Energised

Written on the 15 June 2009

Energised

ASX-LISTED ICON ENERGY IS UNDERTAKING A BOLD CAPITAL RAISING VENTURE TO SIGNIFICANTLY INCREASE ITS COAL SEAM GAS (CSG) RESERVES.

By Jason Oxenbridge

THE Gold Coast-based CSG explorer will look to increase its market cap to $300 million in 18 months – an increase of around $180 million.

The company’s $36 million joint venture with the State Government-owned Stanwell Corporation is set to generate electricity for thousands of Queenslanders. Stanwell currently supplies power to 30 per cent of the grid.

Immediate uncertainty surrounds the ownership of Stanwell should the State Government sell off some of its core assets to breakdown debt. But Icon managing director Ray James says regardless of the decisions to come out of Treasury, it will be business as usual.

“If Stanwell gets sold off then we will be dealing with a new owner, which shouldn’t change the equation at all,” says James.

“But that said, the government is floundering around trying to find money and we don’t know what they will do. If the $30 million option they hold is not taken up, then obviously we’re dealing with a different party but we don’t want to become beholden or dependent on that. In any case, we have wells that are just as exciting in the area to go out there and develop.”
Icon is planning a further 30-40 wells in the Surat Basin, on farming land north of Goondiwindi; in Roma, north Queensland; and in South Australia over the next 18 months.

“This industry is not being dragged down by the global financial crisis, in fact we are expanding and going ahead,” says James.

“The whole coal seam gas industry is a bit of an enigma at the moment and is one of the few industries that are moving ahead on the stock market in Australia. We are very confident of increasing the market cap to $300 million, taking our share price to around $1 a share, which will be very nice.”

Stand and deliver

At a recent AGM on the Gold Coast, shareholders voted the re-election of Stephen Barry (chairman of TSS) as a director, while Derek Murphy and Keith Hilless were confirmed to the board as non executive directors.

All but five unit holders voted in favour – the same five who unsuccessfully attempted a management takeover of the company last year. The dispute resulted in Icon Energy’s largest shareholder attempting to oust the Robina-based company board including James. Dianne Baldwin nominated her husband Ron Baldwin, as one of the new directors. Not only did James and his board emerge triumphant, he is also now Icon’s largest shareholder with a 6.2 per cent holding.

“The pressure came from the EGM to overthrow the management. It did distract the management for a while and it was something that had to be dealt with. We thought it was wrong and if we were incompetent we deserve to be overthrown,” says James.

“There were a lot of complicated reasons behind that, but the attempt failed. The interesting thing was that 60 per cent of the shareholders were right behind us and although the vote was 125 to about 175 million, over half of that was in a couple of hands. But the mums and dads voted for us and we had 189 million shares respond out of 332 and that is an incredible result.

“We were very pleased with the result. You can never lose faith in what you’re doing, we have a plan, we have a dream and we can’t lose focus.”

An untapped renewable resource

CSG reserves in Queensland are creating vast jobs and renewable resources, albeit with some implications. Water storage has become an issue with the EPA requiring dams to be built on-site. But the positives for economic recovery and employment are evident. Commonwealth Bank senior economist of global markets Michael Workman, says CSG exploration in Queensland could offset forecast unemployment of 8.5 per cent.

Icon non-executive director Dr Keith Hilless, a former state electricity commissioner, worked in the electricity industry for nearly 50 years. The former chief executive of the Queensland Transmission and Supply Corporation moved into private industry in 1997, after joining the US-owned NRG Asia Pacific.

“Twenty years ago we knew there was this massive source of electricity locked up in coal, but we would always ask, ‘how the hell do we get it out of the ground?’. Now we’re trying to consider powering the next raft of power stations,” says Hilless.

James says the timing of exploration will build sought after CSG reserves that will eventually replace diesel and fire power stations.

“We have a resource that is clean, cleaner than anything else and it will be utilised for a long time,” says James.

“Nuclear and even geothermal are not likely to gazump what we have here in coal seam gas. It’s a marvellous resource and it will be a growth industry for many, many years. If you went back 10 years ago and said coal seam gas was going to work, no-one would have believed you. It was an industry that wasn’t understood, but today it’s a wonderful new thing out there and everybody wants a piece of it.

“In 15 or 20 years, everyone will want a piece of geothermal. Geothermal as an investment is long-term, it is the future, it’s a renewable resource and a very good resource and we can’t afford to ignore it. But it’s not yet on the radar screens of those people who are trying to make a buck on the stock market.”

Never mind the neighbours

As the race to drill vast gas reserves hits fever pitch, several large-scale mining companies are vying for a slice of the action. Companies such as Arrow, Blue, Pangaea, Eastern Star, Bow and Rawson are working alongside Icon in the rich Surat Basin.

“We’re in the same business and we’ve got adjacent acreage. We saw the potential a long time ago. It’s nice to be there, but what ever they do, we have our own plan and own markets so it really doesn’t matter. But it’s nice to be respected and on people’s radar screen,” says James.

SNAPSHOT

• Capital raising to increase reserves with a further 40 wells
• JV with State Government owned Stanwell Corporation
• $36M CSG development in four blocks in ATP 626P
• Proposed $8 million drilling in ATP 626P (100 per cent Icon area)
• Arrow, Blue, Pangaea, Eastern Star, Bow and Rawson working adjacent
• Proposed drilling of two wells in ATP 849P
• Potential for two TCF gas reserves (2P) – not yet proven
• NSAI engaged for reserve certification out of Houston Texas
• Exploration activity in areas outside CSG areas
• Geothermal exposure through 100 per cent interest in EPG 49 and 51


PROJECTS

• Coal Seam Gas (CSG) development of commercial project in ATP 626P Surat Basin, Queensland, north of Goondiwindi
• Exploration wells for CSG in ATP 849P near the town of Mitchell, west of Roma, Queensland
• Drill one well in EP 218 in South Australia
• Exploration to commence in ATP 855P in Cooper-Eromanga Basin


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