ADX Energy Ltd (ASX: ADX)Share price: A$0.12March 25, 2024...

ADX Energy Ltd (ASX: ADX)
Share price: A$0.12
March 25, 2024 Target: A$1.00
Logging results at Welchau further derisk thediscovery

• The logging program has confirmed open fracture networks andvuggy porosity (matrix porosity) essential for well productivitycoincident with hydrocarbon shows between 1346 m and 1702 mmeasured depth. This represents 356 m of gross interval across threeinterpreted lithological sequences. This compares with only 115 m ofliquids-rich gas shows announced previously.

• Intervals with good hydrocarbon shows clearly correlate to eitherfractured zones or zones with vuggy porosity. This providesreassurance as to the consistency of the interpretation. The zoneswith the best characteristics within the ~356 m of gross alreadyrepresents a total of ~40 m. This producible area could be much largeras it does not include all the zones with good characteristics.

• The MDT-tested intervals show medium to very high permeabilitywhich accords with fracture density and petrophysical loginterpretation. This is important and positive as good permeability isimportant for flow rates.

• ADX could not acquire representative downhole samples due to mudlosses in the open fractures. The surface interpretation of recoveredsamples were contaminated with mud from fractures due to losseswhile drilling. The MDT tool was then stuck in the well. It waseventually recovered but could not be re-used.

• After MDT logging, liquid hydrocarbon and gas inflow to the wellborewas observed at surface following downhole sampling operations.This was probably due to the MDT tool sampling process inducing aflow of reservoir hydrocarbons despite the over-balanced mudweight. This is positive as this confirms the mobility of hydrocarbonsin the reservoir.

• Mud gas readings for C1 of up to 20% were recorded from the wellbore with heavier components up to C5 recorded. The condensateyield could be higher than initially expected.

• The well will now be cased ahead of testing in 4Q24. Requiredenvironmental permitting for future operations will commenceimmediately. It will include additional drilling locations.• We view the confirmation of the reservoir quality (fracture plus matrix)and of the mobility of hydrocarbons as positive developments. We reiterateour target price of A$1.00 per share. We see the share pricemovement as an opportunity.

Valuation
Our ReNAV is unchanged A$1.00/sh. Our Unrisked NAV for Welchau isA$1.55/sh.