Petroceltic International: Investors and analysts cheer excellent AT-9 test results

The results from Petroceltic’s (LON:PCI) AT-9 well tests should remove any lingering uncertainty regarding the commerciality of the Ain Tsila project, according to Irish broker Davy.

Davy analyst Job Langbroek said that investors should like this result and as a result they’ll start to price in a lower level of risk.

Petroceltic shares advanced around 13 per cent today after it revealed 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.

This is the highest pre-fracture stimulation flow rates achieved on the Ain Tsila field to date. The group’s 2011 Algerian appraisal programme is now complete. 

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.

Chief executive Brian O’Cathain says 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 Petroceltic chief also explained that today’s result strongly supports the commercialisation of the Ain Tsila field and the current field development plan, which  will be submitted to the Algerian competent authorities in January.

The analyst says the result bodes well for achieving a better outcome in the gas-in-place estimates, which currently range from 5.7 to 20.8 trillion cubic feet (tcf), with a 10.3 tcf mid-case.

Furthermore he believes that the quantum of recoverable reserves should also increase. 

“The flow rate and the likelihood of a better rate under full production conditions mean that the design plateau of 400 million cubic feet per day can be reached comfortably, which should have positive implications for the number of wells required, and also bodes well for an extension beyond the ten years assumed,” Langbroek said in a note to clients.

He added: “All in all, this is an excellent outcome for the last well in the programme — especially given that the well flowed gas with no stimulation. 

“It means that one-third of wells in the nine-well programme have flowed at rates not normally associated with tight gas reservoirs, and it also makes for a much improved environment to complete the next farm-out of the licence. 

“In fact, we suspect that the company may well take stock for a period and review the value on offer to a third party given the recent results from AT-8 and AT-9.”

Davy rates Petroceltic as a ’buy’ and the broker values the stock at 28p a share – some 275 per cent more than the current price of 7.25 p.

Petroceltic has a 56.625 per cent in the Ain Tsila field, alongside partners Sonatrach and ENEL who own 25 and 18.375 per cent respectively.

The AT-9 well was the final well in the 2011 appraisal programme. Today the company confirmed that it has successfully proven gas in all six wells that were completed during the 2011campaign. Three of these wells tested gas at rates above 33 mmscf/d.

"We are delighted to have achieved such excellent flow results from the Ordovician reservoir at AT-9 without fracture stimulation,” Brian O’Cathain said.

“This result confirms the improved reservoir quality indicated by well log analysis and significantly extends the area of excellent productivity within the Ain Tsila Field.  

“This is the third of our nine appraisal wells to flow at very high rates, and supports the production profile anticipated at field start up.”

He added: “The AT-9 result further refines our understanding of this field and is likely to have a positive impact on recoverable reserves. 

“In addition, this result strongly supports commercialisation of the field and the current Field Development Plan which will be submitted to the Algerian competent authorities in January 2012."