Ascent Resources (LON:AST) – BUY*: First Gas
Market Cap: £38m; Current Price: 2.28p; Target Price: 4.3p
Commercial production from well Pg-10
Commercial production from well Pg-10 has commenced. Production from Pg-10 is the first step of the Company’s phase one development plan and it is now moving to recomplete Pg-11A. This second recompletion is expected to commence later this month and take around four weeks.
Production from Pg-10 comes from the “F” sand at 3,125m to 3,175m while production from Pg-11A is targeted from the L, M and N sands at 3,108m to 3,241m.
The equipment required to facilitate production to INA has been ordered and, subject to timely delivery, Ascent expects to commence production to INA by the end of June 2017. Efficient planning and equipment ordering is expected to result in significant savings from the budget to bring the field into production.
Following the favourable decision of the Environment Ministry in March 2017, the Company remains optimistic that the IPPC Permit will be declared valid later this year, enabling the Company and its partners to begin construction of a new processing facility and then commence the production of gas that can be sold into the Slovenian grid.
No change to forecasts, rating or price target.
NORTHLAND CAPITAL PARTNERS VIEW: Very positive news from Ascent Resources with the commencement of first gas extraction from Pg-10, marking an important transition for the Company from developer to producer. With the first well recompletion finished, the Company now shifts its focus to the recompletion of second well (Pg-11A) and the upgrading of the CPP plant, allowing Ascent to expand production and then upgrade the gas sold by dehydrating and treating it for sale under the contact with INA. This will result in the sale of a higher margin product by the end of June 2017.