25% New Standard Energy, 29% PetroChina and ConocoPhillips holds 46%.

Oil Basins (ASX: OBL), a $10 million oil and gas explorer and developer, has interests in two onshore permit areas. It just raised its ownership in its Backreef area, north of the Erskine oil terminal, to 100% by having a share issue of 25 million shares that raised $420,000. It maintains a 50% stake in its other much larger area near and around the town of Derby. In 2013, it realised a net loss of $6 million. Its share price is $0.016

Foolish takeaway

The WA government projected it would be another five to 10 years before shale gas would be produced on a commercial level in the basin area, yet the potential is enormous for the state and the companies both big and small there. These three micro-caps have to grow a lot themselves, possibly through joint ventures or buy-outs from major producers. Still, you’ll want to keep these names on your radar.

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

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