Senex Energy, Asia's worst gas exploration stock in the past year, is rebounding after Chevron's investment in an Australian shale competitor stoked optimism that it may be the next target.
Last week, Chevron made the biggest single investment in shale in Australia, agreeing to pay as much as $US339 million ($A330 million) for a stake in Beach Energy's Cooper Basin prospects.
Shares in Senex, which also explores in the Cooper Basin, have risen 13 per cent since Chevron's investment fuelled expectations that the company could attract a buyer, even after its shares had lost 40 per cent in the previous year.
Chevron and other explorers including ConocoPhillips and PetroChina are entering Australia in search of new sources of the gas extracted from rock formations.
According to the Commonwealth Bank, the Cooper Basin may help supply $US60 billion of projects to export liquefied natural gas from Australia's east coast, where the commodity is forecast to double in price this decade. That shale potential could attract purchasers to Senex, which has a market value of $US770 million, said the Royal Bank of Canada.
"We're in the most rapidly growing, industrialising part of the world and that speaks to power needs and industrial needs for gas" across Asia, said Chris Flynn, a partner at law firm Gilbert & Tobin who specialises in energy and resources.
Chevron's investment "probably is the beginning of more trades" and Senex "is among the obvious potential targets", he said.
Senex produces oil and explores for gas from shale formations and coal deposits. The company last month posted a record half-year profit of $US23.4 million and said it expected to exceed a full-year oil production target of 1 million barrels.
The same day, Chevron agreed to acquire stakes in two blocks in the Cooper Basin, joining Beach's natural gas exploration campaign in central Australia. It marked Chevron's first shale investment in the country.
"Senex represents the last mid-cap opportunity of scale that's independent," said Andrew Williams, a Melbourne-based analyst. "It looks very attractive."
Explorers in Australia are trying to apply fracking methods successfully used in the US - a combination of horizontal drilling and technology for hydraulic fracturing - to extract gas trapped in shale formations. Australia may hold about 400 trillion cubic feet of shale gas, the world's sixth-biggest potential reserves, the US government estimates.
The Cooper Basin, a 130,000-square-kilometre zone straddling the border of South Australia and Queensland where Senex and Beach are exploring, "stands out as the most prospective and commercially viable region for shale gas development in Australia", the CSIRO said last year.
Cooper Basin gas tapped by conventional means is already supplied by pipeline to South Australia, Queensland, NSW and Victoria. While BG Group, Santos and ConocoPhillips are converting coal-seam gas in Queensland to liquid form to export to Asia, they may turn to Cooper Basin supplies to expand their ventures.
Gas from the basin also may be needed to address a looming shortage, with NSW moving to restrict access to some areas for drilling.
"I'd expect the whole Cooper is on the radar of anyone who has participation in those projects, along with people looking to get exposure globally to LNG," said Tim Schroeders, who helps manage about $US1 billion at Pengana Capital.
"The LNG developments on the east coast will require more gas, and if the unconventional play in the Cooper proves up, it's ideally placed."