Analysing Oil Reserves  

After Goldman Sachs did their best to pump up the oil price with talk of a US$105 "super spike" last week, prices have drifted downwards.

Nevertheless, in the absence of a crushing recession or the magical appearance of some good alternative, oil prices should keep rising - and if you're interested in working out if any money can be made in the meantime, analysing the reserves of individual energy companies can be quite enlightening.

ChevronTexaco's recent takeover of Unocal valued Unocal's oil reserves at US$9.37 (A$12.20) per barrel. (Which seems pretty cheap with oil at US$50+ per barrel - but I haven't seen the estimated extraction costs and likely time taken to extract that oil, so who knows).

If that's the benchmark price, then what are Australian oil companies worth ?

Local broker E. L. and C. Baillieu cast their greedy eyes over the local market last week and ranked producers by market price per barrel of oil reserves.

Looking at it from this viewpoint, Papua New Guinea based Oil Search (OSH.AX) came out as by far the cheapest, at a meagre A$2 (US$1.54) per barrel. This is partly due to their low earnings (so they don't seem so cheap on a PE basis) and partly due to country risk (PNG isn't the most stable place on the planet, but still - its not the middle east or west africa either).

Oil Search are looking to build a pipeline to Australia, with the east coast looking for new supplies of gas. Exxon Mobil is their major partner and supplies most of the expertise, so OSH could be a good long term play, with the possibility of an Exxon takeover at some point also adding interest.

Of the others, Santos (STO.AX) is next cheapest at A$9 per barrel (not including their recent find at Jeruk), with the rest all around the benchmark price set for Unocal.

There is some speculation floating around that Shell may make another takeover attempt on Woodside (WPL.AX) to try and shore up their rapidly depleting reserves, but its hard to imagine the government would change their mind and not block any takeover attempt again.

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