ADX sets January date for $350M Austrian gas assault

ADX Energy has locked in a drill rig and set a January spud date for its GOLD-1 shallow gas exploration well in upper Austria, targeting a mean prospective resource of 8.3 billion cubic feet (Bcf) of gas.

The company says the rig is now contracted and will mobilise in the new year for a quickfire 14-day drilling program.Well pad and site construction is expected to be wrapped up by the end of this month.

Notably, ADX is also gearing up for a crucial second phase of testing at its recent nearby HOCH-1 shallow gas discovery next month, setting up a news-heavy, critical period for the emerging Austrian hydrocarbon player.

The GOLD-1 well will be drilled at the company’s Upper Austria project, where ADX is the operator and currently holds a 100 per cent economic interest in the GOLD Cluster Area. The high-impact well is designed to target highly productive, proven shallow gas reservoirs within Miocene-aged sandstones of the Hall formation.

ADX says the well has a hefty 81 per cent chance of technical success, based on seismic amplitudes management believes could be gas-bearing and that compare favourably with its recent drilling success in the Hall formation at HOCH-1.

The shallow nature of the target and its proximity to existing pipeline infrastructure could pave the way for a rapid development cycle and compelling economics should the drill bit hit paydirt. A company study based on a conservative gas price of US$68.6 per barrel equivalent estimates net project revenue of US$38.7 million (A$56.6 million) from a modest investment of just US$4.1 million (A$6 million).

However, European gas prices are currently running much hotter at around US$168 per barrel equivalent. At these elevated prices, ADX estimates a discovery of around 8Bcf could generate up to an eye-watering US$244.8 million (A$358 million) in sales revenue.

ADX has further de-risked the exploration campaign, with London-listed Empyrean Energy securing a 10 per cent stake in the GOLD Cluster Area in return for funding 20 per cent of drilling, testing and completion costs. The company says several other parties are also conducting due diligence on potential farm-in deals, with growing concern over looming European gas supply shortages ahead of winter adding to the prospect’s appeal.

The upcoming drill program forms just one part of a much broader and systematic exploration push by ADX in Austria.

The company recently upgraded the exploration inventory across its 1022-square-kilometre permit area in Upper Austria, tabling an impressive portfolio with a combined mean prospective resource of 579Bcf of gas and 59 million barrels of oil (MMbbl).

The company’s second phase of testing at its recent HOCH-1 gas discovery is the next cab off the rank, after phase one testing yielded a solid commingled flow rate of 548 barrels of oil equivalent per day back in May.

The new tests will evaluate slightly deeper zones in the Hall Channel, where mapping and correlation to nearby substantial gas discoveries indicate the zones may have a significant lateral extension, with an interpreted stratigraphic trap extending at least 2.5km.

The strategic importance of developing local gas resources in Europe has been thrown into sharp relief recently. Europe is heading into the winter with gas storage at historically low seasonal levels, leaving the region more sensitive to cold spells and potential supply disruptions.

With testing at HOCH-1 just weeks away and the rig now locked for spud at the GOLD-1 in January, ADX has two significant shots on goal in quick succession. Against the backdrop of a continent hungry for new sources of energy, a bigger discovery at either could put this long-time Austrian stalwart on the European gas map.

Is your ASX-listed company doing something interesting? Contact: matt.birney@wanews.com.au