Shares in Prospex Oil & Gas (LSE:PXOG) advanced today after the business announced that an application has been made to develop a gas field at one of its assets in northern Italy. Its partner in the country, Po Valley Energy (PVE), has submitted a production concession application to construct a new high-return gas field at a site called Selva, where Prospex owns a 17pc interest.
Selva includes the Podere Maiar-1d appraisal/redevelopment well, where strong flow rates from testing operations confirmed a significant commercial gas discover earlier this year. As part of the application, PVE – also the site’s operator – has proposed the installation of a fully-automated gas plant at the site costing €2.4m. It will also look to construct a 1km-long pipeline to connect with the nearby Italian National Grid connection.
Beyond these developments, PVE has also said it plans to drill additional wells to increase the size of the Selva natural gas resource significantly. It will drill these well in the field’s highly prospective Selva East, Selva South Flank, and Riccardina prospects after acquitting 3D seismic in the second half of 2018 and early 2019.
PVE’s application will be considered for preliminary award at the next Italian Ministry Hydrocarbon Commission meeting, expected in July. Until then, the operator will prepare documentation for an Environmental Impact Assessment so it can commence the next stage of environment approval at Selva.
Selva sits within the 331km2 Podere Gallina Exploration Permit, located in the Po Valley region of Italy, a proven hydrocarbon province where over 5,000 wells have been drilled historically. Prospex saw its shares jump 9.4pc, or 0.04p, to 0.49p following today’s news.
Edward Dawson, managing director at Prospex, said: ‘The submission of this production concession application marks a significant step forward in the commercialisation and recommencement of commercial gas production at the Selva Gas-Field in Italy. Following the successful discovery of commercial gas at Podere Maiar earlier this year, PVE has designed a clear development plan from which to realise value in the near term whilst also proving up the potential of the wider licence area, with multiple prospects set to be advanced, each of which has the potential to significantly increase the size of the overall Selva Gas-Field.
‘Selva is set to be a high return natural gas field development and is undoubtedly a valuable asset within our multi-project investment company, which also includes the Bainet gas discovery in Romania, which is on course to commence production later this quarter, and the Tesorillo Project in southern Spain, which has gross unrisked Prospective Resources of up to 2 Tcf cubic feet of gas. With multiple value triggers due in the coming months, we look forward to keeping shareholders updated on developments and believe 2018 is set to be a very exciting year for Prospex.’
Prospex focuses on high impact onshore and shallow offshore European opportunities with short timelines to production. Its strategy is to acquire undervalued projects with multiple value trigger points that can be realised within 12 months of acquisition while using low-cost re-evaluation techniques to identify and de-risk prospects.
Prospex is working towards becoming an operator in its own right, moving from an investment company into a fully-fledged E&P firm. When we spoke to Dawson in April, we argued that the business is well supported on this journey by an experienced management team with plenty of skin in the game. Dawson has had more than 15 years’ experience in the oil and gas sector and was previously MD of Peppercoast Petroleum and Black Star Petroleum. Meanwhile, non-executive chairman Bill Smith is a director of several listed and private companies including Orca Exploration Group, Mosaic Capital Corporation, and PFB Corporation.
We said we felt the company could be sitting on a vast resource base across its three assets – its potential in Spain alone could be very impressive if fully realised. Also, the firm is due to begin producing in Romania shortly and has full funding for its 2018 license commitments. If the business can deliver anywhere near what it has promised, there could be plenty of upside potential in its share price.