ADM Energy - Initiation of Coverage

African oil & gas company set for rapid growth on the back of an increased stake in the Aje project, plus new development deals

ADM Energy is the old MX Oil which in 2015 became involved in the “hot” Nigerian E&P space through the acquisition of a stake in the highly prized Aje field. Prospects in the West African Transform Margin look compelling moving forward. With a new management team at the helm, there now looks to be a real chance of the company beginning to see a material return on its investment in OML 113 ahead of a substantial increase in production, in addition to a well-planned expansion of the portfolio.

  • Good quality reservoir with high grade oil sold at a premium to Brent

    Aje is a big gas project that lies in the relatively shallow waters off Nigeria. Recently, ADM has doubled its revenue interest here to 9.2% and is seeking to further increase its stake. New OML 113 partner PetroNor is set to inject some much-needed professionalism into this project and drive a large increase in oil production, as well as bring the big gas play on stream.

  • Big oil and gas expansion likely to be project financed to limit dilution

    Aje produces 2900 bopd from two wells, but plans are afoot to increase oil production to 6,000-8,000 bopd through drilling 3 wells in 2021 followed by bringing the gas on stream to take advantage of local US$3 – 7/mscf prices.

  • Leveraging off the team’s extensive African network to do more deals

    The new management team is seeking to build a larger investment portfolio of undervalued projects by leveraging off their extensive network across Africa and originating deals for appraisal, development and producing assets which add production and material reserves/resources.

  • Risked NPV suggests share price upside of more than 700%

    ADM look grossly undervalued in our view. Our conservative valuation illustrates material potential upside in the stock. We update our coverage of ADM Energy with a target price of 19.21p and Conviction Buy stance.


    ADM Energy is a research client of Align Research. Both Align Research & a Director of Align Research hold an interest in the shares of ADM Energy. Full details of our Company & Personal Account Dealing Policy can be found on our website 

    For full disclaimer information please refer to the last page of the full document. This investment may not be suitable for your personal circumstances. If you are in any doubt as to its suitability you should seek professional advice. This note does not constitute advice and your capital is at risk. This is a marketing communication and cannot be considered independent research.

Table: financial overview
Year to Dec 2017A 2018A 2019E 2020E
Revenue (£'000) 1,727 3,127 2,300 3,700
PTP (£'000) (3,435) (849) (1,314) (300)
EPS (p) (0.24) (0.04) (2.97) (0.349)
Source: Company accounts & Align Research