The recent Phoenix South-1 oil discovery, from the never before targeted Early Triassic oil play in the offshore Roebuck Basin, has opened up a new stratigraphic concept in the area. Carnarvon holds a significant share of acreage there, not only in the Bedout Sub-basin, but in its earlier-stage Cerebus blocks further along the coast.

Kin said Carnarvon was in a strong position with $101 million cash, up to US$32 million of royalty payments coming from its now-sold Thailand assets and a gross $US70 million carry on the Roc-1 well later this year on a highly ranked structure up-dip from Phoenix South-1.

He said the company's recent share price, around A11c per share, was at a discount to cash backing and royalty payments with no value given to assets and volumes, estimated at Phoenix and Phoenix South of a net 6.3 million barrels.

The other identified prospects within the Phoenix 3D area, including Roc, have potential for a risked 25 million barrels, which is not accounted for either.

Success in the Roc-1 well is likely to result in an active drilling campaign in 2016 within the Phoenix 3D area that contains the oil discoveries, and which is just 5% of the acreage held by the joint venture. Besides Carnarvon that JV includes Quadrant Energy, JX Nippon and Finder Exploration.

Kin said Carnarvon was "unique" in the oil and gas space, and that a valuation of $0.19 cents per share was based on a $187 million market capitalisation, even though the Roebuck Basin was an emerging province that had been insufficiently derisked.

"Given the underexplored nature of the play, Carnarvon is engaging in an aggressive geological/exploration program, which we view as having a high probability of finding further oil accumulations and believe the risk is weighted towards the upside," he wrote.

"We have ascribed the additional Phoenix areas with varying possibilities of success ranging from 10-20%. This is based on the success of the Phoenix South discovery and extensive follow up lead potential.

"Whilst these results are ‘game changing' in nature, we attribute significant risk to exploration drilling due to the underexplored nature of the play."

Argonaut's probability of success is more conservative than the one from DeGolyer and MacNaughton, which assigned a geological POS of 42% for the Roc, Bewdy and Bottler prospects while preparing a report for Carnarvon.

Kin said the upside in the Roebuck Basin, being defined by the large the 3854 square kilometre Zeester 3D and 5100sq.km Capreolus 3D surveys would certainly open up further targets.

Carnarvon's second project, Cerberus, which covers 3200sq.km of the Barrow Sub-basin has the potential to find analogous traps to the Stag and Wandoo oil fields, in less than 50m of water.

"It is important to note that these blocks have been available for some time and, considering the neighbourhood, one would expect some significantly larger players to already own them," Kin said.

"However, based on the generally accepted view of the North West Shelf geology, these blocks have been passed on by the larger oil companies multiple times as non-prospective.

"Consequently, CVN acquired these blocks for a minimal work commitment comprising re-interpretation of 3D seismic data and geological studies."

Carnarvon's focus is on the Early Triassic play it defined at Phoenix South-1, as well as the more traditional plays in the Cretaceous-aged sediments.

"Carnarvon expect the Cerberus project to be an exact replica of the success at Phoenix with a large acreage holding within a [to be proven] oil province," Kin said.

Regional studies by Carnarvon on the few North West Shelf wells that have drilled into the Early Triassic or older formations, most as invalid tests, found recent fault movement along the Darling Downs Fault System had breached traps in the Perth Basim, which could explain the numerous Miocene oil shows in the Perth Basin, where the Triassic play is known to work.

However, shows in wells in the North West Shelf have been geochemically typed by Carnarvon to potentially non-Jurassic source rocks and recent work has shown that few faults break through the base Cretaceous unconformity.

This has probably allowed the early Mesozoic structures to stay intact and not be breached and likely retain their hydrocarbons.

Kin said a fresh look at the Lower Triassic to Upper Permian petroleum prospectivity of the North West Shelf would be beneficial in light of Phoenix South-1.

Carnarvon shares were steady at 11c this morning.