Reabold Resources PLC (AIM:RBD)’s West Newton drilling asset in West Yorkshire is “a potential company maker”, Cavendish analysts stated in a Wednesday research note.
Reabold revealed that the Environment Agency has issued the variation of the permit for the West Newton B wellsite, allowing for for the use of oil-based fluids within the Permian formations during drilling and testing operations.
The timing for the drilling of West Newton B-2 has been delayed to the first half of 2024, but despite this, the project remains a pivotal opportunity for Reabold, with the potential to significantly elevate the company's profile and valuation, said Cavendish
Reabold, holding a 56% economic interest in West Newton, is financially prepared for its direct share of the well, estimated at a gross cost of $15 million (£12.4 million) to Rathlin Energy.
Reabold's financial readiness is bolstered by the anticipated receipt of a £9.5 million second tranche contingent payment from Shell for the sale of the Victory asset.
This inflow, expected upon the project's development consent, may position Reabold to extend additional funding support to Rathlin Energy, Cavendish surmised.
The project, located on licence PEDL 183 on the UK northeast coast, is estimated to have an 86% chance of success, and with “little priced into the shares, we see the risk/reward profile for this well as heavily skewed to the upside”.
Cavendish sees a gargantuan upside potential on Reabold stock, with a price target of 1.2p representing a 1,200% upside.