Managing director Iain Smith has been in the role for just a few weeks, but has been a director since early 2014, and he believes it is a "fantastic" time to build a junior oiler.

The new kid on the block has some $900,000 in cash, and a board that has put in some $300,000 of its own money into the company during recent capital raisings, giving directors around 16% of the shares.

The company is run on a shoestring, with Smith the only real employee, tasked to drive a counter-cyclical strategy, getting itself into prospective areas for little cash up-front, as many deferred payments as possible, and working hard on setting itself for the upswing.

It is aiming to recover as much of its exploration expenditure as possible from the government's 45% research and development rebates.

By fate and chance the company has rapidly established a new portfolio with four blocks in Western Australia: two offshore WA blocks and two onshore blocks in the southern Perth Basin

Perth Basin

It recently signed a deal with Empire Oil & Gas for interests in EP 416 and EP 480 that extend between the satellite city of Mandurah and the south-west regional centre of Bunbury, a bit further south of Perth.

The company is earning 60% and will assume operatorship for an initial payment of $450,000, an amount consistent with the pro-rata share of the Black Swan aeromagnetic survey shot over the Perth Basin by Empire last year.

"We like it because it is very much underexplored," Smith said.

"There is obviously a lot of focus on the northern part of the basin, but down in the south there hasn't been much activity with only three wells drilled to date, however those wells do confirm the presence of comparable geological formations to those we see up in the northern part of the basin. So the gas play exists, and based on available 2D seismic data, which Empire has worked up, we have been able to generate a sizeable prospect.

Empire had defined three prospects - Wellesley, Leschenault and Leschenault North - in a 200sq.km area, which could potentially be a single large structural closure, although obviously a lot more work would need to be done to assess that potential.

"That prospect across the two known reservoir intervals could have best case prospective resources of 270 billion cubic feet of gas," Smith said.

Pilot has just signed the deal and won't become operator for several months, but it has started to work on the data.

The targets are the Permian-aged Sue Coal Measures and the overlying Triassic-aged Lesueur Sandstone formations, which are similar to those intersected in the northern Perth Basin.

The formations are the same as those seen in the problematic, large Whicher Range gas field further to the south, however Whicher Range is deeper at around 4000m, while the Sue coal measures are about half that depth in Pilot's area.

"We are chasing basically the same plays that are successful in the north, including the same coal measures that are the source of the gas," Smith said.

"The play exists, and it is wide open in these large exploration permits."

There are a number of wells within Pilot's new permits, showing the potential for good quality reservoir in the southern basin, despite an inability to maintain flow rates at Whicher Range further to the south.

WAPET drilled Preston-1 as shallow stratigraphic test on the Harvey Ridge, and while no hydrocarbons were intersected, good reservoir properties were found throughout the Cattamarra Coal Measures.

Lake Preston-1 had minor gas shows in the Willespie Formation, the reservoir formation for Whicher Range, with possible seals provided by coal seams within the Permian Sue Group, or siltstone beds in the Lower Triassic Sabina Sandstone or the Lower Jurassic Cattamarra Coal Measures.

There is gas pipeline infrastructure across the block, and significant industrial demand for gas in the immediate area.

Some of those industry players may even be potential farm-in candidates, Smith said, although he stressed that no discussions with such third parties have occurred to date.

There are precedents.

Alcoa has funded work in the Perth and Canning basins, ERM Power was and is a backer of Empire, and in NZ a number of energy generators and Methanex have all tried their hand at funding exploration.

With the Worsley alumina refinery recently signing up to take surplus coal from Synergy due to supply issues, it is clear that there could well be significant demand for new gas in the south of the Perth Basin, Smith said.

Offshore

The company's offshore blocks offer potential to be its real company-makers, but to get into the blocks a low cost of entry has been paramount.

Smith says for a small company a farm-out strategy can still work, especially where costs can be controlled.

Both of its blocks are in joint venture with Black Swan Resources (20%), a company associated with Pilot director Conrad Todd, and were secured opportunistically for no up-front cash consideration when their former owners decided they were no longer keen on the Carnarvon Basin.

WA-507-P is in deepwater, north of the giant Thebe, Io-Janz and Gorgon discoveries, and is considered to be highly prospective for gas in the Mungaroo Formation, but there is also an emerging Jurassic-sourced oil play that is being chased in neighbouring blocks by the likes of Shell, Statoil and Eni.

There is 3D seismic data over the block, which Pilot has licenced for a minimal up-front payment and a fairly "creative commercial agreement" with milestone payments due to the seismic licensee based on progressing the project through farm-out and drilling.

Licencing the data largely fulfils the primary work program, with no drilling requirements.

"The permit hosts very large prospects," Smith said.

"We very much see this as an option, and drilling is something we are keen to do on the back of an industry recovery."

Gaffney Cline and Associates has estimated the Dalia Updip prospect as having potential for 4.7Tcf (best case). A well, Dalia South-1 was drilled by Woodside Petroleum in 2010 using the Maersk Discoverer drillship, but was dry.

Pilot now says it is clear the prospect was drilled some 300m off-structure.

The block contains three prospects with best case prospective gas resources of 10 trillion cubic feet.

GCA is determining the oil numbers, but Smith said based on the gas potential the oil potential could be "really very large, to the tune of several hundred million barrels".

WA-503-P is the smaller permit, a single graticular block in shallower waters.

The block was secured from Neon Energy and Pilot needs to shoot 3D over the permit before May 2017.

"We are in discussions with a seismic contractor, and we are again hoping to potentially do that work in the new year, on favourable terms, where a large percentage of those costs would be deferred," Smith said.

"It is a good time to be out there negotiating with seismic contractors."

The block is suitable for jack-up drilling, and is close to existing discoveries such as Hurricane, Sage and Legendre, and using the vintage 2D there are three mapped prospects with the potential for 10-40MMbbl.

Pilot plans to complete final interpretation of the existing 3D seismic data before hitting the farm-out market to fund the seismic work.

Smith admits the farm-out market is slow, but that fact has enabled it to put its portfolio together and position itself for an industry recovery, whenever that is.

"If we can bide our time and add value through low cost work in the meantime, we will be well placed when interest comes around," he said.

With four permits as operator, and limited resources, Smith said the company is in no great hurry to expand its holdings, and is not actively pursuing new acquisitions.

Earlier this week the company was able to exit its Alaskan project, and should see some much needed cash coming in from that divestment process.