A veteran of the oil game, having spent three decades watching and reporting on the people, events, companies and politics that have shaped and reshaped the exploration and production landscape, Slugcatcher can be relied upon to deliver clear, clean analysis and rational assessment of the stories behind the news. And retain his sense of humour along the way.
So, dear reader, enjoy your weekly dose of Slugcatcher – exclusive to ERN. There are plenty of stories set to flow from this pipeline, so onto this week's column.
The price of nickel rises strongly – a flood of new floats hit the stock market. The price of gold rises modestly – an even higher tide of floats flood the market. The oil price hits an all-time high and, guess what? Nothing happens.
The example, obviously, is a slight exaggeration used by Slugcatcher, your humble new columnist, to make the point that something is seriously wrong at the small end of the Australian oil patch. The problem is not on the technical side of the industry. Australian oil experts, and their roaming international cousins, remain as smart as ever.
The trouble is on the money side of the equation, the side which Slugcatcher finds most comfortable because the people there talk his language, and they more closely resemble slugs (of the garden variety).
Humour aside, there is a lesson to be learned from data assembled by the Australian Stock Exchange. Over the past 12 months, more than 100 small mineral exploration companies have floated, all on the promise of rising metal prices which are tracking the surging demand for commodities in China, Japan and the U.S. as the global economy recovers.
The oil sector, which is being driven by exactly the same forces of supply and demand as the minerals market – for proof look no further than the $US40-plus oil price (read $A57 a barrel for an Australian producer) – has produced six new floats.
Slugcatcher may be missing something in those numbers, but he doubts it. Over the past 12-months, the Australian oil sector has been graced by the appearance of Great Artesian Oil & Gas on August 5. Oilex on October 24. Innamincka (what a beauty) on November 6. Planet Gas on March 11 this year. CH4 Gas on April 7, and Enterprise Energy on May 14.
And remember, this trickle of capital raisings has taken place as the oil price has risen 50% -- much more than the gold price, and about the same as nickel.
Oh, say the clever dicks out there in oilsville, here goes another young scribbler trying to compare hard and soft rocks. “We’re different,” they say. “Oil is a special case, there are no comparisons with metals.”
Wrong, says Slugcatcher. There is a common thread, and it’s called money. The capital market, if given an opportunity, will support anything that promises to make a buck, and the faster that buck is delivered, the more cash which will be forthcoming.
What seems to be wrong is that the boys and girls in the oil patch have lost their connection with the money men. Or, as Austin Powers would have said, they’ve lost their Mojo.
There is minimal comfort level with local oil among the slugs who inhabit Pitt Street, Collins Street and St Georges Terrace. These are the addresses where the money is raised, or in coffee shops off to one side, and it is there that oil sector entrepreneurs should be trundling out their bold plans, their drilling programs, and their optimistic assumptions of future profits.
Gosh, say the tech-heads who run small oil. We couldn’t make promises like that! We can’t prove that there’s oil in the ground until we drill – and we can’t drill until we raise the money, let alone secure the acreage.
At this point, Slugcatcher resorts to a Homer Simpson observation, “Doh!”. Do you really think the minerals boys know there’s gold, or nickel, in them thar hills. Of course they don’t. They just think there is or, in some cases known to Slugcatcher, they pretend there is.
The point of all this is that small oil in Australia has lost its entrepreneurial spirit. The Mojo has gone. At today’s oil price there should be an oil exploration boom, a plethora of new floats, a stampede of entrepreneurs, and a rush to tap some of the money which is pouring into the minerals sector.
It’s not, and that’s a damned shame.