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- ADX Energy (ADX) secures funding to drill a new well at the Welchau gas prospect in Austria
- Kepis & Pobe Financial Group (KPFG) agreed to cover 50 per cent of the drilling costs in exchange for a 20 per cent interest in the Welchau farm-in area
- The Canadian investment company may also choose to fund the remaining drilling costs, for a total of €3.8 million (A$5.9 million), to earn another 20 per cent stake
- ADX says KPFG will be an “excellent partner” and will help bring new capital market attention to the gas potential of the Welchau area within its operated Anshof field
- ADX Energy shares are up 15.4 per cent to trade at 0.8 cents at 1:50 pm AEDT
ADX Energy (ADX) has secured funding to drill an exploration well at the Welchau gas prospect within its ADX-AT-II exploration license in Austria.
The company has signed a joint development agreement with Kepis & Pobe Financial Group (KPFG), which agreed to fund 50 per cent of the costs to drill the Welchau-1 well.
In exchange, KPFG will earn a 20 per cent equity interest in the Welchau farm-in area. The Canadian investment company may also choose to fund a further 50 per cent of the well drilling costs to earn another 20 per cent interest. It has until January 21, 2023, to decide this.
ADX expects it will cost up to €3.8 million (A$5.9 million) to drill Welchau-1.
Within the next 10 days, KPFG will make an initial payment of €197,000 to fund 50 per cent of the pre-drill well costs, and it will also pay a €100,000 option fee.
ADX Energy said KPFG would be an “excellent” partner and will help bring new capital market attention to the gas potential of the Welchau area.
The Welchau farm-in area lies in the southern part of the Anshof field, which was discovered by the Anshof-3 well drilled at the start of this year.
ADX believes the Welchau area is connected to a gas discovery at the Molln-1 well, which was drilled in 1989. Molln-1 reportedly tested pipeline-quality gas at a rate of up to 3.5 million cubic feet per day (mmcfpd) down-dip from the proposed location of Welchau-1.
In addition to the farm-in funding, KPFG will pay €228,000 to ADX for back costs relating to studies associated with the Molln gas discovery. The results of the Welchau well are expected to provide more clarity on the potential of Molln.
If the Welchau well results in the development of a gas project, KPFG will be repaid the farm-in funding from 50 per cent of net revenue recovered from gas sales. The remaining revenue will be distributed to reflect each party’s equity interest in the Welchau farm-in area.
Assuming KPFG exercises its option to fund the entire Welchau-1 well cost, it will own a 40 per cent stake and ADX will retain a 60 per cent equity interest in the Welchau farm-in area.
ADX has chosen a location for the Welchau-1 well and is finalising an agreement with the landowner. It can now commence permitting of the well and plans to start drilling as soon as possible.
Company shares were up 15.4 per cent to trade at 0.8 cents at 1:50 pm AEDT.
