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ADX Energy on fast track to cashflow with Austria deal

“Rather than waiting for 12 to 18 months onshore or five years offshore to get cash flow, we can get there within three to six months.”

ADX Energy Limited -
Infrastructure is in place in Austria for any discoveries

ADX Energy Limited (ASX:ADX) has picked up a couple of little gems in Austria and Romania believes Ian Tchacos, the firm’s executive chairman.

The potential, especially in Austria is substantial says the oil industry veteran.

Austria’s oil and gas market traditionally has been the domain of two companies – state oil group OMV and RAG, a former Shell/Mobil vehicle now owned by two gas utility companies.

 

RAG’s new owners have switched its attention to gas storage and transmission with a halt put to any new oil exploration.

As a result, ADX has been able to tie-up a deal (subject to licence transfers) with RAG for one small oil field producing 350 barrels per day near Vienna plus exclusive access to an exploration database defining a drilling inventory of other 24 ‘walk-up’ drill prospects on acreage surrounding other RAG fields in upper Austria.

Tchacos says it bought the 350 barrels per day Zistersdorf & Gaiselberg oilfield for about €4mln effective 1 January 2019 but by the time it pays for it, the field will have generated about €1.7mln of cash so the net cost is nearer €2.3mln or about a year’s worth of cash flow. 

“That's an excellent deal for us because this field is on a very, very flat production trajectory. 

“The decline rate is very low and the field has a resource life of around 10 to 15 years. 

“But we also see deeper potential in this field as all production so far has been quite shallow.

“There are about 1 million barrels of reserves developed so far, but we could take that up to 1.5mln with an infill well and a couple of cheap sidetracks from existing wells. 

“However, it could go up to 8 million barrels with the development of additional (deeper) resources that are very easy to get to.

 “All the facilities are there already and tied into the refinery in Vienna, so it is a neat little boutique asset.”

Little brother

RAG has been operating in Austria for about 50 years, but its new owners want to focus on gas storage so they are effectively handing over their entire exploration portfolio and probably €100mln worth of data to ADX. 

They are backing out of the acreage that surrounds their other production infrastructure in upper Austria, says Tchacos.

“We will take on the portfolio and all the data so this is extremely valuable for us.

“It is effectively walking into an exploration portfolio that would take 5 years to generate and cost at least €30 or €40 million to get to the same point.” 

We are becoming their little brother, he quips.

RAG keeps the production assets and the gas storage in upper Austria but ADX will have all the exploration potential around these producing assets. 

“We've also agreed access arrangements so that when we make discoveries we can tie them in immediately and generate cash flow.” 

That means ADX can get out and start to drill almost immediately and with best in class 3-D data to refer to, many of these prospects are effectively appraisal opportunities or low-risk exploration and right next to infrastructure. 

“Rather than waiting for 12 to 18 months onshore or five years offshore to get cash flow, we can get there within three to six months.”

Romania moving forward too 

That’s a big change of pace for ADX, but in Romania, too, much is happening, adds Tchacos.

Here, ADX (58%) is partnered with AIM-listed Reabold Resources PLC (LON:RBD) in Danube Petroleum, which holds a 100% interest in the Parta licence and the Iecea Mare Production licence.

In September, initial results from the IMIC-1well indicated multiple zones of hydrocarbons that exceeded initial hopes, said Tchacos.

“Our pre-drill estimate was around the 8BCF of gas, but we have doubled that and are very happy with what we found so far.

“But there is much more stratigraphic upside potential that we hope to define with a focused seismic program.”

Flow testing is planned in the next few months while Tchacos notes that the drill site is also close to open access infrastructure with good gas prices in Romania.

A follow-up well, IMIC-2, is planned to be drilled 1.8 Km to the northeast. 

There is also a supportive fiscal regime and ADX is hoping the project will generate cash of around A$5mln per annum.

 “We have an exploration licence and we also have a production licence.

“Recent drilling was in the production licence where we were re-entering a well from the 80s.” 

“But with modern logging technology and 3D seismic, we achieved much better results and something that is far more predictable.”

Test results will be available in 2-3 months dependent on the availability of workover rigs.

Plug and Play

ADX still has its original projects in Tunisia and Italy, though going forward will Austria, Italy and Romania, said Tchacos.

Austria, especially, is a ‘ready to go plug and play opportunity of the type you very really get nowadays’.

“We have production in Austria, we have the development opportunity in Romania and a heap of exploration potential now both in Austria and Romania.”

Funding wise, ADX raised A$5.5mln last month for the Austrian deal. 

Eventually, Tchacos sees a listing for the company either in the UK or somewhere else in Europe.

“Wherever we see the greater investor interest for our activities in the near-term.”

At 0.9c, ADX is valued at A$13mln.

Quick facts: ADX Energy Limited

Price: 0.0095 AUD

ASX:ADX
Market: ASX
Market Cap: $13.73 m
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