ADX Energy (ASX: ADX): 3.5x resources estimates increase at Welchau incorporating deeper potential
• As expected, prospective resource estimates at Welchau have been upgraded, now incorporating the deeper Duplex Array 2 gas‑condensate interval.• The sands in this interval are estimated to contain 165–262 bcf of prospective gas (P50–Pmean), together with 5.8–9.2 mmbbl of associated condensate.
• Combined prospective resources across Duplex Arrays 1 and 2 are now assessed at (P50–Pmean) 230–387 bcf, plus 8.1–13.6 mmbbl of condensate, representing more than a three‑fold increase versus previous estimates.
• These deeper resources could be accessed by extending the Welchau‑1 well by only ~600 m to reach the shallower duplex.
• ADX has two re‑entry options: sidetrack to test the up‑dip oil target, or deepen the existing wellbore to appraise the gas‑condensate interval. The unrisked NAV for the up‑dip oil target is ~A$0.16 per share, while the combined unrisked NAV for Duplex Arrays 1 and 2 is A$0.64 per share. One of these activities is assumed to occur around FY26.
• We have increased our target price from A$0.21 to A$0.22 per share to reflect the additional prospective resources. For now, we apply a very high risk factor (10%). With the Strait of Hormuz closed and Qatar LNG flows constrained, European natural‑gas prices have spiked, creating a more favourable backdrop for junior E&Ps with European gas exposure such as ADX Energy.
• ADX plans to spud the HOCH shallow‑gas prospect in April, with an unrisked NAV of A$0.01 per share and a 57% chance of success.
Valuation
Our total unrisked valuation for the company based on its 2P reserves and the shallow gas play in Austria is ~A$0.08 per share. Our ReNAV of A$0.23 per share for the company reflects: (1) producing assets, (2) shallow gas targets, (3) Welchau-1, and (4) the Italian permit, based on anticipated farm-out terms.
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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