It took a complaint from a follower of one particular player in the US oil game for The Slug to take a closer look at the Aussies who have made the long trek across the Pacific to try their hand in the home of oil.
It wasn’t a pretty sight but it was a surprise.
Until the whistle was blown about sub-standard investment returns from Australian oil companies exploring in the US, The Slug had been travelling under the impression that great wealth was being created.
After all, it’s only a few years ago that someone counted up 44 small Australians actively exploring in the US, and surely not all of them could now be considered failures.
Perhaps not is the answer to that question, but a surprising number of them have fallen into the category of “over the horizon, and out of sight”.
A simple test illustrates this point. The Slug took a sample of about a dozen Aussies in the US and looked at their share prices. What a surprise to find that 10 out of the 12 have current share prices which are closer to their 12-month lows than their highs.
The same thing could be said of the biggest locally-listed oil and gas producer, Woodside Petroleum, but not of the second biggest, Santos.
Woodside, however, is a special case with a range of internal problems which we won’t talk about right now.
The question at hand is why are so many of the small Aussies in the US doing so badly? Consider some of the prices:
Adelphi peaked at $1.05 in January but is now close to half that price at 55c. Amadeus peaked at $1.40 and is now 72c. Aurora hit 78c and is now 38c. Elk got to $1.05 and is now 30.5c, and Tomahawk went as high as 72c and is now 28.5c.
There are, of course, some stocks doing better than that. Antares Energy at 84c is close to its 12-month high of 97c.
But and this the point being made by The Slug, there is no avoiding the fact that a lot of money raised in Australia has been shipped across to the US for very little return.
As he considered this situation, two thoughts occurred. Firstly, wasn’t it always going to be like that? Did a bunch of innocent Aussies actually believe that someone in the US hadn’t “been there and done that” in the leases being offered for sale?
Couldn’t everyone see that drilling for “attic” oil in the US is one of the oldest games in the book, and that while you’re almost guaranteed to find something it will almost certainly not be big, and not very profitable?
Secondly, the flight of the Aussies has been a stunning example of just how bad the oil industry is at communicating.
Hands up any reader who has heard much detail from their favourite small Australian explorer working in US – not many.
Perhaps there hasn’t been much to say, but at least a better effort could have been made in explaining where the capital went, and why certain projects failed – if only in the name of keeping the market informed.
The damage done to the reputation of small Australian oil companies is not irreparable, but it is real.
It is also an example of what over the horizon and out of sight really means.
