Nighthawk Energy (LON:HAWK) said the John Craig 6-2 well on the company’s Jolly Ranch project in Colorado tested commercial oil from the Cherokee shale formation.
A continues 24 hour flow test yielded over 600 barrels of crude. Work is now underway to put the well into permanent production.
Three further potential oil-bearing zones were “clearly identified” during drilling, but have not yet been tested, Nighthawk revealed.
The group confirmed the next well, Pike's Peak Williams 4-30, is “proceeding to schedule”.
Chairman Stephen Gutteridge said: “The results from the John Craig 6-2 represent a very positive start to our new well drilling programme, and the well is expected to significantly step-up our current production levels.
“We are delighted with the initial flow rates and we will update on sustainable flow levels once the well has been on production for a few weeks.
“The results are also early confirmation that our geo-science led development strategy to identify the 'sweet-spots' in the Cherokee resource play, coupled with relatively mild formation interaction, yields results.
“We are looking forward with increased confidence to the next wells in the programme.”
Nighthawk is expected to drill four wells at US$1 million each. City broker Westhouse recently described this as perhaps the most critical stage in the rejuvenation of Jolly Ranch.
The new wells will help unlock some of the potential of the asset, as well as giving a clear demonstration of the company’s ability as an operator.
Nighthawk is also currently carrying out a comprehensive work-over programme, which is slowly increasing the rate of production.
At the same time the group has also been forced to rehabilitate some of the processing facilities such as pumps, pipelines and storage units to avoid bottlenecks and further enhance output.
In its note earlier this week Westhouse repeated its ‘strong buy’ on Nighthawk, citing the “continued industry interest” in US shale plays as underpinning its bullish recommendation.
Setting a punchy 10.7 pence target price for the shares, analyst Andrew Matharu said the Chesapeake asset sale to Shell and Chevron revealed the sector is still very much on radar screens of the majors. Nighthawk owns the Jolly Ranch shale oil project in Colorado.
“Continued industry interest in US shale oil plays could deliver the step-change witnessed in US shalegas industry and Nighthawk are well positioned to play their part in the Niobrara basin,” Matharu added.
“The drilling of new wells will verify management’s subsurface thesis, demonstrate their credibility as an operator and highlight what the potential of the Jolly Ranch asset is on a per well basis.”