During the year, the company increased its estimate of most likely gas resource in place in the Isarene permit area, which hosts the Ain Tsila field, by 70 percent to 10.3 trillion cubic feet and farmed out an 18.375 percent stake in the project to Enel.

Petroceltic also highlighted the “substantial progress” made with Algeria’s state-owned company Sonatrach on finalising a development plan for Isarene.

The plan incorporates recoverable contingent resources of 2.2 trillion cubic feet of gas and 180 million barrels of condensate and LPG recoverable contingent resources over life of field.

The three Isarene partners have agreed to a three month period starting April 24 to conclude the final discovery report and submit the declaration of commerciality for the field.

Elsewhere, the company teamed up with American firm Hess Corp to snap up two licences in the Kurdistan region of northern Iraq.

According to Petroceltic, the two blocks contain five anticlines, any of which could potentially contain in excess of one billion barrels of oil in place.

On the financial front, the company raised US$60 million in May last year for its Algerian exploration programme and operations in Italy, where it is exploring the onshore Rovasenda project, and has received US$100 million from the Enel farm-out deal.

Petroceltic said it was in a strong financial position with US$64 million in the bank at the end of March.

"Petroceltic delivered on all of its key targets for 2011," said chairman of Petroceltic Robert Arnott.

"The Isarene farm-out deal was approved by the Algerian authorities, the company completed its appraisal campaign on time and under budget, achieving significant success, the plan of development was submitted to Sonatrach on time, and the portfolio expanded through the addition of two highly prospective licences in the Kurdistan Region of Iraq.

“The coming year will see the maturation of our Algerian asset towards development sanction, the booking of commercial reserves, and accelerated activity on some exciting exploration in Italy and Kurdistan."

Isarene hosts the world class Ain Tsila gas field. 

The deal was first struck in April last year. Petroceltic says it is now owed over US$100 million from the deal and payment is due in the next 30 days.

"We are delighted to announce the completion of the Enel farmout and formally welcome our new partner to the Isarene Licence,” said chief executive Brian O'Cathain.

“Since announcement of the deal in April 2011 we have forged a valuable and co-operative working relationship with Enel and Sonatrach, culminating in the completion of the highly successful appraisal campaign. 

“We look forward to a long and successful relationship in this outstanding asset."

Under the terms of the deal, ENEL agreed to pay to US$36.75 million to Petroceltic. This gives the firm more than 24 per cent of all back costs incurred from 2005 until the end of the exploration period in April 2010. 

Additionally ENEL had to commit to funding 49 per cent of the costs associated with the recently completed six well appraisal drilling programme. These costs are capped to a maximum of US$145 million.

Furthermore, there is a further potential payment which is contingent up the outcome of future appraisal as well as future reserve volumes and production volumes. This could be worth as much as US$75 million for the company.

The company now retains a 56.625 per cent interest in the licence while Algeria’s national oil company Sonatrach owns 25 per cent and ENEL owns 18.375 per cent.

Earlier this week broker Daniel Stewart came out with a bullish assessment of Petroceltic. It says the firm has a well diversified asset base that has ‘game changing’ potential.

The bullish view is reflected in the broker’s punchy price target, set at 13.7p, which implies nearly 70 per cent upside from the current price of 8.2p a share.

City broker Daniel Stewart today initiated coverage on Petroceltic International (LON:PCI) with a 13.7p price target.

The broker says the firm has a well diversified asset base that has ‘game changing’ potential, this is reflected by a punchy price target which implies nearly 70 per cent upside from the current price of 8.2p a share.

In Algeria Petroceltic is working, alongside major European utility firm ENEL and Algeria’s national oil firm Sonatrach, to develop the world class Ain Tsila gas field. And the firm will in the coming months start preparing to start its first drilling programme in the Kurdistan region of northern Iraq.

In Italy it is also exploring the onshore Rovasenda exploration project.

“Our target price is borne out by Petroceltic’s development asset in Algeria and its main exploration play in Italy,” said analyst Kate Fisher.

“We see the Kurdistan acreage as pure upside.”

Fisher assigns nearly two thirds of her valuation, 8.7p, to the Algerian assets. She includes 2.4p for Rovasenda and the rest of the valuation is in consideration of the cash due to the company via the farm-out of a portion of Ain Tsila.

Petroceltic expects to receive in the region of US$100 million from the deal in the near future.

There are a number of key events coming soon that will serve as a catalyst for the group’s shares.

Operationally in Algeria Fisher reckons the submission of a field development report, expected later this quarter, and the declaration of commerciality later this year will be important.

 “These two milestones will firm up the progression towards development and should send a clear message to the market. The Declaration of Commerciality will also enable PCI to progress resources into the reserve category which should serve to solicit investor attention,” Fisher explained.

“We note that the development lead time for Ain Tsila is medium- to long-term; first gas is not expected until 2017.”

On a corporate level another farm-out of the Ain Tsila asset could be another catalyst, according to Fisher. 

“This will further demonstrate the ability to monetise assets, diversify risk and crucially, fund the development programme,” she added. “This would go a long way towards mitigating the liquidity risk that we feel PCI faces on this development and would unwind the level of risk we apply to the project.”

Elsewhere the analyst reckons a positive drilling result in Italy could be a game changer for Rovasenda.

The start of drilling in Kurdistan could also have a big impact.

 “The two assets in Kurdistan are in a world-class resource play and thus have clear potential,” Fisher said.

“They are proximate to multiple billion barrel fields and the area has experienced a high rate of success. However, as the areas are completely undrilled, they are inherently risky. Industry eyes are watching this play.” 

Petroceltic International (LON:PCI) today confirmed that it is set for a US$103 million payday as the Algerian authorities ratified its farm-out deal with ENEL.

The deal was struck back in April. 

Europe’s second largest utility company is paying US$36.75 million for an 18.375 per cent stake in the Isarene permit, which hosts the Ain Tsila gas discovery.

It has also agreed to pay a proportion of Petroceltic’s back costs on the licence as well as a further contingent cash payment, which could rise to a maximum of US$75 million.

Petroceltic says the amount to be paid currently exceeds US$103 million.

"We are delighted to announce that the final approval in Algeria of the Enel transaction has been granted which will allow for the deal's swift completion in the coming days,” said chief executive Brian O'Cathain.

“We look forward to formally welcoming Enel as an important new partner to the Isarene licence. 

“This transaction, allied to the excellent results from our appraisal campaign, has confirmed the quality and value of our Algerian asset and provides a firm foundation for the ongoing growth and diversification of our business" 

Petroceltic is the operator of the Isarene permit with a 56.625 per cent stake. The other partners Sonatrach has a 25 per cent stake and on closing ENEL will hold 18.375 per cent.

Last week Petroceltic shares revealed excellent flow test results from the AT-9 well at Ain Tsila.

The well produced gas at a combined rate of 52.8 million cubic feet per day (mmscf/d) during the test, with 43.9 mmcf/d coming from the Upper Zone and 8.9 mmscf/d from the Lower Zone. The well also produced over 1,200 barrels of condensate a day.

This is the highest pre-fracture stimulation flow ratesachieved on the Ain Tsila field to date. O’Cathain believes the well could produce at a rate of 60 million cubic feet a day on a sustained basis once it is has been fracture stimulated and it is in full production. 

The result marked the end of the 2011 appraisal programme.

According to analysts the AT-9 well tests should remove any lingering uncertainty regarding the commerciality of the Ain Tsila project. 

This rate is prior to fracture stimulation and is constrained by surface facilities, it said.

"It is particularly pleasing to close this final well test from the Ain Tsila field appraisal programme with this excellent result, which we understand to be the among the highest gas flow rates ever achieved from an 'unfracced' Ordovician well in Algeria,” said chief executive Brian O'Cathain.

“The relatively high flowing well head pressure indicates that the well could potentially deliver at higher rates in a production setting and underlines our confidence in achieving our planned development plateau rates of 400 million cubic feet per day."

Last week Petroceltic reported excellent flow test results from the well on the Ain Tsila gas field in Algeria.

The well produced gas at a combined rate of 52.8 million cubic feet per day (mmscf/d) during the test, with 43.9 mmcf/d coming from the Upper Zone and 8.9 mmscf/d from the Lower Zone. The well also produced over 1,200 barrels of condensate a day.

The AT-9 well has now been suspended as a future production well. It will be fracture stimulated at a later date, during the development phase.

The Petroceltic chief also explained last week that the results strongly supportthe commercialisation of the Ain Tsila field and the current field development plan, which  will be submitted to the Algerian competent authorities in January.

Petroceltic has a 56.625 per cent stake in the project, while it partners Sonatrach and ENEL own 25 per cent and 18.375 per cent respectively. 

ENEL’s interest is subject to final ratification by the Algerian authorities, following a farm-out deal between Petroceltic and ENEL. Once complete, Petroceltic will be due around US$100 million from the farm-out.

McCutcheon was formerly head of corporate finance at Irish stockbroker Davy. 

Through his role at Davy he was involved in a broad range of corporate activities on behalf of clients, including privatisations, IPOs, fund raisings, debt raisings as well as mergers and acquisitions.

Petroceltic said that McCutcheon maintained a continuous focus on and interest in the natural resources sector while at Davy. During that role he advised the company as well as peers such as Aminex, Providence Resources and Dragon Oil.

"Hugh McCutcheon brings a wide range of skills and experience in deal-making and corporate governance to Petroceltic and on behalf of the board and our shareholders I am delighted to welcome him to the team," said chairman Rob Arnott.

Petroceltic is currently advancing its flagship asset, the Ain Tsila gas field in Algeria. 

Earlier this month the firm revealed excellent flow test results from the latest appraisal well on the field.

The well produced gas at a combined rate of 52.8 million cubic feet per day (mmscf/d) during the test, with 43.9 mmcf/d coming from the Upper Zone and 8.9 mmscf/d from the Lower Zone. The well also produced over 1,200 barrels of condensate a day.

This is the highest pre-fracture stimulation flow rates achieved on the Ain Tsila field to date.

The well test marked the end of the 2011 work programme.

In the coming year Petroceltic will continue to develop Ain Tsila while it also gears up for potentially high impact exploration in Kurdistan in early 2013.

Petroceltic International (LON:PCI) today unveiled the results from hydraulic fracturing on the AT-7 well on the Ain Tsila gas field, Algeria.

AT-7 was designed as an appraisal well to test the south western extension of the Ain Tsila field. The well was hydraulically fractured successfully. 

Petroceltic revealed that AT-9 produced gas at rate of 4.9 million cubic feet per day.

“This result confirms that commercial gas rates can be achieved in the south of the field after the mixed results of AT-6,” said chief executive Brian O'Cathain.

Testing operations are continuing on AT-7. The firm will test the flow of gas while using a variety of different choke sizes so that it can characterise the reservoir in this part of Ain Tsila.

The AT-9 horizontal appraisal well will be tested later this month once the AT-7 testing is complete. AT-9 was drilled to a total depth of 2,494 metres and a horizontal section was drilled for 415 metres. 

This morning the company said that logging results from the horizontal section indicates an uppermost interval of 57 metres. The interval has an average net porosity of 10.6 per cent and a maximum porosity value of 14.5 per cent, Petroceltic said.

Additionally it said there are good indications of natural fractures in the remainder of the horizontal section. 

“We are very encouraged by the logging results from AT-9, which was drilled on time and within budget, particularly as it extends the presence of this interval of high quality sand, successfully tested in AT-1 and AT-8, further south into the centre of the field,” O'Cathain said.

“Initial petrophysical evaluation indicates that this is the best quality reservoir encountered in any of the Ain Tsila wells to-date.”

He added: “(Today’s) results improve our understanding of this field and support the current conceptual Field Development Plan in the Final Discovery Report which we plan to submit to the Algerian competent authorities by the end of January 2012."

Petroceltic has a 56.625 per cent stake in the asset. Joint venture partners Sonatrach and Enel own 25 and 18.375 per cent respectively.

Enel bought its stake in the project from Petroceltic back in April. The transaction is expected to close in the coming weeks. Petroceltic will then be due payments of around US$100 million from Enel.

Petroceltic has agreed a US$30 million bridge loan facility with Macquarie Bank. The facility has been made available to the firm for ongoing capital investment and working capital associated with its businesses in Algeria, the Kurdistan region of Iraq and Italy.

In return for the facility, Petroceltic has granted Macquarie 15 million warrants to subscribe for shares at a price of 4.52 pence each. Macquarie may also be entitled to up to 25 million additional warrants depending upon drawdown of the facility or at certain fixed dates up to December 31 this year.

Warrants issued under the facility will be priced according to the weighted average share price of Petroceltic for the previous 20 trading days.

Petroceltic said that, if it uses the bridge loan facility, it will be able to pay outstanding amounts from the sale of its 18.375 per cent interest in the Isarene Permit in Algeria to Enel. This sale, announced in April, is awaiting final ratification by the Council of Ministers in Algeria. Amounts receivable by Petroceltic upon completion of the sale currently exceed US$95 million.

“The Macquarie facility represents a strong technical, commercial and financial endorsement of Petroceltic's business and asset portfolio,” said Brian O’Cathain, Petroceltic’s chief executive officer. “While Petroceltic is funded to maintain the pace of our Ain Tsila appraisal programme, this facility guarantees that we can continue to build on recent operational success by focusing our efforts on preparations for the submission of the final discovery report in early 2012.” 

The firm also announced today that the fracture stimulation of the AT-8 well on its Ain Tsila discovery in Algeria has further enhanced the substantial pre-fracture flow rates announced earlier this month to 38 million cubic feet of gas per day, while the well has also produced more than 1,100 barrels per day of condensate.

Petroceltic said these results exceed the previous best test results achieved at its AT-1 well and “further confirm the high deliverability” achievable at the field.

Petroceltic International (LON:PCI) has strengthened its asset portfolio considerably in recent months, says chief executive Brian O'Cathain.

In this morning’s interim results statement, for the six months ended June 30 2011, O'Cathain reflected on a busy period which saw Petroceltic tie-up with major Italian utility firm Enel, through a US$100 million deal, to continue the development of the Ain Tsila gas field in Algeria.

This major investment underscores both the scale and value of Ain Tsila, Petroceltic said.

While the Ain Tsila development continues apace, the group has added a whole new area of interest in recent weeks with a new partnership, with Hess Corporation, to explore for oil in the Kurdistan region of Northern Iraq.

"Petroceltic's asset portfolio has been considerably strengthened over the last 12 months by the Ain Tsila appraisal programme, the $100 million plus farm-out to Enel and our country entry into the Kurdistan Region of Iraq,” O’Cathain said.

“Algerian drilling operations will see at least three further well results and four test results completed in the next six months, and our objective is to maintain and exploit the momentum created in this world class discovery. 

"Although stock market conditions in recent months have presented challenges to all companies, Petroceltic has the team, the assets and the funding to deliver our ambitious growth objectives and create significant value for our shareholders."

In November last year the current Ain Tsila appraisal drilling campaign began. Six wells are planned, designed to follow up 2009/10 five well programme, which the company describes as ‘highly successful’.

So far in the current campaign the first three wells - AT-4, AT-5 and AT-6 - all encountered gross gas columns that were in excess of the pre-drilling prognosis, Petroceltic said.

As such the company believes the results are likely to have a positive impact on the field’s gas initially in place volumes. Petroceltic today confirmed that it will update its assessment of the field gas-in-place once the current round of drilling is complete. 

Petroceltic also stressed that the assessment of new high impact exploration opportunities is a critical component of its strategy. To this end Kurdistan has been one of its primary areas of focus over the last two years, largely due to the fact that a number of world class oil discoveries have recently been made there.

In July it acquired two undrilled exploration assets in Kurdistan, both of which are positioned along strike of significant oil fields. 

Last month’s deal gives the company access to ‘very significant’ prospective resource volumes, it said. Petroceltic also emphasised that its success in securing acreage in this popular emerging oil region came ‘in the face of intense industry competition’.

Each PSC has an initial exploration period of three years and Petroceltic expects that its financial commitment during this time will total US$72 million. It said that the preliminary timetable in Kurdistan will include extensive field work this year, followed by 2D seismic exploration next year. It is expected that exploration wells will be drilled in late 2012 or early 2013.

Elsewhere things have also stepped up in Italy. Crucially major Italian oil firm ENI is now in control of the Carisio Permit in Western Po Valley, where a well will be drilled in the future. Meanwhile work on Petroceltic’s offshore licence in Italy is still being held up because of the drilling ban on coastal areas (within 5 miles around the coast and up to 12 miles of protected marine and coastal parks).

In terms of its financials the exploration firm, that has yet to establish production, reported a US$1.4 million loss for the six month period. In May it raised US$60 million through a share placing and it had a strong cash position at the end of June, with US$90 million in the bank. 

It currently has a cash balance of US$84 million, and it has no debt.

Petroceltic (LON:PCI) updated investors on its Algerian operations today and revealed very encouraging results from the AT-6 appraisal well on the Isarene permit.

The well, which is a step-out in the south east of the Ain Tsila gas field, hit 45 metres of net pay thereby confirming the extension of the field.

It is the third well in the current programme and was drilled to 2085m ahead of schedule and within budget and is now being prepared for testing.

Caren Crowley, analyst at broker Davy, which rates the stock "outperform" said of the AT-6 well result:

"This is a good result considering the aggressive nature of the AT-6 well. It was drilled in an area not covered by 3D seismic data and is located some 17km from the AT-4 well in the south-eastern part of the large Ain Tsila gas condensate field."

The company said today it has now moved the rig to drill a further well - the AT-7 - on the far southwest of the field. Drilling is expected to start drilling here late this month.

At another nearby well - the AT5 - well testing has recently begun, said the company, and depending on the initial results, this programme is likely to include hydraulic fracturing of some zones to enhance gas flow rates.

Chief executive of the firm, which has operations in Italy, Algeria, Tunisia and Ireland, Brian O'Cathain said: "Initial results from the AT-6 well are very encouraging and increase the proven area of the Ain Tsila field considerably to the southeast with this large step-out.

"We are also extremely pleased that testing operations on AT-5 are underway.

"We are now entering a most exciting and busy period on our Isarene permit in Algeria with 2 rigs and a rig-less testing unit in operation. We look forward to announcing further well results by the end of July."
 
This second rig - the KCA Deutag T-211 rig - has now arrived on the Isarene permit, said the company, and is preparing to drill AT-8 in the north of the field.

AT-8 well is expected to spud in mid-July and is targeting a structural pop-up feature similar to AT-5. The aim is to test for significant additional gas in place and to possibly access fracture features identified on seismic.

The current six well delineation programme is expected to be complete by year end in time for the 'Final Discovery Report' to be submitted to the Algerian authorities.
 
The Isarene permit (blocks 228 and 229a) lies in the Illizi basin in south eastern Algeria. The company operates the permit with a 56.625 percent interest, Sonatrach holds a 25 percent interest, and Enel holds an 18.375 percent interest, pending final ratification from the Government of Algeria - expected later this year.

Analsyst Crowley described the update from Petroceltic as "good" but said the broker was leaving valuations unchanged at 30.6 pence for the whole group with 20.6 pence for the Algerian play, until flow data from the AT-5 well was received.

"AT-6 has met the first of its objectives which was to prove up gas in the south-east of the Ain Tsila field. Recoverability of the discovered gas-in-place will soon be tested. The company's update also points to accelerated and significant news-flow in H2 which should act as a catalyst for the stock," she added.