Westhouse Securities oil and gas expert David Hart spoke to Proactive Investor about Petro Matad’s (LON:MATD) latest update from eastern Mongolia.
The company announced the results from the third Davsan Tolgoi (DT-3) well, which successfully found oil, but initial analysis has raised a question mark over the previously considered model for the prospect.
The well encountered significant hydrocarbon shows whilst drilling both the Lower Tsagaantsav formation and the overlying Upper Zuunbayan formation. However further analysis indicates that DT-3 lies within a separate compartment from the previous two wells.
Hart described it as a mixed announcement.
Speaking with Proactive Investors Hart said that whilst the market seems fixated on the weaker parts, there are equally some very positive things to take from the update.
The main points the analyst highlighted were: a new opportunity to drill a fourth well; thicker reservoir rock than those assumed in the previous 122 million barrel estimate; and the continuation seismic exploration through the winter.
The analyst wouldn’t be drawn on any concrete conclusions regarding the impact to the company’s valuation, but noted that he has not made changes to his current rating so far.
In a note to clients on the 21 October Hart reiterated his ‘buy’ rating on Petro Matad targeting 250p.
The initial results from Gulf Keystone Petroleum’s (LON:GKP) first well in the Sheikh Adi license bode very well for the prospect, according to Fox-Davies oil and gas expert Lionel Therond
This morning the company revealed that drilling in the Sheikh Adi-1 well has encountered oil shows in secondary targets, in the Cretaceous. The company is now drilling ahead to test the primary Jurassic and Triassic targets, with the Cretaceous intervals being left for later testing.
Additionally in the nearby Shaikan oilfield, the shallow Shaikan-3 well also encountered oil shows and it is being prepared for further testing.
“Oil shows in returns and cores as well as hydrocarbon saturations on logs all bode very well for the potential of [Sheikh Adi],” Therond said.
“We believe it is just a question of time before it is proven to be part of the same Shaikan mega-structure, with resources upgrades of Shaikan to follow.”
Therond believes that this morning’s update shows solid operational progress.
“We are waiting for the next set of tests results before revising our risked valuation ... but, based on all hard and soft evidence so far, we consider our current 200p price target extremely well underpinned.
Therond highlights that the drilling of Shaikan-3 has been smooth and first indications are good.
“Remember that it was not tested or evaluated in Shaikan-1 and that any identified STOIIP (Stock Tank Original Oil In Place) would come in addition to the current STOIIP of the Shaikan structure.
“The Company reckoned in the past that there could be 0.5-1Bbbl or oil in-place in those formations, hence results are eagerly awaited.”
Similarly Daniel Stewart analyst Richard Nolan highlighted that the initial Sheikh Adi result is somewhat reminiscent of experiences encountered at Shaikan-1.
Shaikan-1 was the original discovery well that propelled GKP to become one of the largest and higher profile AIM-listed oil explorers.
The well struck oil in multiple zones back in the summer 2009. However the uppermost zone could not be tested at the time as it too would have compromised the well for drilling to the lower targets.
This upper target is now being tested by the shallower Shaikan-3 well, with oil shows also being reported in this morning’s update.
“Although it is still at a preliminary level, the early results coming back from Sheikh Adi are very encouraging,” Nolan said.
Arbuthnot Securities analyst Dougie Youngson reiterated a ‘strong buy’ rating for Xcite Energy (LON:XEL) after the North Sea oil explorer released its quarterly results this morning.
“Xcite continues to make good progress at its Bentley field; the initial results from the vertical well are particularly encouraging,” Youngson said in a note to clients.
“The well is making excellent progress following the completion of the vertical well and the identification of a thicker than expected reservoir.”
The analyst also highlighted that Xcite is fully funded for the current drilling campaign. Arbuthnot expects the well and the subsequent flow test to be completed in late November.