ADX Energy (ASX: ADX): Production boost at Anshof in October
• The ANS-2A sidetrack well has encountered a 6.5 m net vertical oil column in high quality Eocene-aged sandstone reservoir.• The reservoir quality encountered at ANS-2A is consistent with ANS-2 (porosity and permeability ~20% higher than at ANS-3). The oil-water contact was encountered very close to the top of the water wet reservoir encountered at ANS-2. Pressure data recovered from ANS-2A and the producing ANS-3 well confirms a continuous oil pool. These are two important positives.
• This is partially offset by the top of the structure being lower than expected, resulting in the net oil reservoir intersection at ANS-2A being “only” ~3 times that of ANS-3. The bull case was for ~12 m net pay, representing ~6x the net pay at ANS-3.
• The well will be tied into the adjacent Anshof permanent production facility after well completion operations expected to start early in October. Production performance will be important for assessing the impact of ANS-2A on reserves. The company is also planning to remap the field in the next 2-3 months to determine an optimal location for the next appraisal / development well. Incremental appraisal drilling will be required.
• ANS-2A is expected to be in commercial production at Ansfof by the the end of October, adding 200-300 bbl/d (gross) to existing (110 bbl/d) production from ANS-3. The additional production would allow the company to have consistent positive operating cashflow. We are now assuming that ANS-1 will be drilled in 2H25 rather than 1H25.
• Pending the result of the ANS-2A well test and further visibility on the reserves at Anshof, we re-iterate our target price of A$0.75/sh in line with our ReNAV. Our target price represents 7.5x the current share price.
Upcoming newsflow
In addition to testing ANS-2A, the LICHT-1 prospect will be drilled in October (unrisked NAV of ~A$0.04 per share). The Welchau-1 well is due to be tested during the winter period from October 2024 to March 2025. (unrisked NAV of ~A$1.10 per share). An updated resources estimate reflecting the recent drilling result is expected before the beginning of the well test.
Valuation
The current share price broadly reflects our valuation for the company based on its 2P reserves only (~A$0.10 per share). Our ReNAV is A$0.73 per share. We are not carrying any value for Italy yet where the company holds ~19-66 mmbbl contingent resources and 40-201 mmboe prospective resources.
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.
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