Ansila Energy set to capitalise on skyrocketing UK gas prices

Ansila Energy NL (ASX:ANA) is well-placed to capitalise on sky-high UK gas prices following its recent acquisition of Hartshead Resources Ltd, according to chief financial officer Andrew Matharu. In early February, Ansila acquired the remaining 78.4 per cent of UK gas explorer Hartshead it did not already own and secured $8 million in funding for a multi-phased development of existing gas discoveries across the company’s assets in the Southern North Sea. Gas had been one of the best-performing commodities in 2021 thus far, and the UK gas price was up 300 per cent from where it was when the deal was initially negotiated, Matharu said. “The Hartshead acquisition transforms Ansila Energy into a new UK-focused gas development company complete with a fully-funded work program, a clear roadmap for a multi-phased portfolio development with a seasoned management team, experienced in successfully delivering Southern Gas Basin projects with several notable exits on their CVs.” Exciting market activity Ansila will now push forward with a field development plan (FDP) that will see its gas resources converted from 2C contingent resources to 2P reserves. Recent research from GlobalData has outlined an average sale price for European 2P oil & gas resources of US$6 per barrel of oil equivalent (boe) in deals announced in the second half of 2020, which bodes well for Ansila given the newly-acquired Phase I assets from Hartshead stand at 37.4 million boe of 2C contingent resources and an additional 24 million boe of 2C resources in its follow-on Phase II development area . The funds raised by Ansila will be invested in maturing the Phase I development project and migrating the 2C resources into the 2P reserves category. If one applies that exit multiple to Ansila’s Phase I assets alone, it gives a broad exit value of circa US$225 million. There has also been significant investor interest in the sector of late, with more than 20 corporate and asset-based M&A transactions occurring in the UK North Sea in 2019-20 alone. Most recently, the sale of Scottish & Southern Electricity’s (SSE) UK North Sea business to Viaro Energy fetched US$161 million, as Scottish & Southern exits to focus entirely on renewable energy.  It is worth nothing that a large part of the SSE portfolio sold to Viaro is in the same basin as the Ansila development projects, and the entire asset base is overwhelmingly a gas resource, as opposed to oil. Last year Viaro Energy acquired North Sea focused RockRose Energy PLC for £250 million, whose former management team has recently listed Kistos PLC on the AIM, raising in excess of £32 million to focus on acquisitions in the energy sector involved in the energy transition which also bodes well for natural gas and the Southern North Sea. Southern North Sea potential The Southern North Sea had outstanding potential as one of the most attractive hydrocarbon basins in all of Europe for current investment and future development, Matharu said. It is dominated by natural gas, rather than oil, as compared with other European basins, and has ample available infrastructure, gas-to-wire initiatives, growing electricity infrastructure due to the growth in offshore wind installations, carbon capture and store potential, onshore feasibility studies being carried out to utilise SNS gas for blue hydrogen generation, and a strong track record of recent M&A activity. Following approval of its Phase I field development plan, Ansila will look to progress field development planning on the Phase II area and may also move onto two drill-ready exploration prospects with a total of 24.3MMboe prospective resources which offer further potential upside and will help position Ansila as a future full-cycle gas company with exploration, development and production assets. Economic factors Ansila’s position is further strengthened by a range of market factors playing into the increased demand for natural gas. Matharu said the drive towards electrification and the UK’s 2050 net zero carbon target meant clean energy demand via renewables would continue to grow in the UK but would require gas to be the solution to the UK’s growing energy demand in the near-term to enable the energy transition. Gas prices across the world have also been on the rise due to a cold snap in Asia, with the cold weather making cargoes of LNG harder and harder to come by. The UK NBP futures curve which is indicating prices in excess of 45p per therm during peak winter seasonal demand.  Ansila’s Phase I assets are expected to produce first gas in 2024 with the futures curve predicting average gas prices above 40 pence per therm. - Daniel Paproth