ADX attracts farm-in partner to fund large and highly prospective Austrian gas well
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ADX has secured farm-in funding for the drilling of the potentially transformational Welchau-1 gas exploration well in Upper Austria.
Welchau has the potential to host a best technical Prospective Resource of 807 billion cubic feet of gas updip from the Moln-1 gas discovery that intersected a gas column of at least 400m in 1989 and flowed 3.5 million cubic feet of gas per day.
Under the farm-in agreement, leading Canadian energy finance and development group Kepis & Pobe Financial Group (KPFG) will fund up to 50% of the cost of drilling the well (estimated at €3.81m ($5.91m) in return for a 20% interest in the Welchau Farm-in Area.
KPFG may also choose to fund a further 50% – essentially carrying ADX Energy (ASX:ADX) – of the well cost to earn a further 20% stake in the Welchau Farm-in Area. This option must be made by 21 January 2023.
KPFG will make an initial payment EUR 197,000 for 50% of the pre-drill well costs and pay a fee of EUR 100,000 for the additional earn in option. If KPFG exercise the option, the fee will be offset against an additional payment for a further 50% of pre-drill well costs.Additionally, KPFG will pay the company €228,000 for back costs relating to the Welchau prospect and the Molln appraisal opportunity.
Executive chairman Ian Tchacos said the company is delighted to partner with KPFG, whose principals not only have a strong financing and technical background but are also proven oil and gas operators in Europe with an exceptional track record as co-founders of Bankers Petroleum and BNK Exploration.
“KPFG shares our enthusiasm for the tremendous opportunity presented at Welchau to deliver a large new gas discovery to the market within Western Europe,” he added.
“The competitive terms achieved for the farmout of the Welchau prospect reflect its very large gas resource potential located in the heart of Europe, the relatively shallow drill depth and the close proximity to open access gas export infrastructure.”
Should Welchau result in the development of a gas project, the funds will be repaid to KPFG from 50% of net revenue generated from Welchau gas sales until pay back is achieved.
The Welchau Farm-in Area is located within the thrust belts of the Northern Calcareous Alps portion of the ADX-AT-II license to the south of the company’s producing Anshof oil field.
Welchau is located within the foothills of the Austrian Alps, which is analogous to the giant Apennine thrust belt gas fields of Italy.
The target Triassic Steinalm Formation – a fractured carbonate reservoir trapped in a trending ramp anticline with more than 20 km lateral extent and 100km2 maximum closure area – is also relatively shallow.
Within 10 days after execution of the agreement, KPFG will make a payment to fund 50% of the pre-drill well costs of €197,000 including engineering, planning, insurance, and long lead items for the Welchau-1 well and pay a fee of €100,000 for the option.
Should KPFG elect to exercise the option the fee paid by KPFG will be offset against the payment of further pre-drill well costs.
Both parties have also agreed on a work program for reviewing the potential of the Molln-1 gas discovery as a follow up to or in conjunction with Welchau.
Success is likely to see rapid development given Europe’s hunger for gas as it looks to cut its dependence on supplies from Russia.
This article was developed in collaboration with ADX Energy, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.