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Italian flare: Independent Resources plc

Wednesday, June 04, 2008

Grayson Nash, the executive chairman of Independent Resources plc, has his eye on an Italian gas prize. Having recently tied up a partnership deal with one of the country’s big-name energy groups, Nash’s Independent holds the key to a strategic gas storage facility that could help ease Italy’s supply crisis.

In reality of course “only a fool would be confident with Italian politics”. Nash concedes the problem. The permit to get moving on the gas storage business has already been pushed into early 2009 after a reshuffle of the various heads in charge of making decisions. That aside, the outlook is promising.

Independent is a multifaceted operation with exploration in Italy and Tunisia. At its main Rivara project, in Italy’s Po Valley, Independent is essentially sitting on an upside down mountain that it intends to fill with natural gas and then pump to the country’s gas-loving consumers at peak times of the year. It hopes to be up and running by around 2013 with a facility that holds 3.2 billion cubic feet of gas and delivers 32 million cubic metres of gas every day.

In reality it can’t do it alone. April’s tie-up with ERG S.p.A. not only injected around £7.6 million into the venture – in return for a 15pc stake – but also boosted Independent’s public persona. It can now credibly claim to be working together with an Italian company to provide gas using Italian resources to the Italian people.

The prospect of another partner is also a possibility. The deal with ERG values Independent’s 85pc stake in the operation at £42.9m. Nash says analysts expect the finished storage operation to be worth in the region of £400m.

For now though, the introduction of ERG and the promise of a permit in the first quarter of 2009 will see the start of an appraisal phase, with overall costs for the entire project expected to top £280m.

According to Nash, that will mean a likely return to its AIM investors for more cash in the future. Indeed, he says the AIM listing has been a boon for the company, with certainly no equivalent in Milan and no chance of an Italian listing.

Risks connected with the development of Rivara are being partially offset by gas exploration ventures. A nearby coalbed methane project at Fiume Bruna has just got the green light from the Tuscan regional government with Independent now conducting a raft of new seismic surveying. Early estimates put the resource there at 92 billion cubic feet recoverable. Capex figures here are likely to be around £120m with a possibility that partners will be brought in.

Later this month the company expects to hear on a possible doubling in size of the Fiume Bruna resource, with an extension to the south of the current site.

Elsewhere, the company has just signed a three year extension on oil and gas licences covering 5,600 sq km in Ksar Hadada in Tunisia.

Ben Hobson, SmallCapNews.co.uk