ADX Energy Limited (ASE: ADX): On Track to start drilling in early November
• 3Q23 production of 324 boe/d and cash of A$5.7 mm at the end of September were near our expectations. This includes 101 bbl/d gross production for Anshof that was shut-in on 19 September after reaching the regulatory limit for test production. Until that date the Anshof-3 well produced at a stable rate of 114 bbl/d, which is above the company’s initial expectations. Anshof-3 production will recommence after the drilling of the Anshof-2 well and the installation of a permanent production facility in February.• Drilling of the Anshof-2 well continues to be expected to commence in early November while Anshof-1 could spud in 2Q24. Long lead items for Anshof-1 are expected to be delivered in November.
• We forecast ~700 bbl/d net production at YE24 based on Zistersdorf plus three Anshof wells.
• Welchau-1 drilling operations continue to be expected to commence in late November to mid-Decembe,r subject to an environmental permit expected in early November.
• Ahead of finalizing a farm-out with MND (terms already agreed) for one gas prospect on licence ADX-AT-I, ADX has started the drilling permitting process for three locations on the licence. It is expected that the first drilling permit including the environmental permit will be issued in November. Drilling is expected to start in 3Q24.
• We re-iterate our target price to A$0.80 per share. This represents ~6.5x the current share price.
Valuation
Our Core NAV based on the company’s 2P reserves stands at ~A$0.12/sh. De-risking the 3P/3C at Anshof would add >A$0.45/sh (~4x the current share price). This is being targeted with the Anshof 2 well. Our ReNAV remains at A$0.83/sh. The Welchau prospect has an unrisked NAV of ~A$2.00/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.
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