Positive outlook despite oil price lows

Resources Corner

With few major announcements in the Energy sector this week we’ve taken the opportunity to look at some recent interviews that give us an insider view of key industries. 
 
Oil Search CEO Peter Botten outlined the impact that PNG LNG’s startup will have on the company. While Vanessa Guthrie from Toro Energy gave us an insight into the uranium market and the company's exploration progress.
 
Also this week Wesfarmers bought a 13.7 per cent stake in oil and gas play Quadrant Energy Holdings Pty Ltd. And Infigen Energy has sold its US solar development pipeline to a global solar energy company for $49 million.
 
Oil Search
 
Peter Botton from Oil Search explained how their major LNG export project managed to reach production ahead of schedule and how it will transform both the company and the development of PNG. 
 
FNN: Oil Search is focussed on the PNG LNG Project. What is the project’s significance to Papua New Guinea and Oil Search?
 
Peter Botten: Oil Search Limited (ASX:OSH) has a 29 per cent interest in the PNG LNG Project, which was very successfully commissioned in mid-2014. It’s now been on production just over 12 months and it’s had a massive impact, both on our company’s revenue, our company’s production base but also importantly, on the economy of PNG. It’s more than doubled the GDP of the economy and quadrupled our production base. And that production base will go for 30 odd years. It really does underpin our long-term value.
 
FNN: Where do you see Oil Search can grow its business?
 
Peter Botten: We definitely believe that our future growth is based on development of further LNG. PNG’s a major gas province and PNG LNG represents the basics of basic infrastructure, to build our business in LNG. And together with the Elk/Antelope recent discovery, which is a significant gas resource, we believe that over the next five to seven years, we’ll be able to more than double our production. Again, through the development of a third train for PNG LNG and the development of Elk/Antelope; two very competitive projects in this present oil price environment.
 
See the full interview here.
 
Toro Energy
 
FNN: Toro has just started drilling at its Wiluna uranium project. What is planned for the drilling program and when are the results due?
 
Dr Vanessa Guthrie: This year’s drill program at Wiluna is a very exciting one for us. The aim of the program is to drill out core deposits of Lake Maitland, Millipede and Centipede, as well for the first time, drilling at Nowthanna. And the reason that we’re taking up this particular drill program, is because we’ve found that our gamma measurements for uranium, on which our resource is based, we think may be underestimating the grade. Particularly in the higher-grade zones of uranium that’s in the ground, so we’re testing with geochemistry to determine if this is the case.
 
FNN: How important is exploration for Toro Energy?
 
Dr Vanessa Guthrie: Exploration and growth of the company is very important for Toro. Toro aims to be the go-to Australian uranium company in the mid-tier class, in the next five years. And to do that, we need to fill the pipeline of assets behind our flagship, Wiluna project. We intend to that, by both acquiring and growing through exploration activity.
 
FNN: Private equity investment firm The Sentient Group invested $17.5 million in Toro at the end of last year. How have the funds been deployed?
 
Dr Vanessa Guthrie: Last year we were delighted to bring Sentient into Toro, as a major shareholder. They’re now a 14 per cent shareholder of Toro. And the funds that they invested have been used in two ways. Firstly, $10 million of it is working capital set aside for us to be able to work our way through that current downturn, in uranium prices. And secondly, another $10 million has been dedicated to the Wiluna project itself, particularly around project optimisation studies.
 
See the full interview here
 
Doing deals
 
Wesfarmers Limited (ASX:WES) has bought a 13.7 per cent stake in oil and gas play Quadrant Energy Holdings Pty Ltd who hold assets in Western Australia.  The Perth based conglomerate will spend $US100 million to acquire the interest, giving it the right to appoint one director to the board. Managing Director Richard Goyder says the investment is complementary to the company’s chemicals, energy and fertilisers division’s existing businesses. Quadrant Energy’s gas production currently represents about 40 per cent of Western Australia’s domestic gas supply. 
 
MMA Offshore Limited (ASX:MRM) has won a two year shore base contract with Chevron worth up to $100 million, with an option to extend for an extra year. The marine logistics company is set to provide supply base facilities and services for Chevron’s operations in Australia’s North West. The scope includes operations planning and management for vessel mooring, load and discharge, freight/material management and dedicated laydown and staging areas.
 
Infigen Energy Limited (ASX:IFN) has announced the sale of its US solar development pipeline to a global solar energy company. Infigen will receive $49 million for the pipeline with an $11.4 million upfront payment and the balance due by the end of November this year. An earn-out bonus of $39 million is possible depending on the Power Purchase Agreements secured by the end of December 2016. 
 
Energy Resources of Australia Limited (ASX:ERA) has announced board departures just week after halting the expansion of its controversial Ranger mine near in the Northern Territory. The uranium miner’s Chairman Peter McMahon and independent non-executive directors Helen Garnett and David Smith resigned over the weekend. The outgoing directors say it became difficult for the company to pursue its plans for the project without the support of its major shareholder Rio Tinto Limited (ASX:RIO).