Ascent Resources (LON:AST) – BUY*: Operations update
Market Cap: £32m; Current Price: 2.1p; Target Price: 4.3p
Untreated dehydrated gas production now expected mid-year
Untreated hydrated gas production from Pg-10 is expected to commence to a local corporate consumer in the early part of April. Providing immediate revenue until increased production under the INA contract commences mid-year.
Preparations for the sale of gas to INA under the existing contract are under way. Ascent had previously planned to lease dehydration equipment to allow the gas to be sold to INA while the existing gas separation facility (CPP) was refurbished but the cost of doing this has now been deemed higher than necessary. Instead the CPP design has been revised based on the results of the Pg-10 flow test allowing for a more efficient installation saving time and money. The CPP is expected to be ready for production in three months at around half the budgeted cost.
The workover of Pg-11A is estimated to be completed in May.
The existing pipeline from the CPP to the export pipeline will be installed in April.
The Company remains optimistic that the Environment Minister will soon confirm the decision of the Environmental Agency that a full Environmental Impact Assessment is not required for the new processing facility.
No change to forecasts, rating or price target.
NORTHLAND CAPITAL PARTNERS VIEW: We do not expect Ascent Resources’ change in strategy from temporarily leasing a dehydration plant to focusing on refurbishing the existing CPP to have a material effect on our forecasts or price target. Relatively small changes to production schedules are common during the early stages of an operation and we prepared our forecasts with the potential for this in mind. To remain conservative we have not updated our forecasts for the capex saving resulting from not leasing a dehydration plant, as there is potential for cost overruns in other areas.