ADX Energy (ASX: ADX): Narrowing uncertainty and resources range at Anshof
• The Anshof-2 well encountered high quality Eocene sands with at least 12 metres vertical thickness and porosity of ~20%. The reservoir quality is much better than at Anshof-3 and the sands are ~5x thicker.• The top of the Eocene sand was encountered ~40-50 m higher than expected, suggesting a much larger and flatter structure than expected in the P50 case.
• The oil water contact was also encountered higher than expected. With regards to oil volume calculations, this partially offsets the positive impact of the structure being larger.
• Overall, we now estimate the Anshof recoverable resources between the 2P and 3P case.
• The better-than-expected reservoir quality and thicker sands suggest better well deliverability and higher flow rates, which result in a higher production plateau and lower development cost with a positive impact on NPV.
• Analog wells in the area with similar reservoir characteristics have produced at rates ~1,000 bbl/d and recovered 1.8-2.0 mmbbl per well. This flow rate is significantly above the 400-500 bbl/d we assumed and the high recoverable volume per well could imply a lower well count to develop the 2P reserves (we currently assume five producers to develop ~5 mmbbl 2P gross reserves).
• Pending further details on Anshof reserves, we have changed our target price to A$0.65/sh as we now exclude the 3C case from our valuation.
Next steps
The drilling rig will now move to the Welchau location where the well continues to be expected to spud in January. The well will target a 807 bcfe best case prospective resource (ADX WI: 80%). The rig will then return to Anshof to drill a sidetrack to Anshof-2 in an updip location above the oil water contact. This well will be a producer.
Valuation
Ahead of further details on the flow rate at the side track of Anshof-2 and an update on the reserves at Anshof, we have trimmed our Core NAV from A$0.16/sh to ~A$0.15/sh as we assume (1) one quarter delay in production ramp-up and (2) the A$2.2 mm payment by MND on good flow rate at Anshof-2 will not be paid. Our ReNAV now stands at ~A$0.65/sh as it excludes the 3C resources upside case at Anshof. Our unrisked NAV for the 3P case at Anshof is A$0.36/sh (including A$0.12/sh for the 2P case). The Welchau prospect, to be drilled in January, has an unrisked NAV of A$1.60/sh.
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.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.