Not surprisingly those aspirations proved optimistic but the company is now back on track to reach its goals.
AWE is one of the few small exploration companies with a solid institutional base on its shareholder register.
The institutional support is a throw back to AWE’s beginnings when its managing director, Bruce Phillips, was asked by a few institutions to fill a gap in middle-tier exploration and development companies by creating one.
AWE raised $20 million and bought some assets off TNT, including interests in the Kipper, Basker and Manta gas and oil fields in the Gippsland Basin.
When the fields were on the verge of a 700 petajoule contact in 1999, Woodside Petroleum stepped in with a $18 million offer for AWE’s interests – the group accepted.
The proceeds began a buying spree that provided AWE with its current suite of assets.
Mr Phillips said the group’s strategy is "to build an Australian-based international exploration and development company".
The Australian base has built up some substance in the past two years and a tentative start made on international expansion.
In late 1999, AWE acquired a 96 per cent stake in Omega Oil NL, and in the process picked up the group’s 24.3 per cent interest in the Katnook area of South Australia, as well as a range of exploration and appraisal opportunities in Western Australia and Papua New Guinea.
The acquisition was quickly followed by the January 2000 purchase of Premier Oil Plc’s Australian assets, including 33 per cent of the producing Beharra Springs gas field in Western Australia’s Perth Basin.
The Premier assets were bought for $16 million worth of AWE scrip and Mr Phillips said the assets had delivered about $90 million of value to the group. Scrip is AWE’s preferred currency of tender; the Basker, Manta assets had also been bought with $5 million of scrip.
But the big gun in AWE’s suite of assets is its acquired 30.5 per cent interest in the Yolla field in Bass Strait.
In early September the $450 million development of Yolla, through the BassGas Project joint venture, was given Major Project Facilitiation status by the Minister for Industry, Science and Resources Senator Nick Minchin.
The status will allow the Origin Energy-managed project to speed up necessary Federal and State government approvals, and commercial production is expected to commence in the first quarter of 2004.
Yolla has sufficient reserves to supply about 10 per cent of Victoria’s gas needs for the next 15 years.
However, exploration potential in the permit remains high and Mr Phillips said he expected reserves would at least double.
Yolla also contains about 13 million barrels of liquids, which will add a nice sweetener to project profits and allow the project to be competitive.
Mr Phillips said Yolla would not produce gas as cheaply as the Exxon-BHP Bass Strait gas fields but customers had been crying out for an alternative supplier.
Mr Phillips said: "AWE and BassGas is only able to take on the big boys because customers want diversity.
"Exxon-BHP can produce cheaper but in the past they have taken a stance of increasing prices rather then seeking to increase the customer base. "With a diverse supply Exxon-BHP can’t hold customers to ransom".
There a still a number of hurdles to overcome before BassGas gets the go-ahead. The next milestone will be for AWE to put together its $130 million share of Yolla development costs.
Mr Phillips said AWE had $57 million in the bank and would require a financing package of between $90-100 million.
ANZ and Bank of Scotland are looking at ways of providing the financing and Mr Phillips said he did not expect any problems.
The joint venture partners also need to settle liquids sales contracts for the condensate and LPG produced.
The liquids will represent about 50 per cent of total project sales and should sell easily. The joint venture is currently pursuing five bids to purchase all LPG produced.
The next hurdle will be to get construction contracts in place and go through the process of calling for tenders. That is expected to take place at the end of the year.
BassGas is developing Yolla for future expansion. The platform that will be put in place will have the ability to tie-in at least two of an additional five exploration targets in the region that the joint venture has yet to test and develop.
Other infrastructure requirements include a 120km pipeline to bring the product to shore and an 80km trunkline to Dandenong.
When it commences sales in 2004, Yolla will start delivering to AWE annual revenues of about $47 million a year.
