“The flow rates from our prospect in Italy would suggest we are hugely undervalued.”
Of course, you would not expect him to say otherwise but based on the latest drilling, there does seem to be a significant mis-match.
AIM-listed Prospex specialises in projects that are ‘fairly late’ in the exploration phase.
The junior is chasing a geological play in Europe known as fore-deep and that is present in many countries.
In Romania, it is the EIV-1 Suceava Concession, where Prospex has a 50% stake.
In Italy, Prospex has a 17% working interest in the Podere Gallina Exploration Permit in the Po Valley region of Italy, again a prolific hydrocarbon region.
In southern Spain, meanwhile, there is a 49.9% option over the Tesorillo Project.
Three wells have been drilled in the last 18 months, two of which have been a success.
Flow test boost
“Chasing a geological play enables us to bring our geological expertise to what we are looking at,” explains Dawson.
“The well drilled in October in Romania [Bainet-] is about to go on production, which is a really short timeframe.
“A final bit of permitting is required after which the operator will lay the last mile pipe to tie it in and we are away.”
In Italy, flow tests from well drilled in December last year were a huge (pleasant) surprise, Dawson adds.
Market expectations were a hundred thousand cubic metres (gas) a day and both horizons tested well above that.
“When it comes on production, we think the rates will be significantly better than people thought and will bring cashflow forward and boost the NPV of the project.”
Chuffed about Italy
Dawson, a hedge fund manager before moving into oil and gas, says in all of its investment projects, it looks for good entry points.
“We did that in Italy but the confirmed flow rates were icing on the cake.”
If Italy is promising, it is Spain where Prospex might really hit pay dirt.
In December, the company acquired an interest in the Tesorillo prospect.
Drilled originally in the fifties, the aim is to apply modern technology and see what effect that has.
Tesorillo has a known gas discovery, which a competent person’s report by Netherland Sewell in 2015 estimated might hold gross unrisked Prospective Resources of 830 billion cubic feet of gas (Best Estimate), with upside in excess of 2 Tcf.
That makes it a huge target to go at, says Dawson.
“Italy was a 17 BCF prospect, so at Tesorillo we are looking at something more than 40 times larger.”
The bullish tone was maintained in the statement that accompanied full-year results.
“[We will become a] revenue generative multi-project oil and gas investment company once the Bainet gas discovery in Romania has been brought online in the coming months.
“With production in Italy expected within 18 months and a technical programme underway in Spain to de-risk a potentially huge gas discovery, 2018 should not be short of high impact news flow.”
Dawson adds that he and the board have a record of growing companies, taking them full cycle and selling out to major oil companies.
At a price of 0.43p and a market value currently of just £5.34mln, this is clearly one to watch.