Microcap European natural gas explorer plans to drill at high-impact sites in Austria and Germany this year. Additionally, they are shooting 3D seismic at another field and applying to double their land portfolio in Germany.
Last month, we wrote about MCF Energy Ltd. (TSXV: MCF) (FRA: DC6) (OTCQX: MCFNF) and its plans to capitalize on Europe’s energy crisis. Since then, the company’s growth prospects have become more apparent and we consider this to be significant.
During the last month, amid softening European natural gas prices heading into summer, MCF Energy has come under pressure and we believe the recent weakness is transitory. Meanwhile, the company has been executing rapidly and management has done a great job with advancing the business.
Last week, MCF Energy issued an operations update and provided more visibility on the growth prospects that are associated with the business. We are favorable on how the story has advanced so far this year and believe the market is not assigning enough value to the projects the leadership team is executing on.
As part of the update, management said it expects to start drilling high-impact exploration wells in both Austria and Germany in the third and fourth quarter of this year. So far, MCF Energy has selected the locations of the wells and the permits have either been issued or are in process.
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Plans To Double The Size Of Its Footprint in Germany
Earlier this month, Germany closed its final three operational nuclear plants. The country is the largest energy consumer in Europe and relies heavily on imported natural gas. Germany’s lack of modern domestic gas exploration has created a unique growth opportunity for MCF Energy and we believe the market discounts this aspect of the story.
As part of its growth strategy, MCF Energy is executing on an initiative to double the size of its operating footprint in Germany and we are monitoring how this aspect of the story advances over the next few months. So far, the company’s focus on Germany’s natural gas sector is gaining significant momentum as it is executing on several initiatives to capitalize on this burgeoning market.
A few months ago, MCF Energy expanded its acquisition of German oil and gas interests through its purchase of 100% of Genexco GmbH, a private German oil and gas company. The transaction provided MCF Energy with valuable projects in Germany and an expert in-country team. We are bullish on the growth prospects that are associated with the deal.
Genexco owns a portfolio that includes four exploration licenses, three undeveloped discoveries, and two abandoned fields. Over the next year, Genexco plans to double the size of its license portfolio and has submitted several applications for new project areas. A significant portion of the Genexco acquisition consideration is tied to the success of these new license applications.
When it comes to MCF Energy’s projects in Germany, management considers the Reudnitz project to be a priority. Based on previous studies, the project has significant reserves of methane and helium and is located in the same administrative district as the European Tesla production site.
Going forward, MCF Energy is planning a pilot plant and is preparing to acquire 3D-seismic in the winter 2023/2024 to further explore the potential of the site. We are bullish on the company’s growth prospects in Germany and believe the market has underappreciated the developments that have been made so far.
Executing On A Major Project In Austria
Austria is another key market for MCF Energy. One of MCF Energy’s most attractive assets is its 20% stake in the Welchau prospect in Austria, a large anticlinal structure in the Austrian Alps. Environmental studies are progressing at Welchau and drilling is anticipated to begin in September, and last 6-8 weeks. Based on its large potential size, success at Welchau could be a positive development for Europe’s energy security.Long lead materials and services for the well have been confirmed, and an experienced local operator has been contracted to drill the well.
From a geological and engineering perspective, the prospect is fully prepared for drilling operations and we are bullish on the potential value that is associated with the project. We believe that MCF Energy is well positioned to capitalize on the Welchau prospect and expect the management team’s experience to play a significant role in the success of the business.
Executing on an Organic and Inorganic Growth Strategy
We believe that MCF Energy has been ahead of the curve when it comes to the energy opportunity in Europe (especially Germany). We believe the region has been overlooked and expect the company’s first mover advantage to serve as a major growth driver for the business over the long-term.
MCF Energy has previously said that its top priorities are successfully testing the prospects it has in Austria and Germany, and its aggressive acquisition strategy (focused on new projects and concessions). In addition to the company’s ongoing projects, the management team is focused on identifying new opportunities.
During the last year, MCF Energy has been focused on researching the European energy market. By researching projects and utilizing strategic relationships, the company has been able to create a database of acquisition targets in Europe (especially in Germany). This focus has helped MCF Energy identify new opportunities and stay ahead of the competition.
An Undervalued Growth Opportunity
The ongoing war in Ukraine has exposed a severe vulnerability in Europe’s energy market. The continent has scrambled to provide alternative sources of Russian gas, has urged rationing, and has even increased its mining of coal to address shortfalls. We are favorable on MCF Energy’s strategy to acquire valuable and scalable natural gas assets in the EU and believe the business has significant upside potential.
MCF Energy is led by a management team with a proven track record of success in the energy sector. The founders and leaders of the firm have previously increased production at Europe’s largest heavy oil field by 4000% with Bankers Petroleum and managed Europe’s largest oil and gas exploration in six countries with BNK Petroleum.
By having a strong leadership team, MCF Energy can execute on a calculated growth strategy and we want our readers to be aware of this aspect of the story. Over the next year, we expect more investors to become aware of MCF Energy as the company continues to deliver on its milestones.
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