The latest drill results from Caza Oil & Gas (LON:CAZA, TSE:CAZ) and similarly positive data from neighbouring operators have significantly de-risked the Bone Springs play in New Mexico, according to the company’s chairman John McGoldrick.
“The Bone Springs formation has been around for a long while, and people know it is hydrocarbon bearing.
"It is really the success of some the new fracking techniques that make it quite exciting,” he told Proactive Investors.
His comments followed the release of data for Caza Ridge 14, a horizontal well that flowed at a combined rate of 1,021 barrels of oil equivalent a day. This included 844 barrels of crude.
Caza has a 45 per cent working interest and a 35.2 per cent net revenue share in the well.
“The rate that is coming out the well announced today I would say is fantastic. It bodes very well for the technology, which when used in this particular play can get some great results,” said McGoldrick.
“The fracking technique we used here works very well.
“It is combination of the fracking technique and the sands. Some of the operators around us have been getting some great results.
“What it means is we are sitting in the middle of a particularly good play.
“I think this and other wells in the neighbourhood de-risk the play. We are starting to get a string of really good results.
“These plays can be quite extensive and often you might not be in a sweet spot, thought this certainly looks like a sweet spot. This could be very substantial.”
The fact the group is working in a highly developed oil and gas market means that production is fairly quickly cash generative.
“We are close to infrastructure, so the oil and gas will be off to market. So it is basically it is immediate revenue,” McGoldrick added.
“It will make a substantial difference to our production profile, and therefore revenue stream. So it definitely helps the immediate revenue stream.
“But it really de-risks the play, so funding to help accelerate the project is going to be a lot easier.
“Results like this don’t hurt when it comes to attracting capital.”
Earlier, chief executive Michael Ford described the result as “exceptional" that builds on its earlier success.
“All three Bone Spring wells that Caza has participated in thus far have been successful,” he added.
“We hope to build on this initial success and are currently drilling the horizontal section of our operated Forehand Ranch test well, which should reach total measured depth within the week.”
Today’s news lit the blue touch-paper under the stock, which rocketed 32 per cent to 18.5 pence.
In the last three months, on the back of some very encouraging market updates, the stock has leapt more than 180 per cent.