The Welchau-1 well test program is designed to estimate recoverable resource volumes from potential future development wells in its oil discovery made earlier this year. Pic: Getty Images
Energy
Special Report: Capital market experts Auctus Advisors have reiterated a 75c price target for ADX Energy as the company fast-tracks plans to complete production testing at the Welchau-1 discovery in Upper Austria while preparing to commence production from its successful Anshof-2A oil appraisal well and commences the drilling of the Lichtenberg-1 gas exploration well.
European-focused energy production and exploration company ADX Energy (ASX:ADX) is gearing up to testing operations of two major reservoirs at the Welchau-1 discovery well within the ADX-AT-II oil and gas exploration licence on October 15.
The program is designed to assess the reservoirs’ potential for light oil and gas after drilling earlier this year intersected three primary carbonate reservoirs over 450 metres, all showing signs of hydrocarbons.
The Welchau-1 well has similar carbonate reservoirs to nearby Molln-1 well, which produced condensate-rich gas in 1989.
After reaching a total depth of 1733m, the well was suspended in March 2024, with hydrocarbon shows still present, signalling significant upside and paving the way for further testing for what has already been discovered and potential deepening in the future to evaluate deeper potential below the current depth of the well..
Welchau is also now interpreted as a very light API oil (43.6° API) rather than a gas condensate discovery, as was predicted prior to drilling, based on detailed analysis of samples recovered from the well and other well data.
Auctus Advisors’ latest research note on the company says that while this means the energy equivalent hydrocarbon volumes may be smaller than the original pre-drill estimates, onshore oil can be more valuable than gas to a small company.
“This is due to the ability to produce and progressively develop a field without having to first prove up sufficient reserves to underwrite a pipeline and secure a gas contract,” Auctus Advisors said.
And while ADX has not yet provided a definitive resource estimate, the potential range is very large.
“Welchau is estimated to hold 90-95% oil and the production from Welchau-1 could be trucked to a point of sale or to ADX’s recently installed 3000bbl/d capacity Anshof facility for processing when stable flows can be established,” Auctus Advisors said.
Welchau is currently estimated to hold low, best and high case prospective resource estimates of 12 million barrels of oil equivalent (mmboe), 46 mmboe and 217 mmboe with a mean case estimate of 85 mmboe.
“This compares with 35-272 mmboe (minimum to maximum) with a best case of 134 mmboe estimated before drilling when there was much less known about the existence of a hydrocarbon resource being present” they said.
“The results of the well testing are expected to narrow that range, and it should be noted that the Welchau well was still encountering hydrocarbon shows down to the current well TD so deeper potential exists.”
The advisory company has placed a 75c/sh target price on the company, a 525% premium to its current 12c per share trading price.
“Our starting point for the value of a bbl of oil at Welchau is the same as for Anshof,” Auctus Advisors said.
“We are then assuming a three-year lag with a 10% discount rate, resulting in a value of US$8.5/boe; which is higher than our previous estimate of ~US$4/boe.”
ADX has undertaken the necessary planning, permitting, procurement and contracting to execute an extended testing program on Welchau-1 with operations set to begin on 15 October and continuing through to March 2025.
The key reservoirs are Steinalm and Reifling, holding ~80% of the resources.
In each test, the well may be acidised to optimise well performance.
In case of success and with appropriate permitting, Auctus Advisors believe ADX could either produce from Welchau-1 as a longer-term producer, deepen it by 500–1000m to assess deeper exploration potential, or drill a horizontal sidetrack to assess the production and reserves potential of a high angle well designed to optimise recovery from fractures with in the reservoirs.
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.
