ADX Energy revives Austrian gas well for instant production kicker
ADX Energy (ASX: ADX) has struck immediate paydirt in its new well workover program in Austria, delivering a substantial 40 per cent boost to overall production by tapping into fresh gas, just as European gas prices heat up ahead of winter.
The company’s first reworked production well at its wholly-owned Vienna Basin Fields flowed at an impressive initial rate of 1.8 million standard cubic feet per day (MMSCFD) - 300 barrels of oil equivalent per day (BOEPD) - after a successful recompletion and the opening of a fresh gas-bearing zone.
While pipeline capacity constraints mean the well will need to be choked back to a sales rate of 100 BOEPD, the timing for ADX could not be better. Management says the current European gas price equates to a stunning US$162 per barrel oil price, ensuring the new production will generate strong cash flow as winter demand bites.
The additional 100 BOEPD flow rate is more than 80 per cent above the well's pre-workover estimate of 55 BOEPD. It also lifts ADX’s total Austrian production to 342 BOEPD, representing a hefty 40 per cent increase on the 242 BOEPD averaged in the September quarter.
The strong result comes as European gas markets enter winter with storage levels significantly below the five-year average, increasing reliance on LNG imports and leaving prices exposed to cold weather and supply disruptions. Even relatively modest volumes of new local production are likely to command serious value when European supply remains so tight.
While the Vienna Basin fields are providing the immediate cash, ADX is also sitting on a potentially massive exploration prize in Upper Austria. The company recently upgraded its exploration inventory across a 1022-square-kilometre permit area, tabling an impressive portfolio of 28 prospects with a combined mean prospective resource of 579 billion cubic feet (Bcf) of gas and 59 million barrels of oil.
The ongoing workover program will now turn its attention to other production enhancement activities and exploration testing, including replacing a downhole pump in a second production well, expected to add 15 BOEPD of incremental oil and gas production.
In mid-December, ADX plans to open a fresh production zone in its final well, targeting an additional 30 to 40 barrels of oil per day. After its first well comfortably beat expectations, the company will be hoping for another upside surprise.
More significantly perhaps, the company is about to run a second phase of testing at its recent shallow HOCH-1 gas discovery in Upper Austria, where ADX is the operator and holds a 50 per cent economic interest. Phase one testing yielded a commingled flow rate of 3.15 MMCFPD from four reservoirs, equivalent to an impressive 548 BOEPD.
Given the encouraging early results, ADX is also lining up its next shallow gas drilling targets at GOLD-1 and SCHOEN-1. GOLD-1, targeting a mean prospective resource of 8.3Bcf of gas, is scheduled for drilling in January, backed by a funding deal with Empyrean Energy. SCHOEN-1 offers a further 6.3Bcf of prospective gas resource potential, adding another opportunity to build a substantial Austrian gas business.
The testing, slated for December, will evaluate slightly deeper zones in the Hall Channel. Mapping and correlation to nearby gas discoveries indicate the zones may have a potentially hefty lateral extension, with an interpreted stratigraphic trap extending at least 2.5 kilometres to the south-east.
With cash flow from its Vienna Basin fields ticking up at a time of extraordinarily high gas prices, ADX appears to be in the right place at the right time. As it looks to prove up a much bigger resource prize in Upper Austria from its deep inventory of prospects, this European energy play looks to be warming up just in time for winter.
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