ADX becoming a producer
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ADX looks to early cashflows from European gas assets
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Wednesday, 11 September 2019 10:10AM
ADX Energy Executive Chairman Ian Tchacos
ADX Energy Executive Chairman Ian TchacosPicture: Supplied
Perth-based and European focussed oil and gas developer, ADX Energy, is on the verge of production testing at its Iecea Mica-1 well in western Romania, following the discovery of impressive looking gas zones that exceeded its pre-drilling expectations.
Independently assessed petrophysical results from the well indicate contingent resources of 20 billion cubic feet, or “bcf”, of gas, compared to the best estimate pre-drill appraisal that totalled 18.8 bcf.
The company indicated that good productivity from the gas was expected due to the significantly better than anticipated porosity and permeability.
Management said that “excellent” economic potential is estimated for recoverable gas volumes exceeding 5 bcf, indicating that a 20 bcf resource development could have a value of USD$30m to USD$40m at an assumed gas price of USD$6 per thousand cubic feet, or “mcf”.
The Iecea Mica-1 well straddles multiple gas zones mapped on 3D seismic and is effectively a redrill of a historical discovery well completed in the 1980s by the Soviet Union when it had a large say in Romania’s ongoing affairs.
ADX controls about 1,000 square kilometres of strongly prospective ground holdings in its Parta exploration licence, via its 63% shareholding in UK-based subsidiary Danube Petroleum, with the remaining 37% held by Reabold Resources Plc.
Danube Petroleum, via its Romanian subsidiary, ADX Panonia, holds a 100% interest in the Parta exploration licence.
The company said that despite the relatively modest resource potential of the recently completed well, the discovery of two additional payzones located within the hole, significantly de-risks its second planned hole in Romania.
The new hole will be located 1.8km to the northeast of the first and is a shallower exploration target with a best-case technical prospective gas resource of 15.6 bcf.
ADX Executive Chairman Ian Tchacos said: “The excellent results to date exceed our pre-drill resource expectations for the Iecea Mica-1 well. The 20 bcf best case contingent resource estimate … provides exceptional economic potential from the successful completion and tie-in of the well.”
Iecea Mica-1 is only about 10km from a processing facility, with ADX estimating just USD$1.5m would be required to tie into the existing gas pipeline infrastructure in the region.
And the company is just getting started in Romania, with significantly more acreage available in-country for consideration down the track.
Meanwhile, ADX has secured a second pillar to support its efforts to refocus as a European onshore producer, developer and exploration company in the short term.
In a somewhat left-field opportunity, the company recently landed the relatively mature, though still prospective, Zistersdorf & Gaiselberg Fields, or “Z&G”, in Austria’s Vienna Basin.
ADX offered €4 million – or AUD$6.4m – for the ground, but with €1.5m - €1.7m in net production revenues being offset against the acquisition price and €0.4m already paid as a deposit, the company will only need to find about €2.2m by mid-October to close out the transaction.
Any reserve additions are also debt-refundable, which could be a real bonus and driver of growth for ADX in Austria.
The company believes the Z&G Fields contain around 1.5 mmboe, or “million barrels of oil equivalent”, of proven and probable reserves and it currently produces at about 330 boe per day, which is made up of approximately 88% oil.
Although it is situated in a well-developed region, the company said that the Z&G data set shows numerous by-passed oil accumulations in upper zones and a lower permeability zone opportunity called “Flysch”, which alone could be a company-maker in terms of size and longevity if it checks out.
ADX has also secured exclusive access to 3,650 square kilometres of high-quality 3D seismic for a cost of €0.4m per annum for five years, in the Molasse Zone in the Salzburg region of northern-central Austria.
This complex geological region already has oil and gas shows and Austrian-based RAG Exploration & Production GmbH, or “RAG”, has accumulated a large petroleum exploration data set in the region and spent about €90m acquiring the 3D seismic over its huge land holding of 6,247 square kilometres in the last decade.
RAG’s key shareholders were heavyweights Shell and Exxon, who sold their positions resulting in RAG’s parent changing that group’s emphasis towards gas storage, rather than hydrocarbon exploration.
This leaves ADX in an enviable position, having already defined 24 drillable peer-reviewed prospects with 62 mmboe of prospective resources in the region.
Eight of these potential drill locations already have approved access and the company is in the early planning stages for a five-well program in the Molasse Basin.
In addition, ADX also has its hands on two 100%-owned offshore assets known as the Nilde oil redevelopment project off the southwestern coast of Sicily in Italy and the Dougga gas condensate project nearby, off the north-eastern tip of Tunisia in North Africa.
The Italian project was placed on the back burner thanks to an 18-month moratorium placed on exploration and production activities in February, meaning that little significant work can be completed there until August 2020.
At present, the company is seeking final permit ratification ahead of appraisal drilling of its 50% (post-farmout) owned Nilde oil field in the Sicily Channel, which is reported to have 33 million barrels of oil potential.
Offshore in Tunisia, there is a large gas condensate resource and exploration potential defined on 3D seismic, however, while close to domestic and export gas infrastructure, the play seems to lends itself to a possible merger with other complementary assets in the region, which would attract larger-scale financing.
ADX is now squarely focussed on near-term cashflows from its underexplored, onshore hydrocarbon assets in Romania and Austria, while retaining significant blue-sky potential from its offshore permits in Italy and Tunisia.
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ADX to plough $2.2m into gas exploration in Romania
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Wednesday, 18 September 2019 3:32PM
ADX Energy and its UK partner have committed $2.2m through a share placement in ADX subsidiary, Danube Petroleum, to test a gas well in Romania.
ADX Energy and its UK partner have committed $2.2m through a share placement in ADX subsidiary, Danube Petroleum, to test a gas well in Romania.Picture: worldatlas.com
ASX-listed and European focussed hydrocarbon developer, ADX Energy, and its UK-based partner, Reabold Resources Plc, will commit £1.35m or AUD$2.2m in equity to ADX subsidiary, Danube Petroleum, to advance testing of the Iecea Mica-1 appraisal gas well in western Romania.
Under the agreement, Reabold will contribute 60% of the funds required in two equity tranches before the end of September, with ADX to contribute the remaining 40% by way of a further equity purchase in Danube.
Reabold Resources is an investment company that plays in the natural resources sector with its shares traded on the Alternative Investment Market of the London Stock Exchange. It currently has a market cap of about £50m or AUD$91m.
Reabold and ADX will both subscribe for new Danube shares priced at £1 per share, or about AUD$1.61, which will leave ADX with a 58.4% shareholding in its subsidiary Danube and Reabold holding the remaining 41.6%.
The new capital raising will lift Reabold’s stake in Danube Petroleum by 4.6%, thereby increasing its exposure to and confidence in the Romanian gas assets.
ADX and Reabold have also agreed to detailed future well-funding options based on success at the current well and for the potential construction of gas delivery infrastructure in the region.
Both parties are looking to commence commercial production from the gas field as soon as is practically feasible upon success testing.
In addition to the well-testing of the completed Iecea Mica-1 well, which delineated three impressive looking gas zones, the initial funds will also be directed towards approval and planning for the nearby Iecea Mica-2 well.
Funds raised will also be used to acquire 2D seismic from the surrounding Iecea Mare production license and for the completion of technical reviews for new venture opportunities onshore within Romania.
ADX is on a roll in Romania, with independently assessed petrophysical results from the Iecea Mica-1 well indicating contingent resources of 20 billion cubic feet of gas, or “bcf”, compared to its best pre-drill estimate of 18.8 bcf.
The company says that good productivity from the gas was expected due to the significantly better than anticipated porosity and permeability.
Importantly, a successful well-testing program at Iecea Mica-1, could potentially provide an early cash flow opportunity for ADX that could see it use that cash flow to fund further development opportunities instead of issuing more paper.
The well is located just 10km from a processing facility and the company estimates about USD$1.5m would be needed to tie into the existing gas pipeline infrastructure in the region.
Iecea Mica-1 well straddles multiple gas zones mapped on 3D seismic and is effectively a redrill of a historical discovery well completed in the 1980s by the Soviet Union in old Communist Romania.
ADX controls about 1,000 square kilometres of strongly prospective ground holdings in its so-called Parta exploration licence, via its shareholding in the subsidiary Danube Petroleum, with the remainder held by Reabold Resources.
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Finalisation of Austrian Production and
Exploration Acquisition • On track with government and regulatory approvals for closing
• Oil production since 1st January 2019 meeting expectations
• Closing purchase price significantly reduced due to on trend production
performance coupled with increased oil price
ADX Energy Ltd (ASX Code: ADX), is pleased to advise that with the assistance of RAG
Exploration & Production GmbH (REP)substantial progress has been made in relation
to the closing of the transaction for the acquisition of Zistersdorf & Gaiselberg Oil and
Gas Fields (producing at approximately 350 BOPD) located onshore in the Vienna
Basin (RAG Production Assets) as well as agreementsfor Exploration Data and access
arrangements from RAG Austria AG (RAG) in upper Austria (RAG Exploration Data).
ADX expects the formal closing date will occur within the next 4 weeks based on
discussions with the Austrian Authorities to date.
As announced on 2 July 2019, ADX entered into binding agreements with REP on the 1st of July 2019 for the
acquisition of RAG Production Assets as well as RAG Exploration Data which includes exclusive access to
3D seismic, 2D seismic, drilling data and geological data (including 3650 km2 of modern 3D seismic) over
soon to be available for licensing exploration areas proximal to RAG’s main production assets in upper
Austria. In addition to the RAG Exploration agreements, ADX has entered into access and tariff
arrangements with RAG for production infrastructure in the Molasse Basin. (See Acquisition overview)
Figure1: Zistersdorf Field production well within vineyards (source: RAG)
The purchase price of Euro 4 million for the RAG Production Assets is based on an effective date of 1
January 2019. A staged payment process includes a Euro 400,000 non-refundable deposit which was paid
following signing of the Asset Purchase Agreement with the balance of the funds due at closing on the
later of 1 October 2019 or transfer of the production licenses (most likely date is late October 2019). The
final cash payment will be adjusted for the net post tax cashflow of the fields between the effective date
and the closing date. Oil and gas production since the effective date (1 January 2019) has met expectations
which in combination with the increase in the Brent reference oil price has resulted in cumulative cash
flows from operations exceeding expectation. Based on a closing date of mid October the expected final
purchase price is Euro 2.5 million less the Euro 0.4 million deposit already paid.
RAG Production Assets
■ Production Rate 350 BOEPD and Euro 2 million 2019 post tax flow.
■ Acquisition at significant discount to NPV based on most likely 2P Developed Reserves Case of 0.98
MMBOE (Refer ADX Announcement dated 2 July 2019 note 2)
■ Infill potential to increase 2P Developed and Undeveloped Reserves Case to 1.51 MMBOE(Refer ADX
Announcement dated 2 July 2019 note 2)
■ 2C Contingent Resource potential of 8.5 MMBOE from proven producing reservoirs beneath field
(Refer ADX Announcement dated 6 September 2019 note 2)
■ High value barrels delivered by pipeline to local refinery small discount to Brent Crude
■ Long life production with very modest decline of approximately 2% per annum
■ Highly optimised, automated and very well-maintained production facilities with all in US$31 per BOE
production cost. Excellent owned infrastructure position and land position
RAG Exploration Assets (Refer ADX Announcement dated 6 September 2019)
■ Large exploration potential and valuable data base at low cost (3650 km2 of 3D seismic)
■ 24 ready to drill near field prospects with agreed infrastructure access arrangements provide
immediate low risk reserves additions with a rapid pathway to cash flow.
o Best Case Prospective Resources of 62mmboe note 1 and 2
■ 8 high reward moderate risk prospects in portfolio provide exceptional upside
o Best Case Prospective Resources 1,278mmboe note 1 and 2
■ Access to highly skilled, experienced personnel in line with asset base development.
■ Further cooperation with RAG or REP possible in future