http://www.arcenergy.com.au/files/brokerreports/Macquarie%209%20Feb%2007.pdf
¡§Adelphi Energy ¡V high risk/reward exposure
ƒoƒnThe stated aim of Adelphi Energy (ADI) is to build a
portfolio of highly prospective exploration assets in areas
where success could result in high rewards.
ƒoƒnAdelphi upside: Through ARQ¡¦s 32.4% interest in
Adelphi Energy, the company is exposed to exploration
in the Gulf of Mexico, Yemen and the Timor Sea.
Recently, ARQ increased its interest in Adelphi from 26%
to 32.4% by exercising its options in Adelphi.
Encouraging hydrocarbon shows at Sugarloaf.
ƒoƒnAdelphi¡¦s current exploration focus is the Gulf of Mexico
(GoM) with one discovery, Sugarloaf-1 (ADI, 20%),
providing encouraging hydrocarbon shows across a
secondary shallower and deeper primary reservoir.
Further testing of the well is expected to commence in
calendar 1Q07.
ƒoƒnThe Sugarloaf-1 well was drilled to 6,371m.
Interpretation of wire-line logs indicates that an
aggregate of 27.4m of potential reservoir is gas
saturated. It is anticipated that Sugarloaf will be
commercial with the assistance of fracture stimulation.
ƒoƒnUntil further testing confirms the extent of recoverable
reserves, we have valued 370bcf of recoverable gas
reserves using an NPV of US$2.20/Mcfe and appropriate
farm-in and equity allowances. Our preliminary Sugarloaf
value is worth 21Acps to ARQ (11Acps to our valuation
risked at 50%).
ƒoƒnWe have also included value for ADI¡¦s exploration assets
(1.8x FY07 exploration expenditure), plus Adelphi¡¦s cash
on the balance sheet.¡¨
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