The acquisition includes: the purchase of a number of permits from European Gas for 1.5 million Arc shares plus a royalty; a letter of intent covering petroleum rights to areas under application by Rey Resources, which is targeting coal seam methane; and lodgement of applications for two special prospecting authorities with the Western Australian Government.
Arc managing director Eric Streitberg said the company had run its ruler over a range of basins in Australia before deciding on the acquisition.
“Focusing on the onshore basins makes sense for us given the expertise we have developed in onshore operations in the Perth Basin,” Streitberg said.
Oil was found in the Canning Basin in the early 1980s at Blina, Sundown and Lloyd. But according to Streitberg, the discoveries in some ways did the industry a disservice because they focused attention on the carbonate reef and shallow sediment prospects and little attention was paid to the deeper sections of the basin.
The largely unexplored deeper sequences have now been shown to have classic reservoir/source pairs and much better seals than the shallow sections, he said.
“The potential is rather unqualified as there has not been a great deal of exploration done, but if the geological puzzle can be unravelled there is the potential for very significant fields to be found,” Streitberg said in a briefing released to the Australian Stock Exchange.
“The lack of commercial discoveries after the initial 1980s discoveries, largely because of declining effort, also deterred other explorers,” Streitberg said.
“We are a very precedent driven industry and sometimes areas are neglected because of perceived wisdom rather than geological truths.”
The Canning Basin is a huge area, which Streitberg said presented its own challenges.
“All of our Perth Basin areas would fit into one small corner of our Canning Basin areas, so we will need to be disciplined and focused in our activity, as we always are,” he said.
Historically, logistics have also been a barrier to exploration in the area, both because of the size of the area and its isolation.
However, Streitberg said the sustained high oil prices have “utterly transformed” the economics of the area and made even smaller discoveries commercial.
“The recent focus on domestic gas supply for WA and the potential for the offshore Browse gas fields to be processed in the area means gas is also a prize worth having, particularly given how wet most of what’s been found,” he said.
“The construction of the Telfer pipeline means that gas transportation options down to the southwest markets are also starting to be developed.”
Streitberg said the Canning Basin has another advantage for Arc in that the drilling season is almost exactly counterpoised with the Perth Basin.
“We have an ideal situation where we can use the rig in the Perth Basin during the Canning Basin wet, and then take it uptot he Canning during the dry,” he said.
Arc recently announced that it had signed up Century Rig 18 for the next phase of its Perth Basin drilling program.
Arc shares closed 8c higher Monday at $1.63.
