Chevron Enters Australian Shale Gas Industry With Beach Deal

Chevron Corp., the second-largest U.S. energy company, agreed to pay as much as $349 million to join Beach Energy Ltd. in an Australian natural gas exploration campaign in its first shale investment in the country.

Chevron will acquire as much as 60 percent of a permit in South Australia and 36 percent of a block in Queensland, Adelaide-based Beach said today in a statement. The blocks cover about 810,000 acres in the Cooper Basin, the outback region that straddles the border of the two states, San Ramon, California-based Chevron said in a separate statement.

The agreement follows shale investments by ConocoPhillips, Statoil ASA, BG Group Plc and Hess Corp. in a nation estimated by the U.S. Energy Information Administration to have the world’s sixth-biggest potential reserves. Wilson HTM Investment Group says the accord is the biggest shale gas deal in Australia, which the government estimates may hold almost 400 trillion cubic feet of resources.

“The fact you’ve got a knowledgeable party coming in says they think there’s something there,” said John Young, a Melbourne-based analyst at Wilson HTM Investment Group. “The resource in the Cooper is being progressively de-risked and we’ll over time see a commercial development from this.”

Beach rose 5.8 percent to A$1.37 at the close in Sydney, the most in more than five months. The company had the fifth-biggest gain on Australia’s key index, which climbed 0.8 percent.

Biggest Deal

BG, developing one of the three liquefied natural gas ventures on the Queensland coast, reached an agreement with Drillsearch Energy Ltd. in 2011 to fund a A$130 million ($134 million) campaign to explore for gas in the Cooper Basin.

Drillsearch advanced 4.2 percent to A$1.375, and Senex Energy Ltd., another shale explorer in the Cooper Basin, gained 7.5 percent to 64.5 cents, the most in more than six months.

“For someone with the world to look at and opportunities everywhere to recognize the potential of the Cooper is a huge vote of confidence in the future of the basin,” Beach Managing Director Reginald Nelson said today in a phone interview. “Ultimately it will allow us to move more quickly to accelerate appraisal and development” and will help the company get the drilling services and equipment it needs, he said.

The U.S. company first approached Beach in early 2012, according to Nelson.

Chevron Cash

Chevron will initially pay Beach $36 million in cash and cover $95 million in costs for 30 percent of the South Australia permit and $59 million in cash for 18 percent of the Queensland acreage, according to the Beach statement. The Australian company may receive as much as $349 million over two stages that span several years, Beach said.

About 60 percent of Chevron’s total potential payments would be in cash, a positive for Beach, according to Young, the Wilson HTM analyst.

PetroChina Co., the country’s biggest oil and gas producer, agreed to purchase a 29 percent stake in the Goldwyer shale project in Western Australia’s Canning Basin from ConocoPhillips, the Beijing-based company said Feb. 20.

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