ADX Energy (ASX: ADX) has brought in a joint venture partner to progress the appraisal of its Nilde oilfield redevelopment project offshore Italy.
The company today announced it has signed an agreement with London-based oil and gas services company SDP Services to farmout a 50% stake in the d 363 CR-AX permit, containing the Nilde project as well as the Norma and Naila oil discoveries.
Under the deal, SDP will fund a drilling and seismic work program up to a capped value of €20.82 million ($33.33 million).
ADX will remain as the operator of the licence and retain a 50% interest. It will also be entitled to a 5% net profits royalty attributable to any future production from the Nilde field.
Back in January, ADX advised the market that the Italian regulatory authorities believed the company had insufficient financial capability to fulfil its permit commitments.
ADX is hoping this partnership will increase its likelihood of receiving ratification of the permit, given privately-owned SDP’s strong operating cash flow, profit and substantial balance sheet.
In addition, the specialist services company can provide its own onshore and offshore rigs and seismic and logging equipment.
“We expect that the funding support provided by SDP will break impasse with the Italian authorities and lead to the long overdue ratification of the license,” ADX executive chairman Ian Tchacos said.
The farmout transaction is conditional upon the permit ratification.
Nilde oil redevelopment project
The Nilde project lies in up to 100m water depths in the Sicily Channel, around 60km off the coast of the Italian island.
In the 1980s, the Nilde field had produced 20.5 million barrels of oil. It has since been estimated to hold a 2C contingent resource of 34.1 million barrels, with the Norma and Naila discoveries adding a further combined resource ranging from 2.2 million to 15.6 million barrels (within the 1C to 3C range).
ADX’s fast-track, technically robust and low capex development concept involves using the flexibility of dry trees and leased equipment, as opposed to its original option of a floating production and storage offtake facility.
The company has a memorandum of understanding in place with Calm Oceans Pte Ltd for the construction, installation and lease of the major components for this fast-track concept.
Tchacos said that upon ratification, a substantial investment in the Nilde redevelopment project has the potential to unlock “substantial value” for both companies.
“We now can start to look forward to getting back on track,” he said.
ADX also owns 100% interests in two contiguous licenses across the Tunisian-Italian border, containing the offshore Dougga gas condensate and Lambouka gas discoveries, and a 50% stake in the Parta Block, onshore Romania.
ADX shares were sitting at $0.012 by afternoon trade – up 20%.