Speaking at the 2011 Excellence in Oil & Gas conference in Sydney yesterday, Somerton managing director Hector Gordon said that to find an unconventional play, one had to first find a good source rock.
"And the first evidence of a good source rock is existing conventional production. It is relevant to note in the US and North America, all the big unconventional plays are currently basins with major conventional production," he said.
"So if you are looking in eastern Australia for unconventional plays, my view is the first port of call would be to look for basins with conventional production - the Cooper, the Surat and the Otway."
While the Surat was already host to coal seam gas projects and the unconventional plays in the Cooper were well advanced, about to "burst through into prominence", Gordon felt the Otway was going to be the "next cab off the rank".
He pointed to the 200-300 billion cubic feet of gas that had been discovered in the onshore Otway and argued that it was as well located, if not better, than any other onshore basin with respect to access to infrastructure.
However, he surprised by saying that while the Otway appeared to have unconventional gas or shale gas potential, Somerton was looking for unconventional oil.
This was due to the Casterton formation, the source rock in the Otway, that sourced not only the gas in the Katnook area but had also sourced oil in terms of shows and recoveries across a wide area of the Killanoora in South Australia.
Gordon added that the Jurassic-aged Casterton was thick and mature in the Penola, Robe and St Clair troughs and that geochemical characteristics of the Casterton supported its potential as a major oil source.
Speaking on the company's plans, he said the strategic alliance agreement with Beach Energy had provided Somerton with access to "deal flow greater than we would ordinarily have and reduces our reliance on farm-outs" to exploit its portfolio.
One example of this was its joint farm-in to the Wombat tight gas play in PRL-2, Victoria.
Gordon said the venture would carry out a fraccing test program into five zones at Wombat-4 in the second quarter of this year, adding that a success could yield up to a trillion cubic feet.
"Somerton is investing $2-3 million dollars in this, but if it works, this could yield something worth more than $50 million net to Somerton at a moderate sort of risk."
He also touched on the follow-up to the East Wing discovery in PEL 168 that targeted about 10Bcf of gas. This would consist of seismic in April and drilling later this year.
"That may sound small, but that's about half of our market cap, so if we can follow this up successfully, there is substantial upside and leverage."