In its interim report, Nighthawk Energy (AIM: HAWK) said it continues to be encouraged by its performance, as it begins to see progress with its production. In the six months ended 31 December 2009, the company generated revenues of US$1.01m, up 218% against the comparative period in 2008.
The company also noted its operational achievements in the period, with a successful six well winter drilling campaign completed and the start of Schlumberger’s new evaluation at Jolly Ranch. At Revere, the company expanded infrastructure and began the evaluation of proven, probable and possible gas reserves on the Xenia acreage.
“Over 260 wells deemed commercial have been drilled, cased and completed during the past 30 months and we are beginning to see progress with production”, Nighthawk MD David Bramhill commented.
Significantly, Nighthawk noted that at US$1.01m, first half revenue is more than twice the revenue generated for the whole of the previous financial year, ended 30 June 2009. The company said this has been achieved through organic production growth, which is expected to continue and accelerate as more appraisal wells are put on stream at Jolly Ranch and production enhancements take effect at Revere.
The company increased total assets substantially to US$115.5m during the period, up 65% from US$81.3m at 30 June 2009. Nighthawk said this growth is the result of its investments in its core projects, Jolly Ranch and Revere, with an approximate US$19m net investment in the six-month period. The company noted that its projects are jointly-developed with its partner Running Foxes Petroleum, sharing all costs on a pro-rata basis.
Nighthawk completed an institutional placing early in the period, in July 2009, raising US$36.5m gross. The placing strengthened its capital base, provided funding for continuing development and ensuring that Nighthawk remains debt free. The company also expanded its potential investor base, with a US listing. Nighthawk’s equities obtained a quotation on the OTC-QX International Platform in New York and also undertook a Level 1 American Depository Receipt (ADR) programme, which was fully sponsored by The Bank of New York Mellon.
Nighthawk's strategy is to create value by building a scalable hydrocarbon company focused on low risk, high reward assets in a politically and fiscally stable environment. Nighthawk holds substantial equity in four projects across the US mid-continent, all of which are operated by Running Foxes. Nighthawk and Running Foxes continue to develop their existing acreage and, where further substantial reserves are indicated, extend land positions.
The company said that the nature of its assets mean that it is building production and value gradually, and as it continues to prove-up core projects, Nighthawk expects inherent value to become more apparent without exploration risk as all wells drilled are in the appraisal category.
Nighthawk said its principal aims for the remainder of 2010 are the continued increase in production levels, 2P reserves and to underpin a per acre valuation typical to other US shale oil plays. “In Jolly Ranch we believe that Nighthawk can achieve its ambitions by proving up the project to a level that establishes a high value shale oil play similar to other prolific US shale oil projects", Bramhill added.
The company believes it is well positioned for the future and remains confident that significant progress will be achieved in 2010.
Broker Daniel Stewart & Company (DS&C) responded to the results released by Nighthawk, saying it was not expecting much change following the production figures reported in late February. The new drilling campaign that will begin in Q2 2010 will target new zones following the identification of seismic and petrophysical indicators which may be production ‘sweet spots’. Indications are that production at Revere could increase from 200 boe/d to 500 boe/d during 2010.
Westhouse Securities also issued a note in response, saying key news flow over the next few months is likely to include production updates and results from the new drilling campaign at Jolly Ranch. In addition, there will be further drilling at the Revere project and continuing development work at both projects.
Nighthawk continues to build production and is building a very substantial reserve base, the broker added.