Australis Oil and Gas halts trade for drilling program

 Sean Smith  |  The West Australian   Sunday, 18 March 2018 10:01PM  

Australis Oil & Gas has gone into a trading halt to raise up to $40 million via a placement to help fund a proposed $US100 million drilling program over its emerging shale play in the south-east US.

The Perth-based company gave away little in its announcement.

However, it told investors in a presentation last week that it would consider raising new equity as part of a funding package for the drilling program, which is expected to see up to 10 wells sunk over its Tuscaloosa Marine Shale properties in the second half of the year.

It is believed that debt will account for most of the funding for the drilling.

Australis is one of the biggest landholders in the TMS, which straddles Louisiana and Mississippi, after paying $US80 million for a swathe of holdings early last year.

The Ocean Monarch has left beachgoers guessing about where it came from and where it's going.

The company already produces small amount of oil — about 4 million barrels a year — from the region but the new drilling would enable it access more of the estimated 145 million barrels of recoverable oil sitting under its tenements.

While Australis and its advisers from Euroz have to yet to finalise the quantum or the price of the equity raising, it is believed the company will issue up to the allowable 15 per cent of its issued capital.

Shares in Australis last traded at 36¢, valuing the group at $280 million.

Run by the management team behind Aurora Oil & Gas, which was bought by Canada’s Baytex Energy for $1.8 billion in 2014, the company has taken a long-term cyclical view, accumulating properties in the TMS that can be developed and sold on the back of stronger oil prices.

Australis is chaired by former Aurora chief Jon Stewart, with Ian Lusted as managing director and Graham Dowland as finance director.

Its shareholders including many Aurora investors who are betting the management team can repeat their success with Australis.

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Replies to This Discussion

Management team (ex Aurora) has a heck of a track record as a non WI partner in the Eagle Ford / Austin Chalk (Hz Frac play) in Central Texas (Karnes / Live Oak / etc area).

Wonder if their targets are both the TMS and the AC (as a horizontal frac play)? 

I believe that their primary operating WI partner was Marathon.

Appears that they are bringing that expertise and experience to TMS?? But this time as operator.

This should be interesting.

Good thing about Australian public companies - they tend to say a lot more about what is happening than US based public companies.

In the case of Australis, the hurdle is funding.  They are a penny stock company.  They have expiring leasehold that must be HBP'ed.  There has been no TMS drilling since 2015.  Some leases may have extension clauses but what Australis needs in the short term is the ability to create large acreage units and establish production with a single unit well.  This was a long term "hold" investment which was a bet on rising crude prices.  I don't think that low $60's/barrell will make for economic wells but the clock is ticking and there is little time left to wait.  I expect PE is the likely funding source but they will want a big chunk of the asset and a drilling commitment.  With major oil basins at acreage premiums, I think investors are looking for some bargain basement opportunities.  It will be interesting to see if any pull the trigger on Australis and the TMS.

Agree on all points 

Would not be surprised if the TMS discussion morphs into an AC focus over time. These guys know that play from their MRO involvement

Ausralis TMS assets are mostly in MS as that was where Encana was focused.

Australis caps off $39.2m raising to tap US shale oil 

Sean Smith  |  The West Australian  Wednesday, 21 March 2018 8:00PM

Australis Oil & Gas has finalised its equity raising at $39.2 million, with the new stock to be issued at 34¢ a share.

Having gone into a trading halt on Monday, the Perth-based, US-focused energy group revealed today the new equity would be taken up by institutional and sophisticated investors via a private placement.

The issue price represents a 5.6 per cent discount to Australis’ closing price on Friday.

The proceeds of the raising will help fund a proposed $US100 million drilling program by Australis over its oil shale tenements in the south-east US in the second half of the year.

The company is a major player in the emerging Tuscaloosa Marine Shale province straddling Louisiana and Mississippi.

It is already drawing some production from the area, but the new drilling will allow it to access an estimated 145 million barrels of recoverable oil under its tenements.

The balance of the cost of the drilling program is expected to be funded by debt.

Australis was founded by the management team behind takeover success Aurora Oil & Gas, which was bought by Canada’s Baytex Energy for $1.8 billion in 2014.

It is really going to be interesting to see what Australis does as to new drilling in the TMS. They obviously have confidence in the TMS since it is the foundation of their new company - and based on past success in the US unconventional plays, they will be closely watched with high expectations.

I would look for them to bring in some non op WI partners (on a promoted basis) to spread out the costs and risk on this project.

How difficult is it for an Australian company to operate in the US? And in a specific area like the TMS where relationships with landowners and local contractors is very important for success?

I am intrigued and will be watching this closely. I recommend that others who are interested sign up for their email alerts to keep up with what they are doing.

I have added their Jan 2018 presentation below. Their Portuguese onshore position is also interesting.

Australi%20O%26G%20Jan%202018.pdf

<Australis Oil & Gas has finalized its equity raising at $39.2 million, with the new stock to be issued at 34¢ a share>>>

This:  http://https://www.sec.gov/investor/alerts/ia_oilgas.pdf

I'm just sayin'...

...that the link is non-functional. 

Sorry about that. Try copying the link and open in a new browser window.

Yep, that works.  Good cautionary reminder.  We've seen a few companies playing fast and loose with the facts.  Mainland Resources and Black Dragon come to mind.

Good comment by Skip to follow - private companies do not have the "guidelines" that public companies do.

Changing gears - I know that Australis is planning to raise more capital, but when you consider the cost of drilling TMS horizontals (let's say $7 to $10 million apiece) plus operating in "foreign" environments (the USA and Portugal - both areas will require local offices and staff), dollars will be chewed up quickly.

I am figuring that we will eventually see Australis bringing in one or more non Operating WI partners (on a promoted basis) to join in their plays and reduce their capital needs.

Also thinking that one or more of these new partners could be Australian based.

This is a proven and successful management team when it comes to US based unconventional plays (i.e.  Eagle Ford and AC in Texas) - what they do in the next 12 to 48 months will be worth watching

I expect that a portion of their leasehold is not held.  I suspect they can't wait 12 to 18 months to HBP.  I believe the move to raise capital at this time indicates that they will have to drill whatever they wish to retain soon.  As in this year.

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