Aurelian’s new Polish gas discovery encourages City analysts

City analysts are encouraged by the new Polish gas discovery announced by Aurelian Oil & Gas (LON:AUL) this morning.

The Krzesinki-1 exploration well, which has been drilled on the same licence as the Siekierki tight gas field, encountered a 65 metre gas column. And according to Aurelian the discovery contains between 10 and 20 billion cubic feet of gas in place.

The well is being prepared for testing and the results are expected before the end of this year.

"We are pleased to have discovered gas in the Krzesinki exploration well which is located 8 kilometres from our multi-fracced horizontal well (MFHW) Trzek-3,” said chief executive Rowan Bainbridge.

“The discovery is expected to be tested this year and we will provide a further update when this testing is complete. This well will also provide valuable data to assist our ongoing assessment of the wider Siekierki tight gas field.” 

The Krzesinki-1 well was targeting a separate reservoir to Siekierki, although they are both in the same age rocks. 

The company said that 175 metres of core has been recovered from the well. Aurelian added that from the extensive quantity of core, it has so far yielded measured ambient porosities between 5 and 16 per cent, and ambient permeability between of 0.04 mD to 40.0 mD. 

In a note to clients this morning finnCap analyst Will Arnstein said that, based on the available information, he believes that Krzesinki should be able to flow gas to surface without stimulation.

He notes that the 10-20 bcf gas in place estimates falls short of Aurelian’s pre-drill estimates of 60 bcf, but today’s result is still encouraging. Repeating a ‘buy’ recommendation, Arnstein said that Aurelian shares remain ‘over sold’ on London’s AIM market.

Meanwhile Oriel Securities analyst Nick Copeman also sees Aurelian as a ‘buy’. This morning Copeman highlighted that the new discovery could be worth between 3 to 5p a share to Aurelian, if the well produces commercial flow rates.

“Whilst Krzesinki is encouraging in its own right, it also highlights that reservoir quality in the Siekierki structure appears to improve to the south-west as prognosed, suggesting the potential for longer term upside in the this large structure where 1.6 trillion cubic feet of gas in place has been identified,” Copeman said in a note to clients.

Additionally in this morning’s statement Aurelian told investors that it has hired a specialist tight gas team, from industry consultancy AGR, to work alongside its in-house technical team. The AGR team will carry out a detailed, bottom up review of all existing data on the Siekierki field so that it can assist in the development of an updated appraisal plan for the Siekierki project.

“We are also looking forward to working with AGR and believe that their significant experience with tight gas reservoirs will greatly assist our thinking as we work towards preparing a revised appraisal plan for the wider Siekierki structure,” Bainbridge said.

Meanwhile in Romania, on the Brodina licence, the Horodnic-1 exploration well has been spudded. The well follows up the Voitinel-1 discovery well which was drilled in 2009. 

The well will test the late Badenian sandstones which successfully flowed gas in the Voitinel-1 discovery in 2009.  It is being drilled around 2.5 kilometres to the southeast of Voitinel-1 and it is targeting a mid case gross gas-in-place of 52 billion cubic feet. 

Bainbridge added: “In Romania we have also spudded Horodnic-1, the second well on the Voitinel trend following the 2009 discovery at Voitinel-1. 

“We will provide an update on this well in late November or early December."

In early trading on AIM Aurelian shares were up 0.5p, about 3 per cent, changing hands at 18.75p.