part 226 Feb 2020 19:37
Following the significant commercial gas discovery at the Podere Maiar-1d well in 2018, Prospex’s 17% interest in the Podere Gallina licence was assigned net 2P reserves of 2.26 BCF and net contingent and prospective resources of 2.40 BCF and 15.56 BCF respectively. House broker Novum believes historic gas production at the asset should allow the company and its partners to recover most of its 2P gas resources from Podere Maiar-1d. Thus, using long-term gas prices of £5.44/mcf and fixed OPEX costs of £251,000 per annum, the broker has ascribed a value to Prospex’s interest of £4.7m.
However, the broker goes on to stress that, the Podere Gallina licence contains plenty of contingent resources beyond the Selva Malvezzi Gas-Field. Most of this potential is housed within two prospects called Selva North and Selva South, and which both sit within the same stratigraphic concept as Podere Maiar-1d.
And despite being called prospects, the two structures have already produced gas to surface in commercial quantities from previous wells, leaving significant volumes of gas updip in each accumulation. As such, the broker views them as ‘attractive low-risk, potential additions to the longer-term Selva production profile’ and has assigned the prospects net un-risked and risked valuations of £5.59m and £2.34m respectively, highlighting that successful drilling will boost these numbers further.
Then there’s the Tesorillo project. At 831 BCF gross P50, the prospective resource size is substantive. The permits are located in farm land close to the gas trunkline from Africa to Europe and gas prices in Europe are attractive. A commercial discovery by Tesorillo-1 should create significant value. However, further appraisal drilling is likely to be required to confirm resource size before a development decision can be taken. Novum has, nevertheless, ascribed a risked valuation to Prospex’s 15% interest of £12.3m.
The EIV-1 Suceava Concession (onshore Romania), on the other hand, and which still holds multiple prospects and leads, including a gas discovery, has been ascribed a risked valuation to Prospex’s 50% interest of £3.13m.
That being said, however, the ‘mother of all assets’ has got to be the El Romeral gas power project. The asset, previously owned by Chevron, includes three blocks with existing gas production and a gas-to-power station housing three Jenbacher gas engines that convert gas to electricity. The facility was built at a cost of £8.3m and currently generates annual revenues of £669,000. Prospective resources for the three blocks currently stands at 90 BCF alongside two proven, but undeveloped, discoveries (5 BCF gross contingent resources). Thus, there’s significant opportunity to scale-up production. Using long-term gas prices of £5.44/mcf, and allowing for increased revenues, house broker Novum has ascribed a risked valuation to Prospex’s 49.9% interest of £19.7m.
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