ADX Energy has secured loan note funding for $1.5 million, with a term of 18 months, to grow its Austrian oil operation through exploration and development well drilling, in addition to the construction of a high–capacity and permanent oil production facility.
The company plans to kick–off development drilling at its Anshof oil discovery in this year’s third quarter and then move ahead with engineering plans for its production plant.
Management has revealed that a total of 30 loan notes worth $50,000 each have been issued to existing and sophisticated ADX investors. The notes expire on January 11 next year and the company will pay investors an interest rate of between 8 and 12 per cent.
The funds will be used by ADX to mature its rich upper-Austrian oil and gas portfolio that consists of exploration prospects such as Welchau, which is yet to be drill-tested, and the Anshof oilfield that is actively producing saleable product.
The Anshof oilfield has been an active producer for the company since it was discovered by the Anshof–3 well last year. Frustratingly, ADX says the well’s production rates are limited by the leased early production unit currently bottlenecking production at surface.
A priority for the company will be the construction of a permanent higher–capacity oil production facility to service the Anshof–3 well, bringing its production rates to a higher level – and unleashing the well’s full potential.
Production performance from the Anshof–3 well to date has exceeded the company’s expectations, flowing at average stable rate of 113 barrels per day of light crude oil (33° API) during production testing in October last year.
Insignificant pressure decline was observed after the cumulative production of about 10,000 barrels. Strong pressure support was confirmed by pressure build-up at the end of the shut-in period estimated at 165.8 bar, compared to an initial reservoir pressure of 169.4 bar based on surface pressure measurement.
The company plans to take full advantage of the Anshof production license that was awarded by the Austrian Government in March this year, by drilling two more production wells. The wells will be drilled from the existing surface infrastructure at the Anshof–3 production site and are planned to target thicker reservoir intersections.
Importantly, the company says its wells will aim to intersect the field’s oil–water contact, providing it with a more robust estimate of upside production potential, especially since the Anshof–3 well shows no sign of slowing down or producing water.
The Anshof–2 well will be drilled first, in this year’s third quarter, followed soon after by Anshof–1.
"The funding, which has been secured on favourable terms, enables the Company to continue its important pre-investments in equipment and services for upcoming exploration and development drilling programs as well as engineering and procurement for the replacement of a leased early production unit with a permanent facility at the Anshof well site. Providing a permanent production facility for the Anshof-3 discovery well, which continues to outperform expectation, and two planned appraisal and development wells at the same location will enable the rapid build up of cash flow from the Anshof field" ADX Energy executive chairman Ian Tchacos
At the company’s exploration flagship Welchau gas prospect, it is following up on an accidental gas hit back in oil–focussed 1989, when the Molln–1 well hit a 400m gas column. The well produced gas at 3.5 million cubic feet of gas per day for 16 days with a rich 40 barrels of condensate per million cubic feet of gas.
Management plans to follow up Molln–1 with further drilling and has generated four Welchau gas prospects to choose from, all in the same structural setting along the 100-square-kilometre structure.
Welchau is relatively shallow, sitting about 1120m below the surface. It is close to access roads and about 18km tie–in–distance from Austria’s national gas pipeline network.
An independent review into the potential size of Welchau, completed by international energy group GaffneyCline and Associates, suggested the low side estimate should increase by 72 per cent to 365 billion cubic feet of gas equivalent (bcfe), up substantially from ADX’s estimate of 212 bcfe.
The best technical assessment and maximum resource estimates provided by GaffneyCline were 20 per cent and 31 per cent lower the ADX’s respective appraisals.
The main point of difference in the estimates stems from the assumed condensate ratio for Welchau gas. ADX used a condensate ratio equivalent to gas recovered during down-dip testing of Molln-1, providing a best technical estimate for the resource of 807 bcfe with a maximum of 1631 bcfe.
The company says that even the low-case gas volume estimate for Welchau represents a potentially high-value resource due to its location in central Europe and proximity to existing gas pipeline networks.
The planned Welchau-1 well is an important, high-impact well that has attracted industry, government and media attention. It has clear support for the development of natural gas, which is recognised as an important transition fuel by the European Union and critical for Austria’s energy security.
The well is operationally drill-ready in terms of geological and engineering work, with the drilling program submitted to the regulator for approval and expected to be granted this month. The company says procurement of long-lead materials and services such as casing, well heads and drilling services, is underway.
Drilling operations at Welchau–1 are expected to start in September this year and are likely to continue for up to two months. Austrian contractor RED Drilling and Services has been given the task of drilling the deviated wellbore and has previously demonstrated local success by drilling ADX’s Anshof–3 discovery well within budget and without any lost time or safety incidents.
With European gas supply cut by 80 per cent because of the Russian–Ukraine war, the protracted energy supply crisis has resulted in the continent’s gas storge facilities being only about one-third full. Countries are scrapping to secure their own energy sources and Austria is no different.
At the start of last year, Austria sourced about 80 per cent of its gas from Russia. By September, the country had reduced its exposure to Russian-supplied gas to about 20 per cent.
With ADX now well–funded to increase oil production at Anshof and plans to drill-test new big gas at Welchau, the company’s goals to become a leading onshore European energy producer – with a focus on rapid investment return and cashflow growth – seem to be crystalising.
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