Carnarvon Petroleum Limited (ASX:CVN) and its joint venture partner Quadrant Energy are preparing to commence drilling at the Phoenix South-3 well.
The well is in waters off north-western Western Australia with other projects such as Condor and Eagle to the north and Labyrinth and Maracas to the south.
Testing same interval as Phoenix South-2
The Phoenix South-3 well will test the same interval that contained gas and condensate in the Phoenix South-2 well 560 metres away.
The cost to redrill to the top of the Caley interval will be mostly covered by an insurance claim associated with the Phoenix South-2 well operation, which had to cease drilling at this interval.
Dorado-1 also targeting the Caley interval
In addition to the Phoenix South-3 well, the upcoming Dorado-1 well is expected to commence drilling in May 2018.
The primary zone in Dorado-1 is also the Caley interval, although the well will also test slightly deeper secondary targets for additional oil and gas.
Other potential catalysts
Carnarvon was also awarded a new permit, the Eagle Project, in the highly prospective Vulcan sub-basin, near Carnarvon’s recently acquired Condor project.
Eagle is in a hydrocarbon prone region within the North-West Shelf and contains several Jurassic and Cretaceous oil leads over multiple reservoir levels.
Once the recent Cygnus 3D seismic has been processed over the area, Carnarvon will progress its technical and prospect development work.
Financially robust to fund drilling
Carnarvon had a cash balance of $48.1 million at the end of the quarter.
With existing cash and the successful insurance claim, Carnarvon remains well-funded for its upcoming Phoenix and Dorado drilling campaign.
Consensus share price target implies upside
Furthermore, its shares have been trading strongly, having more than doubled in fiscal 2018 to a 12-month high of 16 cents last week.
This rerating occurred under the third-highest volumes recorded in the last 12 months, suggesting confidence is mounting regarding the company’s active exploration program.
READ: Carnarvon Petroleum enters 2018 with multiple share price catalysts including the prospect of a takeover
However, it is worth noting that the 12-month consensus price target of 24 cents suggests there is share price upside of 60% from Monday morning’s opening price of 15 cents.