(MENAFN- ProactiveInvestors - Australia) Key Petroleum (ASX: KEY) has shaken off the last visages of its past life as a diversified junior explorer, emerging as a tightly focused Canning Basin player.
As part of this change, the company has refreshed its management team and board of directors, appointing Kane Marshall as its chief executive officer and managing director this year and veteran geophysicist and petroleum engineer Ian Paton as its technical director.
With the changes it also developed a new technical strategy aimed at delivering early oil and gas success from its Canning Basin acreage.
This strategy â€" The Canning Push â€" will focus initially on re-entering and working over existing wells.
These include testing of the Stokes Bay-1 well to upgrade contingent gas resources to reserves status; re-evaluating the Point Torment-1 gas discovery; and restoring oil production from the West Kora-1 well.
Last but not least, the company is divesting its non-core assets onshore UK and Suriname, Italy and Tanzania.
Share Price: A$0.042
Issued Shares: 308.07 million
Market Capitalisation: A$12.94 million
Cash: A$1.79 million
EV: Au$11.15 million
ANALYSIS
Key's focus on the Canning Basin could not come at a better time as some early discoveries have highlighted its potential to host substantial conventional and unconventional oil and gas resources.
In the near term, the company's attempts to restore oil production from the West Kora-1 well and re-evaluation of the Stokes Bay-1 well could lead to a substantial re-rating.
Should West Kora-1 return to production at rates close to its initial production of about 200 barrels of oil per day, it could give Key net annual revenue of about Au$3.5 million and open up further prospects in the L15 production licence.
While the objective of the initial work on Stokes Bay-1 is not aimed at producing gas, success could lead to the future recovery of a potential 100 billion cubic feet of gas resource.
Additionally, a re-entry and workover of the Point Torrent-1 well in the same permit could result in its return to production. Assuming a flow rate of about 4 million cubic feet of gas, this would add revenue of about Au$1.7 million before royalties and costs.
Just as exciting is the proposed Cyrene-1 exploration well in EP 438 that leading Canning Basin player Buru Energy (ASX: BRU) is planning to drill.
Besides testing a shallow oil play that can be quickly developed due to its access to infrastructure and proximity to Broome, the well will also test the Goldwyer Shale, a target of ConocoPhillips' and New Standard Energy's (ASX: NSE) exploration efforts to the west.
The prospective Goldwyer is the target of EP 448, where Key and its partners are trying to secure a partner to carry out exploration work.
Success in securing a respectable farmin partner could accelerate its work in the permit while reducing Key's risk and costs. This should swing in a hopeful upside to the company's share price.
Another tick in the right box is the appointment of Paton. Besides his extensive experience that included a stint as chairman of New Standard Energy, Paton has made a number of oil and gas discoveries.
These include 2 commercial gas fields while serving as technical director of Amity Oil, discovering the Montara oil field in the Timor Sea while working with the former Coogee Resources (now part of PTTEP) and leading Santos (ASX: STO) in the North West Shelf where he oversaw numerous discoveries.
BACKGROUND
Key is the third largest acreage holder of ASX listed companies in the Canning Basin, which has in recent years emerged as a highly prospective exploration play with both conventional and unconventional potential.
Importantly, the U.S. Energy Information Administration has estimated the Basin could hold risked recoverable resources of 229 trillion cubic feet of gas.
This data could be seen as the impetus for the entry of major players such as Mitsubishi Corporation and ConocoPhillips, who have made early deals with local explorers, giving them respectable acreage positions at an attractive price.
Buru has been at the forefront of this push with the Ungani oil discovery that has been appraised. They are now headed towards development as well as discovering and firming up the Valhalla basin centred gas accumulation.
Additionally, Buru are developing in conjunction with Mitsubishi a gas pipeline from the Canning to Pilbara, allowing any gas finds to be sold into Western Australia's domestic market.
This could potentially be open to other players in the region, giving Key an outlet for any gas finds it discovers.
Likewise, New Standard Energy is poised to embark on a 3 well drilling program with ConocoPhillips to delineate and better understand the hydrocarbon prospectivity of the liquids-rich Goldwyer Shale.
MANAGEMENT
Kane Marshall is the managing director of the company and was most recently a consultant production engineer for Santos in the Roma Development Implementation Team in Brisbane. Prior to that, he was a reservoir engineer for both Chevron and Woodside working in various field developments in the North West shelf in Perth and has also served as a reservoir engineer and petroleum engineer in North Sea based projects in the UK.
Ian Paton is the non-executive technical director with 30 years worldwide experience as a geophysicist and petroleum engineer. He has been instrumental in numerous oil and gas discoveries in Australia, South East Asia and the United States. He has held senior technical and management roles in both exploration and development with companies such as Santos, Conoco, Coogee Resources, New Standard Energy (ASX: NSE) and PTTEP.
Craig Marshall is Key's chairman and has 30 years technical and managerial experience in the petroleum and mineral industry in Australia and overseas. He is currently the managing director of successful Perth Basin explorer Empire Oil & Gas NL (ASX: EGO) and has served as managing director of Anzoil where he was pivotal in obtaining the first Production Sharing Contract in Vietnam's onshore Hanoi Basin.
Dennis Wilkins is the chief financial officer and company secretary and has 15 years international operational experience in capital raising, funding and administrative management for the resources industry.
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