you cant compare ADI to AUT.. this is the way hartleys see it..
Adelphi Energy Limited (“ADI”, “Adelphi”, “Company”) is on the verge of significant activity at its Sugarloaf project (ADI 20%) in the US. Over the last 12 months, the Company has experienced delays and a disappointing result due to technical issues. However, during this time, the prospectivity of the play has been de-risked by successful results nearby. Testing at its Kennedy-1 well is imminent; however, the well was not drilled ideally so results are not expected to be great.
The next well, Kowalik-1, is expected to spud in July 08 and could yield
flow rates in the order of 10 million cubic feet per day with 2,500 barrels of
condensate per day.
Adelphi is leveraged to the high risk / reward Wisteria prospect (ADI 10%) in the Timor Sea, which is scheduled for drilling in July 08. This well will target a medium risk deeper prospect that has potential for 25 million barrels of gross recoverable oil, and a shallower high risk prospect that may contain 175 million barrels of gross recoverable oil.
The Company has an 8.5% interest in an attractive exploration permit in Yemen, which has a 110 million barrel oil discovery immediately adjacent to it.
Adelphi also has a 100% interest in an Indonesia study, soon to be gazetted, and is in the advanced stage of a farmout agreement to obtain a free carry on the forward work program.
We rate Adelphi Energy Limited as a Speculative Buy.
Investment Highlights
• Sugarloaf Potential 190cps –
The Kowalik-1 well will be drilled, completed and tested in one seamless operation, with spud planned for July 08. The well will target the upper Austin chalk, which has produced strong results in adjacent permits. Through better understanding of the play, the joint venture has planned the location for Kowalik by using seismic to identify areas that are more likely to contain natural fractures. The well will also be completed using the same techniques that have yielded flow rates in an analogue field of up to 20 million cubic feet per day. The potential of Sugarloaf remains unchanged at an estimated gross 600 billion cubic feet of gas equivalent.
• Kennedy-1 Testing – Kennedy-1 was stimulated using a light sand frac
over the deepest quarter of its horizontal section and produced minor gas
volumes and 40 barrels of condensate per day. A bigger frac with different
fracture fluid will be implemented over the same interval within the next few
weeks. It is thought that this could increase rates to between 80 and 200
barrels of condensate per day. Kennedy was drilled into the lower – middle
Austin chalk, which is thought to be less productive than the upper chalk, so
is not indicative of the expected rates at Kowalik.
• Wisteria Prospect Potential 350cps (ADI 10%) –
Potential company making drilling is imminent on the Wisteria prospect in the Timor Sea, Australia. The deeper target, potentially worth 58cps to Adelphi, is considered medium risk. The shallower target is higher risk but has a potential value of 326 cps for the Company.
Adelphi is essentially free carried for the drilling of this well.
• Oil Search Sells Midde East Assets – Not Block 7 (ADI 8.5%) – Oil
Search has recently completed the sale of most of its Middle East assets,
but has opted to retain Block 7 due to its prospectivity. Immediately adjacent
to Block 7 is a large oil discovery that high grades the potential of the block.
3D seismic has commenced prior to possible drilling in late 2009.
• Activity Ramping Up – Adelphi’s cash balance of $5m will allow it to fund
its share of the upcoming program in the US. The Company is free carried
through imminent potential company making drilling at Wisteria and has a
working interest in prospective acreage in Yemen. After relative inactivity,
the Company is entering an exciting phase with potential for significant
share price appreciation.