Stockwatch Michael Kabanuk and Brendan Carrigy's Alberta Bakken producer, Granite Oil Corp. (GXO), added seven cents to 86 cents on 104,800 shares, in the wake of encouraging test results from its first well in nearly a year. The well tested at just over 900 barrels of oil equivalent a day, including 838 barrels a day of oil. This is fairly comparable with the results of the three wells that Granite drilled in 2018, all of which (like the latest well) used a different fracking technique from Granite's older wells. The average combined oil rate of the three 2018 wells is higher than the average rates of the roughly 30 wells that Granite had drilled over the previous three years. In addition to the new test results, Granite provided its preliminary operational results for the first quarter of 2019. Despite the lack of drilling during the quarter -- indeed, the lack of drilling since last May -- production for the first quarter averaged 1,585 barrels a day, relatively flat with the fourth quarter 2018 level of 1,618 barrels a day. This reflects Granite's work on its EOR (enhanced oil recovery) program, designed to lower its production decline rate.
Granite's update caught the eye of Raymond James analyst Kurt Molnar, who in a research note this morning praised the company's "return to solid footing." Mr. Molnar opined that Granite has "one of the best oil projects in the basin" and should benefit immensely from rising oil prices. Not only that, but its "ongoing frack innovation appears to be paying dividends," declared Mr. Molnar." That might strike some investors as a rather clumsy choice of words, given that Granite used to pay an actual dividend of as much as 3.5 cents a month. It had to reduce this dividend multiple times before finally suspending it last December. This is just one of the reasons why the 86-cent stock has collapsed from its November, 2015, peak of $9.39. In any case, Mr. Molnar evidently reckons that Granite is finally about to turn things around. This morning, he upgraded the stock to "outperform" from "market perform" and hiked his price target to $2 from $1.40