ADX Energy Ltd
ABN 50 009 058 646
H A L F - Y E A R F I N A N C I A L R E P O R T F O R T H E S I X M O N T H S E N D E D 3 0 J U N E 2 0 2 4
A D X E N E R G Y L T D
C O R P O R A T E D I R E C T O R Y
Directors
Ian Tchacos (Executive Chairman)
Paul Fink (Executive Director)
Edouard Etienvre (Non-Executive Director)
John Begg (Non-Executive Director)
Company Secretaries
Peter Ironside
Amanda Sparks
Registered and Principal Office
29 Bay Road
Claremont, Western Australia 6010
Telephone: +61 8 9381 4266
Web Page: www.adxenergy.com.au
Email: admin@adxenergy.com.au
Share Registry
Computershare Investor Services Pty Ltd
Level 11
221 St George's Terrace
Perth, Western Australia 6000
Telephone: +61 8 9323 2001
Facsimile: +61 8 9323 2033
Solicitors
Steinepreis Paganin
Level 4, Next Building
16 Milligan Street
Perth Western Australia 6000
Bankers
Commonwealth Bank of Australia
1254 Hay Street
West Perth Western Australia 6005
Stock Exchange Listing
Australian Securities Exchange Ltd
152-158 St Georges Terrace
Perth Western Australia 6000
ASX Code: ADX
Auditors
InCorp Audit & Assurance Pty Ltd
Suite 11, 4 Ventnor Avenue
West Perth, Western Australia 6005
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A D X E N E R G Y L T D
D I R E C T O R S ' R E P O R T
Your Directors submit their report for the half-year ended 30 June 2024.
DIRECTORS
The names of Directors of the Company during or since the half-year and up to the date of this report are as below. Directors were in office for this entire period unless otherwise stated.
Name | Position |
Mr Ian Tchacos | Executive Chairman |
Mr Paul Fink | CEO and Executive Director |
Mr Edouard Etienvre | Non-Executive Director |
Mr John Begg | Non-Executive Director - appointed 4 March 2024 |
Previous Director | |
Mr Andrew Childs | Non-Executive Director - resigned 4 March 2024 |
REVIEW AND RESULTS OF OPERATIONS
Summary of Financial Performance
A summary of key financial indicators for the Group is set out in the following table:
Consolidated | Consolidated | |
6 Months to | 6 Months to | |
30 June 2024 | 30 June 2023 | |
$ | $ | |
Net loss for the half-year after tax attributable to members of the | (3,280,545) | (2,299,049) |
Parent Entity | ||
Included in loss for the half-year: | ||
Operating revenue, net of hedging | 4,971,267 | 7,043,474 |
Cost of sales - operating costs | (4,228,058) | (4,745,087) |
Cost of sales - royalties | (210,399) | (472,131) |
Cost of sales - depreciation/amortisation | (1,420,558) | (1,200,741) |
Cost of sales - partner share of operations | 18,177 | (108,241) |
Restoration expenses - changes in abandonment provision | (281,439) | (648,207) |
Dry well costs | - | (387,461) |
Exploration expensed | (814,926) | (1,072,561) |
Basic (loss) per share (cents) from continuing operations | (0.70) | (0.06) cents |
Net cash from/(used in) operating activities | (1,099,791) | (54,980) |
Net cash from/(used in) investing activities | (7,968,934) | (1,180,848) |
Net cash from/(used in) financing activities | 13,594,756 | (426,938) |
Placement Raising A$ 13.5 million:
In May 2024, ADX advised it had successfully raised A$13.5 million (before costs) from the issue of 128,571,428 new fully paid ordinary shares at an issue price of A$0.105 per share. One (1) free-attaching quoted option was issued for every two (2) Placement Shares. The exercise price of the Placement Options is A$0.15 with an expiry date of 8 May 2026.
Options Exercised
In March 2024, ADX received $ 1.296 million from the exercise of 9,943,337 options at 13 cents each, and 25,000 options at 16 cents each.
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Production (Gross) in Austria was as follows: | 6 Months to | 6 Months to |
Crude Oil Sold (Barrels)* | 30 June 2024 | 30 June 2023 |
38,699 | 55,541 | |
Gas Delivered (M3) | 440,994 | 703,010 |
Total Oil Equivalent (BOE) | 41,386 | 59,824 |
Average Production Rate (BOEPD) | 227 | 331 |
- Crude oil sold represents total gross production. This includes 8,639 barrels of crude oil sold from the Anshof-3 well for the six months to 30 June 2024 (2023: 20,380). Refer to note 13 of the financial statements for partnership details for the Anshof-3 well.
Operations Review
Activities Overview
ADX Energy Ltd (ASX: ADX, "ADX" or "the Company") is pleased to provide an update on its activities for the half-year ended 30 June 2024.
Figure 1: The RED E200 drill rig prior to well spud at the Welchau-1 gas condensate discovery well.
ADX has completed a period of successful activity during half year ended 30 June 2024 which has placed your Company in a position to substantially expand its asset base in Austria during the remainder of the year. The announcement of a liquids rich gas discovery at Welchau-1 was a significant milestone for the Company. The discovery will be further evaluated by a very important and highly anticipated testing program during the fourth quarter in 2024.
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Figure 2: Anshof Permanent Production Facility at ADX' Anshof-3 location
The installation and commissioning of a Permanent Production Facility (PPF) at the Anshof Oil Field with a maximum capacity of 3,000 BPD was successfully completed with the recommencement of production from the Anshof-3 discovery well. The PPF underpins the pathway for further production and cashflow growth from the planned Anshof-2A appraisal well as well as further appraisal and exploration activities in the area
During the period ADX continued to produce stable, long life and low emissions oil and gas from its Gaiselberg and Zistersdorf fields in the Vienna Basin (Vienna Basin Fields). The Vienna Basin Fields production remains an important source of cash flow for the Company as well as providing the opportunity for value adding and complementary energy projects. In the near term such projects are a Solar Park, Green Hydrogen Production and underground Hydrogen Reservoir Storage. These activities are in line with ADX' ambition to further reduce the carbon footprint of its low emissions conventional oil and gas production operations and develop complementary renewable energy activities. This will be achieved by leveraging the experience and skills of the ADX team, the Company's operating capability as well as upcycling its existing assets (extensive infrastructure, depleted underground reservoirs and access to land). These initiatives are not only potentially profitable they are an important aspect of our ongoing licence to operate in the European energy environment.
ADX continued to progress the development of its exploration portfolio in Upper Austria with the completion of another important farmin with MND Austria a.s. (MND) to fund an exploration well in the MND Investment Area (MND EIA) in the ADX-AT-I exploration licence. As a result of the MND transaction ADX will drill the Lichtenberg gas prospect in the fourth quarter of 2024 largely funded by MND. Lichtenberg provides another growth opportunity with exciting follow up play potential. In addition to the extensive operational and commercial achievements during the period our team continued permitting, planning and procurement activities to enable a two well appraisal and exploration drilling program (Anshof-2A and Lichtenberg-1) as well as the testing of Welchau-1.
Most importantly the safety of our people including our contractors and the protection of the environment within the communities in which we work is of paramount importance to ADX. The Board of ADX is proud to report that no lost time incidents (LTI) were recorded during the reporting period for safety or environmental causes at ADX' Vienna Basin Fields, the Anshof Field or the Company's exploration licences. In addition to meeting the Company's existing environmental obligations ADX has commenced planning for the precise measurement, quantification, monitoring, reporting, and verification of methane emissions. This will enable ADX to comply with new methane emission regulations which came into force within the European Union (EU) on the 4th of August 2024 under a three-year phasing in period.
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Figure 3: Group cash movements during the 6 months ending 30 June 2024
During the reporting period A$5.1 million was generated from production operations and other operating income, A$6.3 million from farmouts (funds have primarily been offset against capitalised costs) and A$14.0 million raised from placements and the exercise of options. Most notable expenditures included A$ 4.1 million utilised on operating costs, corporate and administrative costs of A$1.6 million, A$13.5 million on capital costs and A$0.6 million on exploration expenditures. The 30 June 2024 cash balance of A$12.6 million placed the Company in a strong position to fund its ongoing appraisal and exploration activities.
Highlights for the Half Year Ended 30 June 2024
- Austrian Net Production 204 BOEPD resulting in sales revenue totalling A$4.3 million net to ADX for the 6 month period ended 30 June 2024. Note that production was curtailed by the shut in of Anshof-3 well during first quarter for the installation of the Anshof permanent production facility.
- Completion of MND Farmin to fund drilling of the first gas exploration prospect in the ADX-AT-I exploration licence.
- The Welchau-1 liquids rich gas discovery intersecting 450 metres of shows within the giant 100 km2 structure.
- The installation and commissioning of a permanent production facility at the Anshof oil field, with a maximum liquids capacity of 3,000 BPD.
- The recommencement of production from the Anshof-3 well into the new Anshof production facility on 3 April 2024 which is producing at an average rate of approximately 110 BOPD (Gross).
- Permitting, planning, procurement and rig contracts in place for the drilling of the Anshof-2A oil appraisal well, the drilling of the Lichtenberg-1 gas exploration well in the ADX-AT-I exploration licence and the testing of the Welchau- 1 discovery.
- A$13.5 million placement, primarily to institutional investors, and a cash balance for the 6 month period ended 30 June 2024 of A$12.6 million.
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Figure 4: Planned appraisal, exploration and testing activities in Upper Austria during the second half of 2024.
The Company's second half operational activities during the remainder of 2024 will focus on ADX Upper Austria exploration licenses.
Anshof-2A Oil Appraisal Well
- Drilling of the Anshof-2A side track well commenced in early September 2024. The well will target a bottom hole location up dip from the Anshof-2 well using the RED 202 drilling rig.
- The well is expected to intersect thick Eocene reservoir similar to that encountered by the Anshof-2 well which was approximately 6 times thicker than the producing Anshof-3 discovery well.
- The sidetrack well will take approximately 2 weeks to drill and is planned to be tied in to the recently commissioned Anshof permanent production facility located at the Anshof-3 site.
Lichtenberg-1 Gas Exploration Prospect
- The drilling of the Lichtenberg-1 gas exploration well is planned to commence during October 2024 in the MND Investment Area within the ADX-AT-I licence.
- The prospect will target high productivity gas reservoirs proximal to gas infrastructure with further follow up potential.
- MND will fund the first EUR 4.5 million of the well costs to earn a 50% economic interest in the MND Investment Area. Welchau-1Evaluation and Well Testing
- Analysis work on the 450-metre column of condensate rich gas and liquids encountered in the Welchau-1 exploration well was ongoing during the reporting period. A revised resource estimate is expected to be released in late September 2024.
- A submission has been made to the designated environmental authority to undertake production testing operations during the winter period from 1 October 2024 to 31 March 2025.
- A detailed well testing program designed to evaluate the multiple hydrocarbon reservoirs encountered at Welchau -1 is expected to be completed by October 2024 in preparation for well testing operations.
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Looking forward to the second half of 2024, your Company is well positioned in terms of both funding and operational readiness for the abovementioned drilling and testing program. The implications of each element of the work program for the Company are important for the immediate and long-term development of the ADX Austrian energy business.
The drilling Anshof-2Aside track well is important for the reserve growth at Anshof and the potential build-up of cashflow from our Austrian operations. The recent installation of the permanent production facility is expected to be a catalyst for further drilling at Anshof as well as multiple nearfield oil exploration prospects which can provide rapid value and cashflow growth.
The drilling of the Lichtenberg-1gas exploration well will be ADX' first exploration well in the ADX-AT-I exploration licence. The ADX-AT-I licence is expected to be gas prone, host highly productive reservoirs and is proximal to gas export infrastructure. Success at Lichtenberg is expected to provide a number of follow up prospects that may result in a material and valuable gas resource which would be highly profitable at prevailing European gas prices.
The planned testing of the Welchau-1liquids rich gas discovery during the fourth quarter of 2024 and the first quarter of 2024 is a significant opportunity for the Company to production test a potentially transformational discovery which was unable to be tested earlier this year due to environmental permitting constraints. ADX is planning a multi zone test over a five to six week period to evaluate the flow characteristics of the Welchau reservoirs. Ongoing success at Welchau would propel the Company to another level in terms of materiality and growth potential at a time when Europe is desperate for sustainably produced domestic hydrocarbons. Welchau is a potential play opener. The discovery of a large column of hydrocarbons at relatively shallow drill depths has significantly enhanced the potential of a follow up prospect with similar depth and structural characteristics that is proximal to Welchau.
The drilling program at Anshof and Lichtenberg is largely funded via Energy Investment Agreements with MND. These agreements not only provide important funding, they reduce the Company's exposure to downside risk and introduce a financially and technical capable partner into the Company's assets. The Company's operational activities are accompanied by the continued development of a rich inventory of oil and gas exploration prospects in Upper Austria which we believe will continue to provide further farmout and drilling opportunities.
In conjunction with our oil and gas exploration, production and development activities, ADX engaged consultants to progress feasibility studies in relation to the viability of a Solar Park for self-consumption of electrical power required at ADX' Vienna Basin production operations as well as Green Hydrogen Production for third party sales. ADX has also recommenced the evaluation of Hydrogen Storage at its Vienna Basin Oil and Gas Fields for hydrogen which may be generated by ADX or stored commercially for third parties. The Company will provide the results of these studies as well as potential partnership opportunities by the end of 2024.
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ASSET ACTIVITIES SUMMARY
Production Assets, Vienna Basin Fields and Anshof Field - Onshore Austria
ADX is operator and holds a 100% interest in the Vienna Basin production licences.
ADX is operator and holds an 50% economic interest in the Anshof-3 production.
The Anshof Oil Field and Vienna Basin Oil and Gas Fields production rate, net to ADX, during the half year averaged approximately 204 BOEPD compared to 271 BOEPD for the six months to December 2023. The 25% decrease was primarily due to the partial sell down of Anshof-3 oil production from 80% economic interest to a 50% economic interest in accordance with the Energy Investment Agreement with MND. The net oil and gas production rate from the Vienna Basin Fields averaged 181 BOEPD and the Anshof-3 well contributed 23 BOPD (net) during the half year compared to 225 BOEPD and 41 BOEPD respectively for the six months to December 2023.
Anshof-3 well production was shut in from the 19th of September 2023 when the well reached the regulatory limit of 5,000 tonnes (36,000 Barrels) for production under a long-term test. Anshof-3 production recommenced on the 3rd of April 2024 into the newly installed and commissioned PPF.
Figure 5: Showing Anshof and Vienna Basin fields net monthly oil equivalent production and net average daily oil
equivalent production rate
Field Revenues and Product Pricing, Vienna Basin Fields and Anshof Field
Oil and gas sales revenues during the six-month period totalled A$4.3 million, net to ADX, a 27% drop compared to the previous six months ending 31 December 2023 when sales revenues totalled A$5.9 million.
The drop in revenue was largely due to lower oil and gas volumes discussed in the previous section and significantly lower realised gas prices. Oil prices remained relatively stable during the reporting period. The average crude Brent sales price during the half year was US$ 84.09 per barrel compared to US$ 85.40 per barrel for the previous six months ending 31 December 2023. Gas prices weakened to EUR 28.16 per MWh during half year compared to EUR 35.75 per MWh for the previous six months ending 31 December 2023. Oil proceeds contributed to 95% of sales during half year compared to 93% for the previous six months ending 31 December 2023.
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Figure 6: Showing Anshof and Vienna Basin fields monthly oil and gas sales revenue
European Methane Emissions Compliance
ADX is committed to achieving and exceeding its environmental obligations, including the reduction of greenhouse gas emissions. Methane is the second-largest contributor to climate change after carbon dioxide (CO2), accounting for about one-third of current global warming. Atmospheric methane levels have risen significantly over the past decade. The first- ever European Union (EU) Regulation on methane emissions reduction in the energy sector came into force on 4 August 2024. This Regulation aims to meet the EU's commitment to the Global Methane Pledge of reducing global methane emissions by at least 30% from 2020 levels by 2030. The Regulation applies to the exploration and production of crude oil, natural gas, and coal within the EU, as well as importers of these fossil fuels into the EU. This ensures equal conditions for all fossil fuel producers supplying the EU's energy market ensuring domestic production is not disadvantaged by cheaper poorly regulated imports.
The Regulation establishes guidelines for the precise measurement, quantification, monitoring, reporting, and verification of methane emissions in the EU's energy sector. Additionally, it sets out measures for reducing these emissions, including leak detection and repair surveys, repair obligations, and restrictions on venting and flaring. It mandates that re-injecting or utilising methane on-site, or directing it to market, must always take precedence over venting or flaring. The Regulation provides rules for transparency related to methane emissions. The requirements of the Regulation will be phased in over the next three years. During the reporting period ADX proactively commenced taking the necessary steps to implement these measures.
Hedging
During the half year ADX has continued to deploy a rolling hedging strategy seeking to provide stable near-term revenue generation during volatile market conditions. A number of hedging transactions have been deployed during periods of favourable market conditions.
- On 26 January 2024, ADX executed hedging transactions with Britannic Trading Limited with a fixed price swap contract for 8,400 barrels of oil at a fixed Brent crude oil price of USD 80.00 per barrel for February 2024 to May 2024 inclusive. The quantity of hedged oil equated to approximately 70 BOPD during the period.
- On 3 April 2024, ADX executed additional hedging transactions with Britannic Trading Limited with a fixed price swap contract for 15,000 barrels of oil at a fixed Brent crude oil price of USD 85.31 per barrel for June 2024 to October 2024 inclusive. The quantity of hedged oil equates to approximately 100 BOPD during the period.
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