South Australia’s Cooper Basin is High St, and its resident oil and gas companies are competing shop owners. Ray Shaw, managing director of Great Artesian Oil and Gas, must ensure his shop window is the most attractive to passers-by if he is to lure patrons in off the street.

Shaw uses the shopfront metaphor regularly when describing the competition for the same pool of investors among the various outfits that call Cooper Basin home. Shaw has the job of cramming his window with as many finely decorated mannequins as possible in order to draw those High St passers-by off the curb and into his store.

Great Artesian listed on the Australian Stock Exchange (ASX) back in August 2003, at which time it represented the first conventional oil and gas group to float on the board in almost two years.

At that time, the mannequin with pride of place in Great Artesian’s shiny new window was the company’s substantial 100%-held ground position in the prolific Cooper Basin.

Great Artesian’s three ex-Santos South Australian permits – PELs 91, 106 and 107 –were all wholly-owned, giving the company maximum leverage to joint venture and farm-in arrangements over the prospective brownfields ground.

The prime-land-position mannequin still enjoys a prominent place in Great Artesian’s shop window, and still catches its fair share of eyes off the street. But it does find itself in a window that is becoming increasingly crowded and considerably more decorative.

Another new mannequin will appear in Great Artesian’s metaphorical window around the middle of 2005, when the Semgsy-1 gas find comes on-line and confers on its parents producer status (Smegsy is split 75%-25% between Great Artesian and Enterprise Energy).

Production testing at Smegsy-1, which sits within PEL 106 5km west of Jack Lake gas field and 12km northeast of the Raven field, has yielded gas flows of up to eight million cubic feet of gas per day.

Smegsy-1’s partners are currently deep in discussions with a third party over sales and transmission of the Smegsy gas, and the partners are also polishing the finer details of constructing 4km of pipeline from the gas find to the existing piping infrastructure nearby. Construction of the proposed pipeline is likely to be a low-cost, relatively fast affair, to be built over the course of 2-3 months at a price of around $500,000.

The successful commissioning of Smegsy-1 will make Great Artesian the first independent junior gas producer (of the new round of explorers) in South Australia. Importantly, the relationships established between Great Artesian and its gas sale partners will play into the company’s hands if and when further gas discoveries are made.

“While it’s not super-large, it [Smegsy-1] demonstrates that the model we’re looking at works,” Shaw said.

Smegsy-1 was but one of three gas discoveries made in PEL 106 last year. To date, the licence has returned a historical success rate of better than 70%, well above the Cooper Basin average of roughly 25%.

Despite this success rate and the fact Great Artesian’s Paranta gas find is waiting in the wings, gas is set to be somewhat overshadowed when it comes to the company’s exploration plans for 2005.

The company’s oil mannequin has been sitting in the back room ever since Great Artesian’s ASX listing, but it is now being shifted to a prominent position in the shop window.

The case for oil exploration within Great Artesian’s licences is strong – the targets sit in an infrastructure-rich region boasting a historical success rate greater than 50%.

Great Artesian plans to have two wells testing for shallow Cooper Basin oil occurrences drilled in the south-west portion of PEL 107 by the middle of 2005. PEL 107 encompasses the Santos-operated Lake Hope oil fields, which have already produced over 16 million barrels of oil.

Shaw said the strong oil agenda for 2005 was partly borne out of the share market’s interest in and understanding of oil exploration.

“Looking over the entrails of last year’s activities, we saw that there were a couple of things in terms of refining our own approach, and we recognised that shareholders tend to get more value for oil exploration rather than gas,” Shaw said.

A quick look at Great Artesian’s share chart from the past year gives credence to this idea. The success at Smegsy-1 has hardly caught the investing public’s attention, with the Great Artesian share price sliding steadily southwards since the discovery was announced.

“For that reason, the next mannequin, if you like, is oil,” Shaw said.

Part two continues tomorrow – Great Artesian farmout program gives more bang for bucks

* This report, first published in a slightly different form in the March/April edition of RESOURCESTOCKS magazine, was commissioned by Great Artesian Oil & Gas