COE 3.08% 31.5¢ cooper energy limited

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    Cooper rakes in cash
    By Barry Fitzgerald
    September 12, 2005

    BOOMING oil prices have worked wonders for the band of junior explorers that make their living out of tapping small oil pools in South Australia's Cooper/Eromanga Basin.

    They have been at it for near on five years now, with their entry into the business a result of the requirement for Santos, the King of the Cooper/Eromanga, to relinquish vast tracks of exploration ground.

    Santos knew that the ground would contain the sort of 1-3 million barrel oilfields from which the juniors now make their living. But when you are producing more than 55 million barrels of oil equivalent like Santos, small oil pools don't hold much attraction.

    All that has been a marvellous thing for the junior explorers. They have been finding only small oil pools all right, but gee, aren't they sweet with oil at $US65 a barrel.

    Cooper Energy is a case in point. Floated back in March 2002, the Perth-based junior now has a market capitalisation of more than $50 million.

    AdvertisementThanks to the booming oil price and its interest in three Cooper/Eromanga oilfields, Cooper is generating about $2.5 million cash a month.

    That is having a telling impact on the group's balance sheet, all for the good. At the end of June, cash on hand was $22 million or more than 40 per cent of the group's market capitalisation.

    There was no offsetting debt and for the June year, the group's after-tax profit came in at a more than respectable $11 million.

    Little wonder that the group's shares at 37.5¢ are trading at a 52-week high. That compares with a 52-week low of 21¢ a share.

    There is more to the group's share price strength than the booming oil price. Under the group's chief executive officer, Michael Scott, Cooper has been planning a bigger future on the international stage.

    Recognising that the discovery of some more 1-3 million barrel oilfields in the Cooper/Eromanga would be nice but not a game-changer, the former Woodside man has been working away at exposing Cooper to some carefully chosen higher reward opportunities overseas.

    The portfolio of overseas opportunities is beginning to take shape and the market likes what it sees. Leveraging off its cash-rich/debt-free position, and its nimbleness as a junior, Cooper has put together an overseas portfolio that gives it exposure to some big-time upside without betting the farm.

    In Tunisia, Cooper has an exposure to three 25 million barrel oil targets for an upfront cost of about $1 million. In Cambodia, about $500,000 has provided it entry into a program where the prospects range in size from 50 million barrels up to 500 million barrels, albeit with work there at a very early stage. And in Indonesia, a commitment of about $5 million gives Cooper exposure to a program where the targets range in size from 50 million to 100 million barrels.

    For a stock that would be expected to move about 10¢ a share for each 1 million barrel find in the Cooper/Eromanga, the overseas program will be worth watching.

    Early upside from the overseas hunt could come from Cooper's introduction of a big-spending joint-venture partner at one or more of the overseas programs.

    Julian Hanna's Western Areas NL is racing towards becoming a nickel producer next year from the rich Flying Fox deposit on the Forrestania greenstone belt in Western Australia.

    Cheering on Western Areas is Great Western Exploration (GWE), headed up by seasoned mining campaigner Tom Bannerman.

    The tightly held GWE — there is only 26.9 million ordinary shares out there — holds an 80 per cent interest in a land package that covers the southern extension of the belt of rocks that is home to Flying Fox (115,000 tonnes of contained nickel).

    It has quietly been ticking the boxes in a program that through remote sensing work has generated some 30 high-priority targets.

    Previous drilling provided some early excitement by confirming the presence of massive sulphide mineralisation.

    But more work is required to determine the best location to punch in some deep holes to fully test the nickel potential of the southern extension.

    To that end, a low-cost 100-hole drilling program to get a better feel for what is going on at some of the targets is now under way.

    Like the program before it, the latest one could generate some excitement.

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