ADX Energy Limited (ASE: ADX): Two high impact wells to commence drilling by YE23
• ADX is expected to start drilling the Anshof-2 appraisal well in November. The well is targeting 4.9 mmboe possible reserves (net to ADX). Anshof is also estimated to hold 5.5 mmboe net 3C contingent resources (net to ADX).• The Anshof-2 well is anticipated to be onstream together with the existing Anshof-3 well in 1H24. The Anshof-1 well will then be drilled in Q2 or Q3 24 increasing gross production from the Anshof field to ~1,000 bbl/d with three wells (500 bbl/d net to ADX). New permanent production facilities are being installed in Q1 24 that will have a capacity of up to ~4,000 bbl/d of oil.
• MND has already paid ADX A$3.2 million for past costs and long lead drilling expenditures. MND will fund a further A$7.8 mm of project costs to drill, complete and tie in the Anshof-2 and Anshof-1 wells to earn a 30% economic interest in the Anshof project. MND will also pay a further ~A$2.2 mm in back costs and fund ~A$6.0 mm of additional work programme costs if Anshof-2 production performance is in line with the independent expert’s prediction. The total firm and contingent cash payment and investment obligation is ~ A$19.2 mm.
• Welchau-1 is expected to be spudded in December. The well is targeting 807 bcfe gross best case prospective resources.
• ADX also holds an extensive portfolio of exploration and appraisal opportunities onshore Austria. This includes the IRR gas prospect (38 bcf gross prospective resources), SCHOE (6.6 bcfe), HOCH (4.8 bcfe) and GAST (3.6 bcfe). The GRB oil prospect (9.5 mmboe) is on trend with the Anshof discovery.
• ADX has already agreed terms with MND for further investment in gas exploration in an area within the ADX-AT-I licence.
• We have changed our target price to A$0.80 per share as we incorporate the recently announced 10 for 1 share consolidation. This represents ~9x the current share price.
Valuation
The recent transaction with MND (acquisition by MND of an interest in Anshof) values ADX, based on Anshof only, at A$0.08-0.13/sh (excluding Zistersdorf and any contribution from exploration). 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 (~4.5x the current share price). Our ReNAV now stands at A$0.83/sh. The Welchau prospect has an unrisked NAV of A$1.96/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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