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ADX locks in Euro cash flow with oil hedging deal

ADX has taken advantage of the high oil price by locking in a hedging contract with global trader BP, guaranteeing a minimum US$80 per barrel for oil produced from its Gaiselberg and Zistersdorf fields in the Vienna basin, Austria. The hedge is capped at US$130.25 per barrel and covers 50 per cent of ADX’s forecast production output until the end of the year.

The price of Brent crude is currently just above US$120 per barrel after only dropping below US$100/bbl twice, albeit briefly, since March.

Any gas sales are not covered by the hedge, also known as a collar contract, nor future production from its recent Anshof discovery. Gas sales revenue currently tips in around 30 per cent of ADX’s annual income, with ADX saying gas pricing is currently north of the equivalent of US$150 per barrel of oil because of the extremely strong demand for non-Russian gas.

On current and forecast production, the hedge covers about 115 barrels of oil a day up to a limit of 24,600 bbl. ADX is only the second ever exploration operator in Austria.

ADX says its hedging strategy is to lock in the current strong cash flow with the high oil price to ensure it has its operating and administrative costs covered whilst still being able to ride any further commodity price increases.

The company still has a high exposure to further upside in Brent crude oil pricing through the collar structure and 50 per cent of forecast production remaining unhedged. ADX also expects production from its Anshof operation later in the year, giving it further potential upside to a commodity price that shows little sign of weakness.

Increasing field revenues as a result of higher oil and gas pricing combined with sustained oil production rates have placed ADX in a strong position to continue its portfolio expansion of oil and gas assets in addition to compatible green energy production opportunities.

ADX pivoted from problematic projects offshore Tunisia into Vienna in 2019 with the acquisition and subsequent upgrade of the long-life Gaiselberg and Zistersdorf oil fields in Austria.

The fields have been in operation since 1938 and have gone through several enhancements with the application of modern production technologies and brownfield improvements.

In addition to the highly productive reservoirs of the geologically young Miocene and Pliocene ages, ADX says the acreage contains the large, proven but underdeveloped, Flysch formation, a Mesozoic sandstone reservoir that has been producing for many years at lower production rates from only a few wells but has a very large oil resource.

Is your ASX-listed company doing something interesting? Contact: matt.birney@wanews.com.au

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