Caza Oil & Gas Inc. CAZFF

Directors Talk"

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Caza Oil & Gas announced an update on drilling activities in West Copperline Property and Gamma Ridge in New Mexico. In the 3rd Bone Spring Sand interval, the West Copperline 29 Fed #4H horizontal development well reached a total depth of ~16,015 feet and subsequent fracture stimulation commenced on 1st July 2014. The well produced at a peak 24 hour gross rate of 1,598 barrels of oil equivalent, delivering 1,220 barrels of oil and 2.27 million cubic feet of natural gas. The Broadcaster 29 Fed #3H horizontal development well, direct offset to the West Copperline Fed 29 #1H and #3H wells, is drilling at ~10,800 feet; preparation for drilling the lateral section is underway. Meanwhile, the Gramma Ridge 27 State #2H horizontal Bone Spring test well reached a total depth of ~14,650 feet in the 2nd Bone Spring Sand interval. At West Copperline, the company is currently producing four wells on two contiguous 160 acre tracts (west half), whereas the Broadcaster wells (east half) would be operated by a third party. Log and core data from Brushy Canyon, Avalon and 1st Bone Spring Sand intervals here point out the presence of oil and natural gas across each of these intervals. The company has a 62.5% working interest in these wells. Our view: Encouraging results from West Copperline further enhance the prospectivity of the Bone Spring Play. Additional drill activities undertaken here have shown an accelerated pace of operations, alongside reducing costs. The recent log and core data obtained across multiple prospects within West Copperline improve the asset’s prospects for future development. Moreover, the US$10m funding secured from Apollo Investments last month would help Caza finance its upcoming operations. Given the ongoing developments at West Copperline, Forehand Ranch and Jazzmaster properties, we remain optimistic about the company’s performance in the coming years and hence maintain a Speculative Buy rating.