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Nighthawk Energy (LSE:HAWK) has successfully dug a well that promises more than the threshold for commercial production of oil.
In a statement released earlier today, the US-focussed shale oil and gas explorer and producer said the John Craig 6-2 well, the first of the new four-well programme, has produced over 600 barrels of oil in a 24-hour period through a 1-inch choke and under natural pressure.
“This is a highly positive result, significantly above the production rates required for commerciality,” the company said.
Drilling of the four wells at the identified locations based on “extensive geo-scientific analysis” as the firm put it nearly a month ago, was a two-month programme Running Foxes did not consent to participating in, giving Nighthawk 100% working interest in said drilling.
Nighthawk, however, will only get 80% of all the revenues from the well once it starts pumping oil, which will be soon as the company is now preparing the well for production.
That, nonetheless, still equates to 480 barrels, over seven times more than the current average gross oil production of the company at 63 barrels of oil per day in the six-month period ending 31st December 2011, as a consequence of lack of investment, as reported by the company back in March 2012.
Trading on the London Stock Exchange opened with Nighthawk shares gaining as much as 41% right after the opening bell and lead the greens with 3.4 million shares traded in 10 minutes.
Dealings of the company’s stocks were extraordinarily swift and the share price and percentage change rise and fall several times in a minute. At one point it was 22.9% up to 4.30 pence.
Proving Potential
But the bigger news investors in the City were probably seeing is the implication of the successful drilling of the said well.
Nighthawk’s Chairman, Stephen Gutteridge, placed the firm’s perspective following the results, saying:
“The results are… early confirmation that our geo-science led development strategy to identify the ‘sweet-spots’ in the Cherokee resource play, coupled with relatively mild formation interaction, yields results.”
John Craig 6-2 well encountered oil at its primary target, the Cherokee formation, one of the three formations that Nighthawk identified to have P50 estimates of about 1.4 billion barrels of oil, and identified additional potential oil-bearing targets during the simple vertical drilling.
The second well, Pike’s Peak Williams 4-30, is currently being drilled 2.5 miles north-west of the firm’s producing well, targeting both the Cherokee and Marmaton formations.
“We are looking forward with increased confidence to the next wells in the program,” Mr. Gutteridge stated.
Meanwhile, the market is having a field day as 8.5 million shares have been traded by 8:37 AM GMT, bursting the shares up 35.7% to 4.75 pence, half an hour after the market opened.
Company Spotlight
Nighthawk Energy holds 75% interest in the 410,000-acre Jolly Ranch Project in Colorado, United States. The company’s focus is the development of hydrocarbon potential from shale source rock.
Shares are listed on the Alternative Investment Market of the London Stock Exchange.
