ADX Energy (ASX: ADX): Reflections on Welchau
• Independent consultants have calculated that each of the three reservoirs encountered at Welchau (Reifling - 128 metres, Steinalm -118 metres and the Guttenstein - 111 metres) are hydrocarbon bearing with uncertainty on the hydrocarbon type.• Laboratory work on the Steinalm reservoir has confirmed the full properties ofthe 43° API light sweet oil that was recovered in an MDT sample run in the Steinalm Formation. The vertical extent of this light oil in the Steinalm or in the shallower Reifling and deeper Guttenstein is uncertain and there is no clear evidence of a hydrocarbon-water contact in any of the reservoir formations based on the open hole wireline log data.
• Multiple open fractures and resulting fracture networks have been identified. In addition, there are other features that have the flow characteristics of open permeable fractures but are not fractures.
• Welchau-1 is expected to be tested in 4Q24.
• Two additional exploration opportunities have been identified. (1) There remains over 1,000 m of exploration potential below the current Welchau-1 well TD and the well could be deepened. (2) A similar anticline structure to Welchau at similar shallow depths is located ~7 km Northwest of Welchau-1.
• We re-iterate our target price of A$0.75 per share in line with our ReNAV. Our target price represents 7.5x the current share price.
2Q24 production
2Q24 production was 231 boe/d. This includes 46 bbl/d for Anschof. At the end of 2Q24, Anshof-3 was producing at 116 bbl/d (70 bbl/d net). The well continues to show strong performance.
Valuation
The current share price reflects a discount to our valuation for the company based on its 2P reserves only (~A$0.10 per share). Our ReNAV is A$0.73 per share. The company will spud the Anshof-2 sidetrack well in September. This well could add reserves and production. In early October a gas exploration target will be drilled with MND.
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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