ADX Energy (ASX: ADX): Operations on track
• 4Q23 production was 218 boe/d as Anshof did not contribute to production during the quarter (in line with previous indications). Commercial production at Anshof is expected to restart in March after the commissioning of a permanent production facility.• ADX held ~A$8 mm in cash as at YE23.
• Drilling at the high impact Welchau-1 well targeting between 365 bcf and 1,128 bcf gross prospective resources is expected to commence in early February. The success case drilling programme is expected to take ~39 days.
• The planned Anshof-1 development well could be replaced by a sidetrack of Anshof-2. The replacement of the Anshof-1 well with an Anshof-2 sidetrack would reduce the cost to develop this part of the field and allow to retain the Anshof-1 well slot for a future well.
• Drilling of the first gas prospect in the ADX-AT-I licence is still expected in 2H24. Two prospects are under consideration: LICHT (already permitted with 16 bcf of best estimate gross prospective resources) and IRR (permitting ongoing with 38 bcf of best estimate gross prospective resources).
• We re-iterate our target price of A$0.65 per share. Our unrisked NAV for ADX’s 75% interest in Welchau is ~A$1.50 per share. This represents almost 15x the current share price.
Maturing additional prospects
ADX is also working on maturing a number of low risk shallow gas exploration prospects such as HOCH and SCHOE in the Northern part of the ADX-AT-I licence. HOCH and SCHOE have gross best estimate prospective resources of 4.8 bcf and 6.6 bcf respectively. These two prospects could be drilled from the same surface location, which would reduce their individual cost and simplify permitting. HOCH could be connected to the GAST prospect (3.6 bcf gross prospective resources). The target reservoirs in these prospects are expected to be highly permeable with potential IP rate of 10 mmcf/d.
Valuation
Our Core NAV and ReNAV stand at A$0.13 per share and A$0.62 per share respectively. We have updated our 2024 forecasts that now excludes the A$2.225 mm contingent success payment from MND if the Anshof-2 well had met certain production performance criteria. We continue to assume that MND will fund a disproportionate share (2 for 1 ratio) of the cost of the Anshof-2 sidetrack plus the cost of an additional Anshof well. 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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