Alba Min Res PLC (AIM:ALBA) Horse Hill – Broker Notes

Alba (AIM: ALBA), has been informed by Horse Hill Developments Ltd, the operator of the Horse Hill-1 (“HH-1”) Kimmeridge and Portland oil discovery located in licence PEDL137, that, following the successful Portland Extended Well Test (“EWT”) programme, it now considers the Portland oil field to be commercially viable.

Declaration of Commerciality for Portland Oil Field: 

This morning we learnt from Alba Mineral Resources (ALBA.L) that the Portland oil field at Horse Hill is now considered “to be commercially viable”. Alba holds a net 11.765% interest in the Horse Hill Oil Discovery project, which consists of both the shallow Portland and deeper Kimmeridge oil discoveries.

The start-up of long-term oil production at Portland is now being targeted for 2019, subject to securing the appropriate regulatory consents. Planning permission is already in place to produce from the horizontal well HH-2, which is expected to be drilled in early 2019. In total the field development plan for the Portland includes production from three wells and up to two support wells.

Comment & Recommendation

This is a landmark news event for Alba, which moves the company nearer to joining the small club of resource producing companies listed on AIM. From the information known to date, First Equity estimate oil production from the Portland could amount to a gross 1,000 to 1,400 barrels of oil per day (bopd), resulting in a sizeable 117 to 165 bopd net to Alba. We will need to see the published findings of Xodus’ Competent Persons Report to get a more accurate estimate of the Portland’s oil production numbers, cash flow and net present values.

The bigger production and resource size prize lies beneath the Portland in the Kimmeridge, upon which the KL3 extended well test programme is currently in progress. Further results and potential high-impact news-flow from KL3 are anticipated in the coming weeks, along with KL4 afterwards.

Alba’s project positioning at Horse Hill has been recently strengthened following consolidation of its listed peers, with Alba now just one of only two AIM listed participants at Horse Hill and third largest stakeholder overall. Alba also provide investors with multi-commodity exposure, with a diversified portfolio of interests, that encompass projects in Greenland, including the Thule Black Sands ilmenite project and also the Clogau gold project in Wales, providing substantial exploration upside and ability to produce premium priced ‘Welsh’ branded gold.

For a Company on the cusp of cash flow generation at Horse Hill from a sizeable and potentially valuable asset, the shares still trade below where they should lie. Our price target remains at 6.0p, of which 4.0p is attributed to the Horse Hill oil project. This may need updating when the Xodus report is announced. With the all these above factors in mind and prospect of further substantial news-flow events, we rate the shares as a ‘Buy’.

*First Equity Limited acts as Broker to Alba Mineral Resources plc

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