Key Highlights

  • The renounceable 2-for-5 rights issue is priced at 1.2 cents per share and aims to raise up to A$5.2 million.
  • Each two new shares carry one attaching option exercisable at 2.5 cents by 31 December 2028.
  • Proceeds will fund Vienna Basin well work, Phase 2 testing at HOCH-1 and the GOLD-1 drilling programme.
  • All directors intend to take up their entitlements, the company said.

ADX Energy (ASX:ADX) opened its renounceable rights issue on 10 November, dispatching a prospectus to eligible shareholders as it seeks to raise up to A$5.2 million. The offer, first advised on 2 November, gives shareholders the right to buy two new shares for every five held at 1.2 cents each, based on a Record Date of Thursday 5 November.

Each two new shares come with one free attaching option exercisable at 2.5 cents and expiring on 31 December 2028. ADX said it will seek Quotation of the options. Because the offer is renounceable, shareholders who do not want to take up their entitlements can sell them: the rights trade under the code ADXR, with rights trading due to end on 18 November. The offer closes at 5:00pm AWST on Wednesday 25 November unless extended. All directors intend to take up entitlements, ADX said.

Where the money is going

ADX said the proceeds will fund three areas of work in Austria: production enhancement well work in the Vienna Basin, Phase 2 production testing at the HOCH-1 gas discovery in Upper Austria, and the drilling, testing and completion of the GOLD-1 shallow gas well. The company also holds exploration interests in the Sicily Channel offshore Italy.

Well work already under way

On 6 November, ADX said it had begun a well work programme using an MB Well Services workover rig, expected to run for about eight weeks. In the Vienna Basin fields, which the company holds 100%, the work targets about 100 barrels of oil equivalent per day (BOEPD) of incremental production.

The largest component is the planned recompletion of GA-093 as a gas producer, which ADX expects to add 50 to 60 BOEPD of gas and has timed to coincide with European winter gas prices. A pump replacement at GA-072A is expected to add about 15 BOEPD, and completion of a new oil zone at GA-087 is targeted to deliver 30 to 40 barrels of oil per day. These are company targets, not achieved rates.

At HOCH-1, in which ADX holds a 50% economic interest in the ADX-AT-I licence, Phase 2 involves removing the existing completion, drilling out a cement plug and installing a new completion to test deeper Hall Channel zones. Phase 1 testing recorded a commingled rate of 3.15 million cubic feet per day, or 548 BOEPD, from the shallower reservoirs.

Why it matters

The raising is designed to fund near-term activity aimed at lifting production from existing fields and evaluating further potential at HOCH-1 and GOLD-1. Incremental gas production, if delivered during the European winter, could benefit from seasonal pricing, although prices and outcomes are not assured.

For shareholders, the structure offers a choice: take up the entitlement, sell the rights on market, or let them lapse and be diluted. The attaching Options could provide additional funding in future if exercised, but only if they are exercised before expiry.

The options also carry an embedded future decision for holders: whether to pay 2.5 cents per share, more than double the 1.2 cent issue price, before the end of 2028. Their value will depend on how the company and its share price perform over that period.

Risks and next steps

Workover and recompletion results are uncertain, and the incremental production figures are forecasts. The Phase 2 test at HOCH-1 may or may not confirm commercial flow from the deeper zones, and GOLD-1 has yet to be drilled. The Sicily Channel interests are not among the stated uses of funds. The amount raised will depend on Shareholder take-up, which could affect how much of the planned programme is funded. The next dates are the end of rights trading on 18 November and the offer close on 25 November.