ADX Energy (ASX: ADX): Very high impact exploration well encounters gas and condensate in Austria
• The Welchau well (ADX WI: 75%) encountered 115 m of liquids-rich gas shows in the primary target formation (Steinalm Formation) between 1452 m and 1567 m. The deepest gas shows were encountered at a depth of 1645 m. The well has reached TD at 1733 m.• The Steinalm Formation intersection in the well is in line with the pre-drill prognosis. This is important as this gives confidence in ADX’s structural model. The Welchau prospect is estimated to hold 134 mmboe prospective resources (~100 mmboe net to ADX). The deeper gas shows suggest that there could be additional targets with further potential.
• The Steinalm Formation intersected in Welchau is the same zone that flowed condensate-rich gas in the nearby Molln-1 well at a rate of 4 mmcf/d in 1989. The compositional analysis from the gas shows at Welchau shows similar results to the gas tested at the Molln-1 well.
• The well has encountered 380 m of effective seal (the Lunz Formation) above the main target. This addresses the key risk at Welchau that was about seal quality and thickness.
• The Welchau-1 well could be a play opener in the area where no wells have been drilled since 1989.
• The well was drilled faster and at a lower cost (-~30%) than expected due to improved drilling rates. This is a positive for future drilling in the area..
• We have increased our target price from A$0.65 per share to A$1.00 per share as we have increased our chance of success for Welchau.
Next steps
The well will now be logged over the coming days to better understand the quality of the reservoir, the nature and size of the gas pay and the location of the gas shows. Samples will then be taken and analysed to better understand the composition of the gas and the condensate yield. The drilling data already suggests that the Steinalm Formation is an extensively fractured carbonate. This is important with regards to flow potential. The well is located at the crest of the structure and is shallow, so the reservoir quality is expected to be better than at Molln-1 where the target reservoir was encountered much deeper. Gas shows comprising Methane (C1) to Iso Pentane (C5) have been encountered throughout the section. The C1 to C5 ratio plots indicate the presence of permeable reservoir. The well is expected to be tested in early 4Q23.
Valuation
Pending further details, we have increased our chance of success for Welchau from 25% to 50%. We have increased our ReNAV from A$0.62/sh to A$1.00/sh. Our Unrisked NAV for Welchau is A$1.55/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.
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