Auctus Advisors maintain 30c price target for ADX as it progresses Austrian shallow gas play

• Auctus Advisors maintains 30c price target for ADX Energy as it prepares to drill shallow gas prospects in Austria
• Initial drilling expected to test the low-risk GOLD prospect with success expected to upgrade nearby prospects
• Company expected to seek farm-in partners to de-risk drilling by funding well costs

Special Report: UK-based equity markets advisory Auctus Advisors continues to maintain a 30c price target for ADX Energy as it draws plans for a multi-well program to test shallow gas prospects in Austria.

This is significantly higher than the company’s current share price of 3.2c.

Earlier this month, the company matured seven of more than 30 leads and prospects across the ADX-AT-I and ADX-AT-II licence areas in Upper Austria to drill-ready status with a further four prospects being matured within its newly varied acreage areas.

ADX Energy (ASX:ADX) noted that successful discoveries can be developed in clusters to optimise utilisation of facilities and maximise project value.

Auctus notes the company has started the farm-out process for the GOLD cluster of shallow gas prospects in ADX-AT-II.

This cluster includes the GOLD (A&C), GOLD (B), GRAB, and ZAUN prospects, with a combined P50 prospective resource estimate of 12.1 billion cubic feet of gas.

GOLD has a high probability of success of 77-81% while ZAUN and GRAB have 55% and 57% probability of success.

Auctus believes a successful outcome at GOLD would significantly enhance confidence in ZAUN and GRAB’s potential.

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Proven success

The GOLD cluster of prospects target the well-established Miocene-age Hall Formation in the Upper Austrian Molasse Basin.

This sandstone reservoir has produced a cumulative 232Bcf of gas from some 83 fields in the area since 1969.

It typically consists of stacked thin sands, with a maximum total net sand thickness of about 8m, that exhibit excellent porosities and permeabilities – both essential elements for strong gas flow.

Even sands with thickness of less than 1m net thickness can yield high initial production rates of up to 5 million cubic feet per day (MMcf/d) of dry and sweet natural gas (methane with no liquids and very low levels or no carbon dioxide and hydrogen sulphide).

Auctus expects ADX to farm-out a 50% interest in the GOLD cluster in return for funding drilling at GOLD, which is expected to cost US$2.3m with a further US$0.7m required for completion and testing.

A multi-well program might decrease well costs by 20-30%.

The total gross cost for drilling, completing, and tying in the GRAB and ZAUN prospects is projected at ~US$10m with a further US$7.5m allocated for gas processing and pipeline infrastructure. 

Production for the cluster could start in 2028, reaching a commercial sales plateau of ~9.5MMcf/d. 

“We estimate the project will generate around US$40m in operating cash flow, net to the company’s post farm-in 50% WI,” Auctus concluded.

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.