Petroceltic International (LON:PCI) said this morning it is confident October’s appraisal programme on the Ain Tsila gas condensate field in Algeria “will demonstrate the value of this important asset”.
While the Dublin-headquartered group has assets in Tunisia and Italy, its focus is currently on Algeria and proving up a potentially world class discovery.
"Algeria is the cornerstone of the Petroceltic investment story,” said chief executive Brian O’Cathain, following the release of interim results.
“Despite some changing circumstances in other areas of the world, the underlying investment case remains as strong today as it has ever been.”
It has been a busy six months for the company, which raised US$120 million in placing in April. In June it received a further US$26.1 million following a well farm out deal with Orca exploration. The cash will be used to develop the Elsa-2 discovery in Italy.
As at the end of June it had US$108 million on the balance sheet.
However it was the company’s five-well Algerian drilling that caught the eye of investors. The testing programme was completed in February with a major Ordovician gas condensate discovery made at Ain Tsila.
Gas initially in place (GIIP) estimates for the field currently range from 2.6 to 10.3 trillion cubic feet (TCF) with a P50 estimate of 5.5 TCF.
The rig services contract was awarded to Dalma Energy in July for Algerian drilling programme.
Two well locations have been approved by the company’s partner Sonatrach, with the first well due to spud in early October.
“In the first half of 2010, we have seen some solid progress made,” said O’Cathain.
“We have put in place the capital and resources to exploit our world-class discovery in Algeria, and have made good progress in Italy and Tunisia, despite challenging circumstances.
“We are focused on the exploitation of our valuable Algerian discovery first and foremost.
“We remain confident that the appraisal programme for the Ain Tsila gas condensate field, due to start in October 2010, will further de-risk and demonstrate the value of this important asset.
“We are also exploring opportunities to expand our portfolio into areas that exploit our competencies in exploration, deal-making and operating in challenging environments."
Alongside the success in Algeria, there have been several minor setbacks. The first well in Tunisia, Oryx-1, found no significant hydrocarbons.
Meanwhile, Elsa-2 well preparations had to be suspended by in July amid confusion over legislative changes that may prohibit drilling for oil in Italian seas within five nautical miles of the coastline and within 12 nautical miles around the perimeter of protected marine parks.
“Petroceltic was scheduled to spud the Elsa 2 well in the fourth quarter at a seabed location on the permit that may be affected by the proposed restrictions,” the company said.
“However, the detailed working of the revised legislation is as yet unclear.
“Petroceltic intends to continue with the existing environmental permitting process, which is at an advanced stage, whilst the implications of the proposed changes to legislation are assessed.”
However the group says it has lodged an application with the Ministry of Economic Development to suspend the current timing of the delivery of the Petroceltic’s “commitments” on the permits covering the Elsa-2 well.
Separately, Petroceltic said its loss before tax widened to US$4.98 million in the first half from US$2.12 million.
The Irish broker Davy this morning repeated its ‘outperform’ recommendation following the update.
“Petroceltic confirmed that the first well on its Algerian appraisal drilling programme will spud in October,” said analyst Caren Crowley. “This is in line with previous guidance.”
She reckons the shares are worth 25.7p on a “risk-weighted” basis. On its own Algeria is worth 13.5p, the analyst or 30p a share on an unrisked basis.