BMO Capital Markets comments on Ithaca Energy Inc.According to BMO Capital Markets:
Ithaca Energy
(IAE-LSE; IAE-TSX)
Stock Rating: Outperform
Stock Price: £0.45
Target Price: £0.80
April 13, 2015
Successful Flow Test on Final Stella Well
Ithaca has announced that the fifth and final development well on the Stella field achieved a flow rate of 8,080 boepd over a 12 hour period on a 48/64 choke. The flow test comprised 6,191 bopd and 11.3 MMscf/d of gas. Fluid samples show oil gravity of ~39° API. The well will be suspended as a future producer. Combined the five development wells have achievedrates in excess of 53,000 boepd gross and management confirm that there is additional reserves potential in the Ekofisk formation.
Our View:
- Management were quietly optimistic at last month’s FY14 results but this is slightly better than we expected and the high proportion of liquids should add to the initial oil production at Stella (currently constrained by gas processingcapacity on the FPF-1).
- We would be surprised if management updated initial Stella production guidance at this stage (remains ~16 kboepd net, ~30 kboepd gross), however, we believe the positive results from all five development wells must put upward pressure on management’s estimate.
- We await further clarity from the company so make no changes to our numbers on the back of this but, indicatively, an acceleration of liquids production (without assuming any reserves upside) has the potential to add ~5% to our Core NAV.
- Our Core NAV currently stands at 85p/sh.