Q&A with the Founding Trio of Australis: A Powerhouse Company in the Oil and Gas Industry
Australis Oil and Gas is a US unconventional oil shale-focused company established in 2014. The Company participates in an industry that has grown the US shale oil production dramatically during the period of 2009 – 2021, making the US the largest oil producer in the world and disrupting international markets.
Holding an expansive net acreage of over 100,000 acres in the oil-rich core area of the Tuscaloosa Marine Shale (TMS), Australis is the largest producer and oilfield proprietor in the region. TMS remains as one of the last emerging basins in the USA, carrying a significant potential amongst shale plays from across the globe, as proven by previous operators and its long-term well production history.
With its strategic positioning at the TMS core, Australis delineates a profitable and production-defined onshore area that has proven reserves and undeveloped resources amounting to over 170 million barrels. Australis founders Messrs Jon Stewart, Ian Lusted, and Graham Dowland, are all former founders and key executives of Aurora Oil & Gas Limited; they are the same ones who brought great success to that eminent company.
In a discovery interview where CRIISP Media sat down with Ian Lusted, he shared unparalleled details about their company’s journey, the strong minds behind it, and a look-see at how they were able to build a reliable process to generate a steady, positive cash flow.
Ian, TMS is a massive oilfield. Can you share more about how Australis was able to dominate the region—the core area, specifically?
In 2010 – 2012, large companies such as EOG and Devon applied stimulation efforts to draw the oil out of the reservoir but the early wells were difficult to drill and the production results were disappointing, primarily because they followed the trends and theories that had worked in other plays—meaning, they had leased and drilled in the wrong areas of the TMS. These companies quickly exited the play and deployed their capital elsewhere.
By the time we entered, following the industry downturn in 2015/16, it was clear that the wells drilled in the core area were performing better than the more traditional and established play but no one other than us were looking!
What problem does Australis aim to address and how do you plan on solving it?
Broadly, the US unconventional industry has been in consolidation mode since the impact of COVID. Due to shareholder pressure to improve returns, the industry has been more disciplined with its capital and focused on profitability from existing portfolios rather than pursuing growth opportunities. This has limited most transactions to script-type mergers to add contiguous inventory and reduce costs through synergies or modest acquisitions that achieve the same objectives. In this context, it has been challenging to market an asset like the TMS. However, as the unconventional oil industry matures, then companies will be forced to consider earlier stage opportunities to replenish high productivity reserves at a sustainable cost and the TMS compares very favourably with the limited alternatives that are available.
This year, Australis has been engaging with a range of potential partners in the US. It includes shale players, private industry groups, and strategic investor groups including high-net-worth family offices.
What can you say the cornerstone of your strategy is when it comes to these solutions?
We believe that appetite for this type of asset will recover along with the industry sentiment and confidence in the medium and long term oil price. Once this occurs, the key differentiator and cornerstone of our strategy will be asset quality. This is a multifaceted attribute with drivers such as oil productivity, oil quality and composition, proximity to infrastructure, and favourable local and state rules which will all combine to make the Australis TMS position highly attractive.
The foundation of the company is undoubtedly strong; coming from a successful venture at Aurora, how were you able to use the experience and knowledge in Australis?
The knowledge gained from our successful experience at Aurora was applied during the initial opportunity identification phase and the asset value accretion phase. During the Aurora journey, we made a number of difficult but ultimately valuable decisions. Australis has tried to maximise both the positive and negative knowledge gained last time when devising and implementing our business strategy. It is worth noting that the Directors and Executive Management have made significant fiscal investments alongside shareholders throughout the journey, including the most recent placement in the Q1 of 2021 which creates a significant alignment in terms of outcomes.
Moving forward, what are your goals for the next 6 to 12 months and where is Australis ultimately headed?
The goals are simple. We will continue to live within our means and manage the existing production in a safe and prudent manner whilst seeking a partner in putting up capital for the play. This will be used to drill wells in order to increase production and cash flow, convert resources to proven reserves, and grow the value of all our undeveloped acreage and resources.
Australis Oil and Gas flaunts strong management with a track record of monetising value for shareholders. The existing share price offers a unique opportunity to invest in the company at ground floor prices, providing heightened leverage and significant value to entering investors.
To reach out to the team directly, feel free to register interest.