ADX Energy (ASX: ADX): Drilling rig on location of high impact well by the end of January
• A rig is expected to be mobilised to the high impact Welchau-1 drilling location during the last week of January. Drilling is expected to last for 6-8 weeks.• The total vertical depth of the well is only 1,800 m with a dry hole cost estimated at ~EUR5.1 mm.
• Welchau gross prospective resources have been independently estimated at 365 to1,128 bcf (ADX’s internal estimates: 212 to1,631 bcf). The prospect is located up-dip of the Molln gas discovery drilled in 1989 where a 400 m gas column was encountered (with up to 900 m indicated based on pressure gradient) and was tested at 3.5 mmcf/d of condensate rich gas.
• Based on the low case independent resource of 365 bcf the field could be developed with 8 producing wells and could require only one appraisal well. The production plateau under this development scenario is estimated at 120 mmcf/d.
• ADX net cash is estimated at A$7 mm as at YE23.
• We re-iterate our target price of A$0.65 per share that reflects the recent divestment of 5% of Welchau to MCF Energy in consideration for MCF Energy funding 50% of the cost of the exploration well up to an increased cap of EUR5.1 mm. Our unrisked NAV for ADX’s 75% interest in Welchau is ~A$1.50 per share. This represents almost 15x the current share price.
Other activities in 2024
The Anshof-3 well is expected to resume production by the end of 1Q24. Anshof-2 is expected to be sidetracked in 2Q24 after drilling of the Welchau-1 well. During 4Q24, ADX plans to drill the IRR-1 gas prospect with 38 bcf gross prospective resources or the LICHT prospect. The well will be funded via the recently announced energy investment agreement with MND.
Valuation
Our Core NAV and ReNAV stand at A$0.15 per share and A$0.62 per share respectively. Our unrisked NAV for the 3P case at Anshof is A$0.35/sh (including A$0.12/sh for the 2P case).
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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