Mackie Research Capital repeated a 'Buy' rating on junior oiler Point Loma Resources Ltd (CVE:PLX) after the successful drilling of the Rex-2 well at Wizard Lake, which the broker said found 'excellent' oil shows.
As previously reported, Rex-2 - the first of a two well farmout program with Salt Bush Energy at the Wizard Lake project - was spudded on July 27 and completed by another partner Whitebark Energy Ltd (ASX:WBE).
Whitebark now has a 40% working interest in Rex-2 and the Wizard Lake oil field, a holding which will increase to 50% following the drilling of Rex 3.
"The Rex-2 horizontal well was successfully drilled to a total measured depth of 3,033 metres in only eight days. The well encountered excellent quality reservoir along the entire 1,460 metre lateral with porosity of up to 21%," Mackie analyst Bill Newman said in a note.
"This compares favorably to PLX’s the Rex discovery well which has a 1,200 metre lateral, with porosities ranging from 15% to 18%. The Rex-2 well also had excellent oil shows throughout the lateral section and within a week, PLX expected to commence a 35 stage fracture stimulation program which is approximately 30% more than the 28 frac stages completed in the discovery well," he noted.
The first production well at Wizard Lake, the 16-17-48-27W4 Rex oil well, started producing on June 5 this year, having been first drilled last December.
That well tested at around 340 barrels of oil equivalent per day and the analyst expects it could achieve a peak oil rate of 500 barrels per day as it fully cleans up and the pump rate is increased.
On May 30, Point Loma announced a farm-out agreement with partner Salt Bush Energy to help delineate the Wizard Lake Rex oilfield discovery. Salt Bush will fully fund the cost of drilling two horizontal oil wells at an estimated amount of around C$5 million.
Second spud expected
Newman reckons that given the initial results of the Rex-1 and Rex-2 wells, he expects Salt Bush to choose to drill the second delineation well - Rex-3.
He also noted that internal mapping has shown that the Rex pool has the potential to hold 60 million barrels of original oil in place on Point Loma land.
"With over 20 potential drilling locations, the Rex oilfield has immediate production ramp potential," said the analyst.
Mackie has a target price of C$1 for Point Loma shares, which are currently changing hands for C$0.12.