Frontera Resources (LON:FRR) is continuing to deliver on its strategy of increasing its production through its active drill programme over the next two years, says Arbuthnot Securities analyst Dougie Youngson.
As such the analyst repeated a ‘buy’ recommendation and a 12 pence price target for the stock.
This morning Frontera announced the start of a new campaign at the Mirzaani field in the Republic of Georgia. The programme begins with the re-entry of two recently drilled wells, No.1 and No.5, to perforate additional key reservoir sections that were intersected by each well.
The No.1 well is targeting around 10 meters of identified oil bearing sections within reservoir Zone 12. This should provide important reservoir and production information to plan future drilling within the south eastern portion of the field. The other well, No.5, will perforate 11 meters of identified reservoir section within Zone 13.
This work is part of a planned programme to obtain reservoir and production data from the extensive series of reservoir sandstones intersected by the well.
Old Park Lane Capital analyst Barney Gray also welcomed this morning’s update. He Highlighted that while the work will be performed at a ‘modest’ cost of around US$100,000, it will gather reservoir and production information that is crucial to planning drilling operations in undeveloped areas of the field.
In the event of success, Frontera’s current resource exposure of 17.9 million barrels at Mirzaani could double. Gray said this upside is currently not factored into his current valuation of the shares of 10 pence., adding that shares in the company "have been significantly oversold during the past month”.
Gray also pointed out that well No.5 is of particular interest since it produced at a rate of over 100 bopd before increased water production began to impair flow rates.
Frontera holds a 100 percent interest in the Mirzaani field, which is located in the eastern portion of the Shallow Fields Production Unit. The field is currently producing at a rate of 90 barrels of oil per day (bopd) from the older and historically developed portion of the field.
Frontera hopes to boost production from its portfolio in Block 12 from 225 bopd to around 5,000 bopd over the next two years.
The company said data from the three wells it has drilled so far, including No.1, No.2 and No.5, has confirmed that fracture stimulation – a procedure designed to increase production from a well – is likely to significantly increase production rates and enhance the value of the field.
Independent engineering firm Sewell and Associates has assigned a best estimate for gross original oil-in-place for the Mirzaani field and Mirzaani northwest extension of 541.7 million barrels, with a low-to-high range of 343.8 to 857.3 million barrels.
“Continuation of operations at the Mirzaani field represents the start of a new campaign designed to build upon our discovery of significant undeveloped portions of the field,” said chairman and chief executive of Frontera Steve Nicandros.
“The success achieved from our work to date provides us with the excitement and expectation that this field has the potential to deliver important new reserve additions and near term production increases from our planned drilling programs over the next twenty four months.”