Energy Co.'s Shallow Gas Prospects Have a High Chance of Success
Research Report

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Disclosures for Auctus Advisors, ADX Energy Ltd., June 16, 2025

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On June 16, 2025, Auctus Advisors analyst Stephane Foucaud maintained coverage on ADX Energy Ltd. (ADXRF:OTCMKTS; ADX:ASX) with an unchanged target price of AU$0.30 per share, representing an 1100% implied total return from the share price at the time of the report of AU$0.03.

The analyst maintained the target pending further visibility on the Welchau project, while highlighting the company's strategic focus on shallow gas prospects with a high probability of success.

Strategic Repositioning and Asset Portfolio

ADX Energy Ltd. has repositioned its acreage holdings to maximize exposure to proven shallow gas plays in Austria. The company has matured seven drill-ready shallow gas prospects within the ADX-AT-I and ADX-AT-II license areas, with an additional four gas prospects being developed within newly varied acreage areas.

The company has commenced planning and permitting for a multi-well drilling campaign, with successful discoveries planned for cluster development to optimize facility utilization and maximize project value.

GOLD Cluster Farm-Out Initiative

ADX has initiated a farm-out process for the GOLD cluster of shallow gas prospects located in ADX-AT-II. The cluster encompasses the GOLD (A&C), GOLD (B), GRAB, and ZAUN prospects, with a combined P50 prospective resource estimate of 12.1 billion cubic feet (13.3 billion cubic feet on a mean basis). Individual prospect resources include GOLD at 7.5 billion cubic feet, ZAUN at 2.7 billion cubic feet, and GRAB at 1.9 billion cubic feet.

The probability of success ranges from 77-81% for GOLD (A, B & C), 55% for ZAUN, and 57% for GRAB. Foucaud noted that "a successful outcome at GOLD would significantly enhance confidence in ZAUN and GRAB's potential."

Technical and Geological Assessment

The prospects target the shallow Hall Formation play in the Upper Austrian Molasse Basin, described as "a well-established Miocene-age sandstone reservoir that has produced a cumulative 232 bcf since 1969." The formation hosts approximately 83 gas fields and typically consists of stacked thin sands with maximum total net sand thickness of approximately 8 meters, exhibiting excellent porosities of 18.5%-27.4% and permeabilities of 30-150 millidarcies.

The analyst highlighted that even sands with less than 1 meter net thickness can yield high initial production rates reaching up to approximately 5 million cubic feet per day. The gas produced from all known fields in this play is dry and sweet.

Financial Projections and Economics

Drilling the GOLD prospect is expected to cost approximately US$2.3 million, with an additional US$0.7 million required for completion and testing. The analyst noted that mobilization represents a major component of drilling costs, with multi-well programs potentially decreasing well costs by 20-30%. Total gross costs for drilling, completing, and tying in the GRAB and ZAUN prospects are projected at approximately US$10 million, with an additional US$7.5 million allocated for gas processing and pipeline infrastructure.

Production for the cluster could commence in 2028, reaching a commercial sales plateau of approximately 9.5 million cubic feet per day. The analyst estimates the project will generate around US$40 million in operating cash flow, net to the company's post farm-in 50% working interest.

Valuation Analysis

ADX Energy reported 2024 production of 216 barrels of oil equivalent per day, projected to increase to 264 barrels of oil equivalent per day in 2025 and 270 barrels of oil equivalent per day in 2026. The company maintains a net cash position of US$5 million in 2024, transitioning to approximately breakeven in 2025 and US$5 million net debt by 2026.

Foucaud's aggregate unrisked NAV for ADX's net interest, assuming 50% working interest post farm-out in the shallow prospects, is approximately AU$0.11 per share, representing 3.5 times the share price at the time of the report. The analyst's ReNAV is approximately AU$0.27 per share, with an unrisked NAV of AU$2.981 per share.