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Brokers remain bullish on Petroceltic after Isarene update

Published: 15:19 20 Oct 2009 BST

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Today’s update from Petroceltic’s (AIM: PCI) Isarene permit in Algeria triggered a flow of broker reports, all of which were positive, highlighting the unexpectedly high results from the flow tests conducted at the recently hydrofractured AT-1 well and the gas discovery in the AT-2 exploration well, which “underpinned confidence in the overall commercial potential of the field.”


Dublin-headquartered Petroceltic operates and holds a 75% working interest in the Isarene permit in southeastern Algeria, which covers 7,520 sq km (square kilometres) in an area adjacent to a number of fields with proven oil and gas production, including the In Amenas project operated by BP, Statoil and Sonatrach. The company’s ongoing seven well drilling campaign in the area is focused on appraising gas and oil discoveries already made by Petroceltic and former operators.


Petroceltic has accelerated the programme and is currently gearing up to drill the AT-3 well just south of AT-2, where it just hit a 100 metre gas column, looking to extend the limits of the overall Ain Tsila structure.


“Clearly, commercialising any discovery in Algeria is a torturous process; however, we feel that the Petroceltic management team is better placed than most to meet this challenge,” said stockbroker Mirabaud in its note, noting that the flow tests demonstrated the effectiveness of the fracture simulation process on the tight Ordovician reservoirs. The 33 mmscfd/d (million standard cubic feet per day) flow was far ahead of the 10 mmscf/d expected by Mirabaud, which it said was “surprisingly high” for a vertical well.


The stockbroker put the chance of success for the Ain Tsila ridge at 40%, carrying an unrisked core value of 14 pence per share with an unrisked value of 34p. Further de-risking will be possible if further flow-test results from AT-2 and AT-3 prove a success.


The buy recommendation was retained and the target share price was set at 22.5 pence.


Irish stockbroker and financial advisor Davy was even more bullish on the company, rating it as “outperform” and setting the target at 27 pence, which, according to the broker, looked “increasingly comfortable” in view of the latest results. Davy noted that the “very material flow rate” will help towards the commercialisation of the Ain Tsila reservoir and the license in general and anticipating results from AT-2 and the INE-1 well, currently set to be flow tested along with the INE-2 well drilled earlier this year.


The company also holds interest in permits in Italy and Tunisia. Shares in Petroceltic last traded at 17p.

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