Opportunities amid the oil price plunge

Resources Corner

The plunging oil price may have forced energy players to revise capital expenditure but has also sparked opportunities in the sector. 
 
Merger and acquisition activity has been evident among a series of recent asset sales and divestments of stakes snapped up by local companies. 
 
Horizon Oil Limited (ASX:HZN) CEO Brent Emmett told FNN the company is on the look-out for opportunities: 
 
“We do always at the time of the cycle keep a weather eye out for opportunities. And, I don’t rule out that there may be a long-dated low-cost opportunity with some upside that might be a good acquisition for us in this part of the cycle .” 
 
Horizon Oil CEO: Oil price outlook 
 
“The very severe downturn that the industry has seen in oil prices since the middle of 2014 is the overwhelming factor effecting oil and gas markets at this stage. Many of us, like myself, have been through this before, we all remember the down parts of the cycle in 1985/86, 1998, 2008, 2009 - And we’re in another one of those. 
 
I am confident prices will recover, I don’t think the downturn will be for a particularly long time. And, I’m confident they will recover because of the quite considerable depletion that is going on in the global oil supply at the moment. And, with oil prices where they are, there is very little or no investment in sustaining and replacing that production. So, I don’t think it’s going to take long for oil prices to come back into balance.”  
 
To watch more of the interview click here 
 
Securing assets
 
Woodside Petroleum Limited (ASX:WPL) has scored the green light from Australia’s competition regulator to buy up to $US4.5 billion of oil and gas assets from US based Apache Corporation. The oil and gas producer last year revealed plans to buy Apache’s Wheatstone LNG project and Balnaves oil interests in Australia and Kitimat LNG project interests in Canada. 
 
ERM Power Limited (ASX:EPW) has completed the sale of its West Australian gas assets to Empire Oil and Gas (ASX:EGO). The sale is a move to restructure the company’s power assets into a more capital efficient growth model allowing the energy provider to focus on its retail business. ERM recently entered the US energy market with the purchase of Texan energy retailer SPG Energy Group.
 
Selling licences
 
AGL Energy Limited (ASX:AGL) has sold an exploration licence to explore for gas on the New South Wales Central Coast back to the state government. The PEL 5 licence covered nearly 400 square kilometres from Wyong to Morisset and has been sold to the government as part of the NSW Gas Plan once the area was deemed to be not commercially viable. 
 
New Guinea Energy Limited (ASX:NGE) has tied up the sale of an interest in a Petroleum Prospecting License to Santos Limited (ASX:STO). The Papua New Guinea focussed oil and gas explorer will divest a 50 per cent stake in PPL (Petroleum Prospecting Licence) 269 for $US32 million cash on completion and up to $US8 million in the future depending on licenses being granted. 
 
Purchasing licences
 
AJ Lucas Group Limited (ASX:AJL) has outlined details of three new Petroleum Exploration Licences (PELs) it plans to acquire in New South Wales for $2.5 million. The purchase also includes an 80 per cent interest in drilling and exploration equipment. 
 
Gas supply deals 
 
Oil and gas producer Santos Limited (ASX:STO) has struck a new gas supply deal with Australia’s biggest alumina producer Alcoa Inc (ASX:AAI). Under the agreement Santos will supply 82 petajoules of natural gas from the John Brookes field from 2018.  The deal is for an initial contract term of five years but also allows for two five-year extension options by mutual agreement.
 
Sino Gas & Energy Holdings Limited (ASX:SEH) has executed a gas sale agreement for the sale of gas from Linxing Gas Station. The energy company has also affirmed Linxing central gathering station is on track for commissioning in the middle of this year. The contracted gas price of $US9.62 per thousand cubic feet is effective until the end of this year and adjustable on an annual basis. 
 
Gas discoveries
 
Real Energy Corporation Limited (ASX:RLE) has confirmed its Queenscliff-1 well as a gas discovery, with gas flowing to surface without fracture stimulation. The oil and gas explorer has described the discovery as important for the company and the development of gas on the Queensland side of the Cooper Basin.