Report
Stephane Foucaud

ADX Energy (ASX: ADX): Approvals to start well testing at Welchau received. Rig and test equipment mobilized.

• All necessary approvals have been received to commence flow testing operations on the Welchau-1 discovery well for the period from 30 October 2024 until 31 March 2025.
• A workover rig has been mobilised to the Welchau-1 drill site with flow testing due to commence during the second half of November. There are multiple zones to test. The key test objectives being to confirm fluid type, reservoir productivity and likely reserves recovery.
• Welchau-1 is a vertical exploration well that was cased and cemented. We would view a test flow rate in excess of 200 bbl/d from any one formation as a success.
• Fractured carbonate analogs in Canada for example are often developed with horizontal drilling combined with acidization. This allows production from a larger number of fractures to materially increase the flow rate of individual wells. Given the shallow depth of Welchau and relatively modest well costs, the development of the field based on horizontal wells is likely to significantly enhance commerciality.
• We have removed the LICHT prospect from our valuation following the drilling results of last week and we have changed our target price to A$0.70 per share. Our unrisked NAV for Welchau is A$1.18 per share (~11x the current share price).

LICHT-1 well
Last week, ADX reported that the Lichtenberg-1 exploration well (LICHT-1) confirmed the predrill expectations of structure and encountered gas shows. However, it has not encountered reservoirs of sufficient thickness that are likely to be commercial based on drilling data. This part of the basin is relatively underexplored and the well data will allow ADX to calibrate the existing 3D seismic and refine the geological model of the area. This will improve the quality of future prospects. The cost of the well has been almost entirely borne by MND.

Anshof-2A well
Initial commercial production from the recent successful oil appraisal well is expected in early December after its tie in to the Anshof permanent production facility.

Valuation
Our ReNAV for ADX is A$0.71/sh.
Underlying
Provider
Auctus Advisors
Auctus Advisors

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. 

Analysts
Stephane Foucaud

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