ADX Energy Ltd. (ADX:ASX) farmed out 30% of its 80% working interest in the Anshof discovery in Austria to MND for AU$11 million (AU$11M), reported Auctus Advisors analyst Stephane Foucaud in an Aug. 7 research note. Auctus lowered its target price on ADX to reflect the dilution expected to result from the deal.
"The transaction provides funding to accelerate Anshof's production ramp-up and increases ADX's ability to bring forward further exploration, including Welchau and further gas exploration," Foucaud wrote.
After the closing of the deal, Australian oil and gas explorer ADX will own a 50% working interest in Anshof. This percentage is valued, by the transaction, at AU$18–32M, minus the value of the carry, noted Foucaud.
789% Potential Return
Even with the lower price target on ADX of AU$0.08 per share, down from AU$0.10, the possible gain for investors in this company is outstanding, at 789%.
Its current share price is about AU$0.009.
Solid Partner
MND is an oil and gas producer headquartered in Czechoslovakia.
"[It] is a very credible industry player in the region, and the decision to enter Austria with ADX highlights the materiality and attractiveness of ADX's assets," Foucaud wrote.
MND entering this deal could spur other companies to do the same, noted the analyst. ADX is seeking prospective partners for interests in its other Austrian assets.
AU$11M Price Tag
For a 30% working interest in Anshof, MND will pay ADX AU$11M. About AU$3.2M of that will be for back costs and long lead items for the Anshof-1 and Anshof-2 wells. The remaining AU$7.8M will be for ADX's share of the drilling and completion costs of the two wells.
Further, if Anshof-2 performs as well as expected by independent experts, MND will pay ADX another AU$2.2M in back costs and cover AU$6M of ADX's net share of an additional work program.
"We view this performance-based milestone as very low risk," Foucaud wrote.
Next Steps at Anshof
Plans call for Anshof to be drilled in Q4/23, followed by installation of a facility capable of producing 2,000–3,000 barrels per day, Foucaud indicated.
Drilling at Anshof-1 is slated for Q2/24.
Once the three wells are producing at Anshof, noted Foucaud, together they are expected to produce 750–1,000 barrels per day.
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Disclosures for ADX Energy Ltd., August 7, 2023
ADX Energy Ltd (“ADX” or the “Company”) is a corporate client of Auctus Advisors LLP (“Auctus”). Auctus receives, and has received in the past 12 months, compensation for providing corporate broking and/or investment banking services to the Company, including the publication and dissemination of marketing material from time to time.
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Author The research analyst who prepared this research report was Stephane Foucaud, a partner of Auctus.
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