Over the years, a number of CEOs of junior and mid-cap companies have complained that local investors will rate a barrel of oil in Australia more highly than a barrel in Southeast Asia or Papua New Guinea.

But with limited growth options in Australia, especially for oil, more local companies are turning towards Asia and ploughing ahead on the basis that good projects ultimately mean cash in the bank.

Asia has lots of oil. Indonesia was once a genuine power in OPEC and in the late 1970s was producing 1.6 million barrels per day.

Like many countries in the region, Indonesia is littered with undeveloped fields in the range of 20MMbbl to 50MMbbl, and advanced prospects as big as 100MMbbl are not unusual.

Opportunities to buy in are increasing as a number of overseas independents, including the likes of Talisman, exit the region.

But winning the support of Australian investors is tough going for our E&P companies.

The reluctance of local investors to recognise the value of Asian projects was clearly displayed in AWE's 2012 acquisition of Ande Ande Lumut (AAL) in the Natuna Sea, in the far northwest of Indonesia's territorial waters near the maritime boundary with Malaysia and Vietnam.

AWE shares jumped by 40% when the acquisition was announced but the share price gain soon faded.

After a year of careful work, AWE announced a 33% boost in 2P reserves to 101MMbbl - making it larger than all but a handful of oil projects in Australia in the past decade - but the market yawned.

And even when AWE banked a handsome profit thanks to the sale of 50% of the project to Santos, there was just a small rally in the share price that disappeared within the week.

AWE's share price began a sustained upward trend six months later and while there were many factors at play, it might just be the market had finally been convinced of the value of AAL.

The same can't be said for Horizon and ROC, both of which have a large percentage of their assets in Asia.

In a joint presentation when announcing the proposed merger a month ago, the companies argued they were valued well below Asian listed E&P companies of comparable size and Australian Securities Exchange-listed locals such as Buru, Senex, AWE and Drillsearch.

By dividing enterprise value by estimated earnings for calendar year 2015, they derived a median valuation multiple for their peer group of 4.6x.

Horizon was just ahead of this median figure at 4.9x but well behind its Asian listed peers Rex International and RH Petrogas, at 8.5x and 7x respectively.

Horizon also ranked behind Senex at 6x.

Roc was well down the peer group list at only 1.8x.

The sum of the pre-merger market caps of Horizon and Roc is $794 million.

The companies argue that part of the rationale for the merger is creating critical mass among Asian E&P players, with the possibility of a re-rating by investors.

The would-be partners pointed out that their combined market cap would increase to more than $1.1 billion if the merged company was re-rated and valued at the median multiple for the peer group.

Ord Minnett senior oil and gas analyst John Young told Energy News there was no doubt some Australian investors were more comfortable with assets in Australia than elsewhere.

"They put a discount on assets in countries that are perceived to be more risky," he said.

He said he believed this was a factor in both Horizon and Roc being undervalued.

"I am not convinced that a valuation based on earnings is particularly helpful for small to medium companies because their earnings are not often in a steady state," Young said.

"But they do seem undervalued and there is a strong qualitative case for combining the companies.

"Roc has stronger production at the moment but its growth plans are not as well developed as Horizon's."

He said the merged company would attract more investors because of its larger size, although it was questionable whether the merger would lead to the rerating they were hoping for.

The discount placed by local investors on Asian assets affects both companies, so it is not a factor in the controversy about the ratio of assets in the proposed merger.

On that subject, however, Young said the split did not look unreasonable because it aligned with the split in 2P reserves and 2C resources for the companies.

He said Horizon's wet gas resources in PNG were the most undervalued asset in the company's portfolio.

"The value of wet gas in PNG was re-rated by Oil Search's recent buyout of Pac LNG in the Elk/Antelope field," Young said.

"On the multiples in that transaction, we have almost doubled the value of Horizon's wet gas resources outside of the Stanley condensate project to $US365 million ($A394 million).

"While Horizon's resources lack the scale of Elk/Antelope, it has three times the liquids yield.

"It will deliver a much higher margin and we are confident the company will find a way to bring those resources to market in PNG's rapidly evolving upstream sector."

Young said winning investor confidence in E&P projects, regardless of where they were located, was ultimately about ticking off the development milestones.

"As projects mature and are brought closer to production, the risks are removed and investors have fewer reasons to undervalue," he said.

"That's the same for projects everywhere, not just in Asia."