ASX-listed Europe-focused onshore oil and gas play, ADX Energy, has caught the eye of London-based institutional broking and advisory firm, Auctus Advisors, following a “transformational” deal in Upper Austria. The deal, which saw ADX pick up an enviable oil and gas acreage position spanning 450 square kilometres boasting an array of drill ready prospects, was described as game changing by Auctus.
Perth-based ADX was recently awarded the two exploration and appraisal licences let go by long-time Austrian petroleum producer, RAG Austria AG, who is gradually withdrawing from its upstream oil activities. As a result, ADX became the only exploration licensee in Upper Austria’s prolific Molasse Basin, which is one of the country’s two mature petroleum fields.
The company’s unique Upper Austria oil and gas foray grabbed the attention of Auctus Advisors, who called the acquisition of the licences “game changing” in a research note marking its initiation of analyst coverage of ADX.
According to ADX, the founders of Auctus have a strong background in the energy capital markets space and are serious followers of the energy sector. All were founders or held senior posts at the FirstEnergy capital markets group before it was taken over.
The London broking firm’s coverage of the stock may represent the beginning of the pathway to a possible listing in London on AIM, ADX says.
One of the potential benefits of a dual listing is its Chief Executive Officer, Paul Fink, can open the door to potential German-speaking investors in Vienna and Frankfurt who may be looking at European onshore oil and gas plays and would be able to trade on AIM via Euronext.
ADX says an AIM presence may also position it for a further phase of acquisition of petroleum assets from RAG.
Auctus analyst, partner and co-founder, Stephane Foucaud, said in the research note: “RAG recently went through a drastic change of strategy to focus on its utilities and gas storage business rather than upstream oil and particularly exploration. As a result, while (RAG) had shot extensive 3D seismic on some of its assets ahead of planned exploration and appraisal activities drilling, the firm is not allocating any more capital to such activities. A further consequence of the change of strategy is expected to result in RAG selling further upstream oil assets.”
Asset divestments and the continued retreat from upstream oil operations by RAG place ADX in pole position to snap them up.
ADX has dubbed the newly acquired asset a drill-ready, multiple-prospect and high-success-rate project adjacent to well established energy and associated infrastructure.
The licences, which the company picked up for a song, already have 10 walk-up drill targets – with estimated combined P50 prospective resources of 42 million barrels of oil equivalent – ready to go.
According to ADX, its Upper Austria package also contains 70 additional follow-up prospects and several low-risk appraisal targets offering potential low-risk cash flow opportunities.
As part of the acquisition agreement with Austria’s mining authorities, ADX has secured access to a massive 3D seismic, drilling, wells and production database from RAG that is set to pave the way for near-term drilling activity and save ADX years in exploration and development time and millions of euros in the process.
RAG has produced more than 800 billion cubic feet of gas and 70 million barrels of oil to date in Upper Austria and ADX’s licences surround RAG’s producing oil and gas fields and export infrastructure.
The nearby mature RAG fields mean ADX can tap an in-depth geological knowledge of the basin and therefore save on sinking mountains of capital into early-stage exploration to build a geological understanding.
In addition, ADX is blessed with members of an experienced technical and operations crew on the ground who have worked for RAG.
However, given the project’s large prospects inventory, ADX intends looking at farm-out options for some of the ground in the new year. The company says the availability of high-quality, myriad drill-ready prospects proximal to infrastructure based on an extensive data set and a high historical exploration success rate is expected to yield market interest.
This is transformational step forward for ADX … ADX through its relationships with RAG and the ministry as well as a strategic exclusive database has been able to secure an exceptional acreage position with a drill-ready portfolio.
The company has been able to build on its acquisition of the Gaiselberg and Zistersdorf fields in the Vienna Basin. It would normally take at least four years and a cost of at least €10 million to be in our current ‘ready to drill’ position for a license area of this size.
The licences will cost ADX €340,000 in a bank guarantee to cover Austrian exploration license fees and an initial work program commitment of up to two wells.
Across ADX’s 10 drill-ready targets, Auctus points out the P50 prospective resources for each of them ranges from just above one million to 15 million barrels of oil equivalent with an average prospect size of 4.2 million barrels of oil equivalent.
The beauty of the new licences, according to Auctus, is that even ADX’s prospects with fewer than one million barrels of oil equivalent of target resources would be “economically viable due to the proximity to existing infrastructure operated by RAG, highly productive reservoirs and relatively shallow drilling”.
Auctus analyst Stephane Foucaud said: “The largest individual prospects exceed more than 10 million barrels of oil equivalent resources. The ultimate prize is much larger with 70 additional follow-up prospects and leads.”
“Any discovery can be quickly monetised through the extensive existing RAG-owned infrastructure. Overall, ADX plans to be producing 2,000 barrels of oil equivalent per day by year-end 2021 with the prospect of additional potential acquisitions from RAG.”
“Individual well flow rates in the Molasse Basin can reach 1,000-2,000 barrels per day … This leads to quick payback periods for wells in Upper Austria.”
The historical success rate of wells guided by 3D seismic has been approximately 47 per cent over the exploration targets drilled by RAG in the Molasse Basin.
ADX currently produces about 300 barrels of oil equivalent per day from the Gaiselberg and Zistersdorf licences in Eastern Austria’s Vienna Basin.
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