ADX Energy Limited (ASE: ADX): Exploration portfolio update in Austria: larger volume, lower risk
• The exploration portfolio in Upper Austria is now estimated to hold 213 mmboe of best technical prospective resources (previously 200 mmboe) in 20 prospects.• The importance of the upgrade is as much about risk reduction as it is about resources increase. The expansion of the portfolio also provides new opportunities for further farmouts.
• The resource estimate increase reflects (1) an upward revision of the size of certain prospects such as IRR (gas) which is now estimated to hold 38 bcf (previously 18 bcf) given a higher expected net pay, ZAM (100 bcf vs 88 bcf previously) and GRB (9.5 mmboe vs 8.5 mmboe previously) and (2) the addition of three new lower risk gas opportunities (SCHOE, HOCH and GAST) on ADX- AT-I which is new play type in the licence with further follow ups extended.
• The discoveries and low risk appraisal opportunities now represent 18.7 mmboe (5.5 mmboe previously). Given the high permeability of the reservoirs, a gas well at SCHOE, HOCH and GAST could flow ~10 mmcf/d.
• The 3D seismic response on the IRR prospect is similar to an adjacent gas field that has produced ~155 bcf of gas thereby increasing confidence in the prospect.
• The discovery of an oil field at Anshof has derisked the adjacent GRB prospect where an old down dip well had already encountered an oil leg. GRB has been upgraded from “Trend Exploration” to “Discoveries and Appraisal” which given its size is a potential high value opportunity.
• ADX continues to offer a combination of strong underlying value, increasing cashflow and reserves growth with very material exploration upside from an expanded near-term drilling programme. We reiterate our target price of A$0.100/sh.
Geothermal
The GMU prospect in the Molasse basin combines a geothermal opportunity (18 MW power and heat potential) with multiple overlaying oil and gas targets in Miocene sands estimated to hold 3.9 mmboe. A well in such reservoir could flow up to 45 mmcf/d.
Valuation
Our Core NAV based on the company’s 2P reserves stands at A$0.016/sh (2.5x the current share price). De-risking the 3P/3C at Anshof would add A$0.036 per share (~5x the current share price). Our ReNAV stands at A$0.10 per share. A successful farmout of some of the prospects and projects could highlight their values and provide further funding to accelerate its drilling programme. The Welchau prospect expected to be drilled in 2H23 has an unrisked NAV of A$0.19 per share.
ADX Energy is engaged as an oil and gas exploration company. As of Dec 31 2015, Co. operated five oil and gas permits in North Africa and Europe, which under following projects: Kerkouane project located in Tunisia; Pantelleria project, Nilde project and Orlando project, which are located in Italy; and Romania project, which Co. held 50% interest on its project.
Auctus Advisors is a specialist Equity Capital Markets and Advisory business with a focus in the Energy Sector.
The partners have complementary skill sets, with decades of experience across Equity Capital Markets, Investment Banking and the Energy industry. We have worked at Société Générale, Canaccord Capital, BMO Capital Markets and Schlumberger. Most recently we have worked together for many years at GMP FirstEnergy.
Auctus has been set up at the beginning of a new decade in which we see significant opportunities in the Energy space. Globally, demand for energy is at record levels and continues to grow. Conversely, investment in traditional energy sources has been severely constrained. We believe this imbalance creates opportunities for both companies and investors.
Auctus provides Corporate Broking, Equity Research and Investment Banking services.
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