Coober Pedy and the “$20 Trillion Opportunity”

By Travis Johnson, Stock Gumshoe, March 7, 2013

This piece was originally published as part of the Friday File two weeks ago, and we’re re-sharing this excerpt with all of our free readers because the ad is driving so many questions our way. It has not been edited or updated, though to our knowledge neither has the original “interview” ad from mid February.

The latest teaser ad for the Energy Inner Circle newsletter (edited by Dr. Kent Moors) is pitching the next great shale oil area — and it’s in Australia.

The tease tells us that a tiny town called Coober Pedy, which is in an almost uninhabitable part of South Australia, is about to become an immense power center of such influence that it will rival the oil sheikdoms of the Middle East, all because of a $20 trillion find that’s going to make at least a few companies (and you, of course) stinkin’ rich.

Coober Pedy is a mining town, miles from anywhere and unusually dry and hot even for the driest continent on earth, and they’re known for mining opals — it’s also a place where only a couple thousand people live, and much of the revenue comes from tourists who come to see the old opal mines and gawk at the underground houses and churches that have been built to help people survive the desert heat. Other than that, there’s not much reason anyone should have heard of it.

Until recently, apparently — there have been rumors and explorers about the work that Linc Energy and others have done exploring for shale oil in Australia, and particularly of the Arckaringa Basin in this specific area. It’s not too far from other tight oil and gas formations in Australia (200 miles counts as “not too far” in the boonies), but there’s not been enough promise of economic reservoirs of oil to get much investment into the area. Until, perhaps, now.

Linc Energy is the central focus of the ad and of any stories about the Arckaringa Basin, and it’s pretty well known (and revealed in the “interview” teaser ad, this isn’t a secret pick) — they have all the leases in the Arckaringa Basin and have been the ones drilling and exploring there for a few years. And they also released impressive estimates in January that got everyone excited, talking about the potential for 200 billion barrels of oil or more. You can see the chatter that’s been happening over this massive Arckaringa Basin potential and Linc Energy in a Wall Street Journal piece here, and in a CBC piece here. It sounds like most of the experts, and Linc themselves, are talking it down to maybe three or four billion barrels as the more reasonable lowball expectation for possible someday recoverable oil.

So, as you can imagine, Moors says “This is going to be huge” — but it’s going to involve other companies as well.

Linc is going to need lots of funding and help from experienced partners to develop anything. They have bankers advising them now to raise the money, and governments are apparently involved in holding hands and making sure that companies get involved to push the development of this field.

He says in the video that he recommended Linc the same day that the news came out — and that it’s a great long-term play, but it’s already shot up so he has other stocks to suggest.

Interestingly, unlike many newsletter folks who try to look below the billion dollar story (Linc is still small by oil company standards, but has a billion dollar market cap) to find the little unheard of story of some neighboring landholder or unknown partner … Moors pitches two large, international companies that he thinks will be major beneficiaries, he calls them the operators and service providers (“OSPs”). Maybe this is because Arckaringa has no other landowners to speak of (Linc apparently has it all locked up), or because the emerging shale searchers in Australia aren’t particularly related to this headline-gathering story.

We’re told that the operators are those who are going to invest early and help fund the exploratory drilling. The service providers are the experts in this type of huge find and in shale production and pipelines, etc. All of the companies are apparently heavily traded in New York, major stocks and large companies that will play off of this find as it generates profits for years to come.

He says, and I’m paraphrasing because I didn’t have the patience to listen to the video too many times, that “the company I’m hearing consistently as the most likely to benefit most is a huge company, has experience farming in to other major projects, government support, and plenty of financing.”

And Moors suggests that there are huge potential returns for the operator, with 135% or better return within the first year thrown out as a possibility. He also teases a chain of options plays that he thinks you can make on the stock to magnify those gains, but I don’t think anyone’s made an argument that Kent Moors is an expert options trader so we’ll leave that to you to dither with if you’d like.

But what is the stock? Well, frankly, Moors provides no real clues on this one — so I’ll have to guess. If I’m hazarding a guess at the company most likely to get involved with a $200-300 million farm-in deal for the Arckaringa basin and get early access to a potential large shale discovery there, my guess is … Statoil (STO).

They have little net debt, strong government backing (they’re controlled by the government of Norway), plenty of shale and farm-in expertise around the world (including their takeover of Brigham Exploration in the Bakken a couple years ago), and they’re already active in early-stage exploration for shale energy in Australia through their joint venture with PetroFrontier in the Northern Territories.

This is just a guess, there are easily several dozen international oil majors that are big enough to fund an early commitment to this project, and who are desperate for new reserves, I just think Statoil is a likely fit. I do not, however, think that the discovery is likely to cause any $50+ billion oil company to double in share price over the next year — that seems like wide-eyed optimism for a project that may indeed be massive but is years and years (expensive years, too) away from production.

I’m no energy expert, but that seems like a stretch — the biggest beneficiary of lucrative farm-in deals would probably still be Linc Energy, which does trade in the US through a sponsored ADR on the pink sheets (LNCGY is the sponsored 1:10 ADR, LNCYF is the 1:1 pink sheets ticker — both are somewhat tradeable for small investors, there is some volume, but if you buy be careful to price your limit order based on the fair value that’s set on the Australian stock exchange — that ticker is LNC.AX on Yahoo Finance — and do your currency conversion to find a reasonable US$ price). Of course, Linc has also shot up incredibly since they announced the discovery in January — though, in their defense, it’s also a real company beyond this Arckaringa discovery, with real projects that generate revenue now. It wouldn’t be a billion dollar company without the Arckaringa discovery and speculation, but it would be real and be generating revenue.

Who’s the service provider Moors teases? He says that there’s someone who is currently active in Australia, who has set up infrastructure and has projects, and has a close connection to the South Australia provincial government. He also noted that when this teased company announces major service contracts, we might easily see them up 100-400% in the next 18 months. And apparently he thinks there will be a winning option trading strategy to ride these stocks higher too.

And that’s about what we learn in the way of clues — so what’s his big company “service provider” pick for this South Australia field? Well, again the clues are not overwhelming … but if you’re talking South Australia and hydrofracking services I think you almost have to give Halliburton (HAL) the pole position. They’re already very active in oil and gas services in Australia, including the coal bed methane projects in the east of the country and the many projects in the Cooper Basin, which is just a couple hundred miles from Coober Pedy. Halliburton spinoff KBR also has a significant presence in South Australia, though that’s apparently more infrastructure and defense related.

So … I don’t know whether or not Arckaringa will turn out to be the next Bakken (or bigger), but if it even comes close there will be ridiculous billions poured into this sparse corner of the world and it would not be at all surprising if the money flowed most vigorously to the big oil companies — they are, after all, quite expert at turning the tide of cash in their direction over time. Here are a few other pieces on the find if you want to get your head around it:

“Reality check for Linc Oil Find”

Linc Energy Signals Shale-oil Bonanza

Linc Energy Shale Oil Find Met With Share of Caution

I’ll confess that I was a little disappointed not to be facing a veiled teaser for Linc Energy, or even for one of the more obscure little shale explorers in other Australian fields … but if my guesses turn out to be where Kent Moors is steering is subscribers I do like Statoil and can’t complain much about the valuation of Halliburton, and there’s plenty of information out there for you to make your own choices about those picks.

I don’t own any of the stocks I’ve mentioned and, frankly, I’m not champing at the bit to buy them because of this discovery … but that’s at least as much because I’m already overexposed to oil exploration in my portfolio as it is due to any reluctance to speculate on a new discovery, so you can go forth and make your own call on Arckaringa and the various possible picks — no matter which large cap companies get involved, I’ll be shocked if they double in a year just because they get a piece of this field.


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46 Comments on "Coober Pedy and the “$20 Trillion Opportunity”"

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Myron Martin
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0
March 7, 2013 5:51 pm

Travis expresses my feelings very well, it may be big but it will take a lot of time and even more money before any of it becomes a reality that will pay off. Great for selling subscriptions but short on any near term returns. I am comfortable with the picks Travis outlined as I have considered, and would be happy to add Statoil or HAL to my portfolio.

There will be time enough to get on board any companies getting involved with this project and there should be plenty of publicity now that this find is out in the open

advantedges
Member
56
advantedges
March 7, 2013 11:07 pm
I lived in Australia for several years (some time ago), and visited South Australia, and listened to the legends of Cooper Pedy. I even bought some opals that were allegedly from there! I would suggest that the Majors will be players in this find if it as huge as Moors suggests. That would include companies like Royal Dutch and Chevron. Will the drillers and fracting companies get involved? Who knows. Will China get involved through Sinopec? Your guess is as good as mine. Travis – I would suggest we do some sleuthing on the company that Moors teases as having… Read more »
blzinger
Member
0
blzinger
March 8, 2013 11:02 am
This time i broke my rules and bought before proven, because this land area is so huge and the companies who own the land so small and poor with cash, I couldn’t wait for the big boys with their horizontal drilling, so I bought the land. Central Petroleum, ” CPTLF “, Rodinia Oil Corp., ” RDOIF ” and Petro Frontier, ” PFRRF ” and also one big boy Linc Energy, ” LNCGY ” Stat Oil and Total have also signed in , and will be ready for the kill !!! ” Zinger ” , Bill Kaunzinger
Anonymous
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Anonymous
March 8, 2013 1:38 pm

The operators identified by Moors are Sinopec Shanghai (SHI) and Halliburton (Hal). (Please don’t use my name as I am a subscriber to Inner Energy).

jay
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jay
July 9, 2013 2:50 pm

which Linc Energy stock did you invest on> LNC:ASX or LNCGY ? I am stuck on which one to go with? Also do you think now is a good time to start buying SHI and Hal shares or wait till they formally announced? thanks for your help

sagenot
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0
sagenot
March 8, 2013 1:43 pm

I’ve asked Money Morning’s Dr. Kent Moors if there is rail transportation, or shipping available close by, I knew that there was no pipeline, that was a week ago. No response yet, but I’ll certainly inform Travis if the Dr. does respond. He owes me for how stubborn he was when I had taken a trial subscription to another Letter that was shilling for him. He’s far from my fave for being on-the-ball with these picks of his.

Be careful guys, unless there is a way to move this oil why would you invest your hard-earned $$ now?

Penny
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0
Penny
March 8, 2013 5:05 pm
There’s the regular rail line that goes from Adelaide (state capital of South Australia) north to Alice Springs and to Darwin (both in the Northern Territory.) The train is called The Ghan and it’s well worth a trip if you want to go check it out. Do visit Coober Pedy while you’re there; it’s an interesting place. In general, the Australians are quite used to dealing with transportation in their great expanse of outback. Look where their iron ore, gold, nickel, uranium, bauxite and other mines are located. There’s nothing like passing a three-trailer road train on a dirt road… Read more »
jerry
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jerry
March 9, 2013 3:53 pm

This is a rail line more to the west of the pedy site . Im guessing in the vicinity of 1-200 miles the run right down to the southern coast fishing center. more research coming.

Penny
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Penny
March 10, 2013 12:39 am
Check out this US company http://www.gwrr.com/about_us “Genesee & Wyoming Inc. (GWI) owns and operates short line and regional freight railroads in the United States, Canada, Australia, the Netherlands and Belgium. We provide rail service at 35 ports in North America, Australia and Europe and perform contract coal loading and railcar switching for industrial customers. In addition, we operate the Tarcoola to Darwin rail line which links the Port of Darwin with the Australian interstate rail network in South Australia. Operations currently include 111 railroads organized in 11 regions, with more than 15,000 miles of owned and leased track and approximately… Read more »
AlB
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0
March 8, 2013 2:28 pm

Moors was the so-called expert who predicted oil would hit $150/bbl last summer. After losing a lot on his recommended call options (which didn’t come within four points of the strike price) my trust in him went to zero. As sagenot suggests, be careful investing in a newsletter writer’s fantasies.

thomas doepke
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0
March 8, 2013 2:58 pm

they are trying to sell this newsletter by talking up A LAZOR AUDIO company thats going to change the way we hear radio, tv, our own hearing. can you check this out Travis?

kevron1228
Member
7
kevron1228
March 8, 2013 3:00 pm

I will “sleep on this” over the weekend before doing anything. I cancelled out on Moors long ago.

john
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john
March 8, 2013 6:17 pm

Travis, you are right . It is STO.. They would benefit most from this endeavor.

RS
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RS
August 10, 2013 1:48 pm

It is clear to me that Haliburton has unusually stong US military ties …and a find this big justifies a base in Australia as well I bet. My vote is Halliburton is a no brainer …

Tarzan Leather-Chaps
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Tarzan Leather-Chaps
March 8, 2013 7:38 pm

It appears STO would be the obvious. RDS apparently has invested the most in the Coober Pedy and is heavily entrenched with large facilities and govt relations. Moors has predicted in writing that WTI will be at or above $105.00 and Brent Crude will be at or above $127.00 on March 31. He is losing much credibility with me, but China needs that energy and will be all over anything in Australia.

Tarzan Leather-Chaps
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Tarzan Leather-Chaps
March 8, 2013 7:40 pm

Also, Santos appears to be the closest pipeline to this area with access to major shiping hubs.

askforinfo
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askforinfo
April 14, 2013 3:15 pm

This is an area map showing the blocks and the rail lines http://www.pir.sa.gov.au/__data/assets/pdf_file/0003/26904/arckaringa_detailed.pdf

baygreen
Member
32
March 8, 2013 8:02 pm
The Drama of a Broadway show with enough spam mail to almost not want to boot up your computer. I could not even count how many scripts and ploys they print for readers to x of there mail . I am always looking for a good investment as we all probably are but in the last few days you would have thought the world was ending by the amount of promo’s for this 20 Trillion guarantee to get your letter news money back but hang on if you invest. The pump and dumpers at least tell you how much they… Read more »
Tradie
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Tradie
March 8, 2013 8:07 pm

How about the Chevron guys? Beach Energy another small Aussie explorer.?

jalaja2
Member
0
jalaja2
March 8, 2013 8:54 pm

I asked for Bakkan energy co below $10.00
Where is it?

kavisk
Guest
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kavisk
March 8, 2013 10:33 pm

What about a water play on this? Fracking takes huge amounts of water and this place is one of the driest places on earth. Any thoughts on who would have a leg up for supplying water to the operators?

kevron1228
Member
7
kevron1228
March 9, 2013 1:08 am
It is my impression that “fracking” need not be exclusivlely hydraulic in nature. One company that might have some business opportunity out of this could possibly be Carbo Ceramics (CRR) : “CARBO Ceramics Inc. manufactures and sells resin-coated ceramic and resin-coated sand proppants primarily used in the hydraulic fracturing of natural gas and oil wells in the United States and internationally. The company offers ceramic proppants, including CARBOHSP and CARBOPROP designed for use in deep gas wells; CARBOLITE used in medium depth oil and gas wells; CARBOECONOPROP; CARBOHYDROPROP used to enhance performance in slickwater fracture treatments; CARBOBOND LITE for oil… Read more »
Tarzan Leather-Chaps
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0
Tarzan Leather-Chaps
March 9, 2013 9:36 am

Be REALLY careful with the water and related plays. POOSF and GSFVF are examples.
POOSF has gone from a 52 week high of $15.65 and currently sits at $0.15.

H Ron Hartman
Guest
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H Ron Hartman
March 9, 2013 12:40 pm

@ Tarzan Leather-Chaps – Agree. Learned the hard way on GSFVF – which was another hyper-pied-piper!

alephnull
Irregular
1
alephnull
March 9, 2013 3:49 pm

A couple of days ago Dr Kent Moors appeared on CNBC with Louisa Boyesen. One remark caught my attention. He said that crack spreads are improving. Although the refiners have had a good performance there maybe more to come. Check for yourselves.

Penny
Guest
0
Penny
March 10, 2013 12:50 am

Here’s a lengthy-but-relevant article from Mining Australia:
http://www.miningaustralia.com.au/features/can-shale-oil-fuel-australia
It’s a more balanced look at the teaser pitch, and does discuss pipeline possibilities.

michael
Guest
0
michael
March 10, 2013 12:37 pm
Hey Travis, I come from a land down under and the story,although headline grabbing,is not quite as big here as it is with Kent ,Bill Pantalon and the other thrashers at money morning.I have bought some though.I know it is probably some time until the resource is proved up but small details like that didn’t stop Africa Oil from turning into a ten bagger last year.And Kenya isn’t Australia if we’re talking safe jurisdictions.Yeah okay,it’s conventional oil in Africa but last time I checked being shale oil hasn’t hurt the Bakken,Eagle Ford,Marcellus and so on and so forth,from motoring forward… Read more »
cyberguy
Irregular
5
cyberguy
March 10, 2013 2:47 pm

Penny —-
Don’t you means GWR for Genesee & Wyoming Inc. ?

Penny
Guest
0
Penny
March 10, 2013 4:11 pm

Hi Tzvi,
Answer: yes & no. GWI is the abbreviation that the company uses for itself, while GWR is their NYSE stock symbol.
I looked at their stock price history and decided that it had risen way too fast for me to be interested just yet. Why didn’t anyone send out a teaser on them 2 years ago!!!

sportsbiz
Irregular
11
March 10, 2013 4:49 pm

Back to the audio company they’ve been touting the last couple of weeks as revolutionary. Anyone have any ideas what this one is?

Quillan
Guest
0
Quillan
March 11, 2013 8:18 pm
WEC. owns a large tenement the size of the UK which adjoins the Linc acreage at Arckaringa. The price has gone steadily down despite having more than 1 billion tonnes of coal in the price for less than nothing on that tenement [Phillipson] and a Market Cap less than the AUD 80 Million [debt free] it has in the Bank. That also ignores its world leading Clean Coal Technology which several Mining Companies are considering adopting. I reckon Moors is full of B/S . Loves to say he’s going to Windsor Castle almost inferring the Queen will be present, and… Read more »
Jim
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0
Jim
April 8, 2013 6:46 pm

The Crafty Investor’s Super-Alternative to Oil Shale Royalties!
By
Chris Mayer @ Daily Reckoning

Steve
Guest
0
Steve
April 14, 2013 12:15 pm

Before the oil gets transported to a market, it needs to get out of the ground. Shale oil requires immense quantities of water to produce it. As the article stated there is no water in this area.

viola
Member
0
viola
April 15, 2013 12:40 am

What fun!!! You are keeping me up past my bed time and I’m An old lady.THE AUSTRALIAN people are the same kind of people that settled this country. I have lived there so I have no doubt that at some point this will happen Mate.

Richard Tonkin
Guest
0
July 14, 2013 10:23 am

Oh, and by the way G&W were also part of the HAL-led consortium (see their media release at link) that built the railway before acquiring long-term lease of the pertinent stretch of track. How’d the find out the good info- Tarot cards?

Myron Martin
Guest
0
July 15, 2013 12:35 pm

Have Geneese and Wyoming on my watch list, but I agree with Penny, has risen to a level where investment is only justified once actual production is initiated and that could be MANY years down the road during which time priorities could change. Moors seems to thrive on publicity whether there is solid prospects for investors or not.

Bonnie Ember
Guest
0
July 30, 2013 7:41 pm

I liked Money matters/Moors presentatition & signed up for the $49. Newletter as a trial.
I did not understand that meant:
I was also buying a $199 newsletter.

Such b.s. for yesterdays news.

I am cancelling without ever reading anything from them.

I feel like an idiot for giving them my credit card.

A friend of mine just moved to. The Baaken.
Plenty of work there guys!

Bill
Guest
0
Bill "Zinger" Kaunzinger
August 11, 2013 12:30 am
Hi Travis Here are some under $10 Bakken to keep his eyes open. SSN, USEG, EOX, TPLM and AXAS. There is a Santos Pipe Line and the GWR RR. I’m sure LINC had a Seismic 3D Air taken. Come on money, LINC needs you ! Water will be needed for fracking which could mean HAL, might be the company because they have every thing needed under one roof. I would like to spread my view at this point on my second Bakken pick, are you ready? TAG OIL, “TAoif” in New Zealand. 45,000 barrels of oil per day, 534 million… Read more »
accoe
Irregular
0
accoe
August 10, 2013 8:17 pm

looking for work outside of australia , cause taxes, cost of living, interest rates are to high to live in australia

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