Zephyr Energy PLC (AIM:ZPHR, OTCQB:ZPHRF) latest well-test success has revealed further upside, that’s according to City stockbroker Panmure Liberum, which has now upgraded its target price for the share.
Repeating a ‘buy’ recommendation the broker lifted its target to 13.7p, from 13.5p.
“The highly successful test of the State 36- 2R well has demonstrated fresh upside due to the potential savings that acid stimulation offers, also unlocking greater potential across the Paradox Basin,” analyst Ashley Kelty said in a note.
“Zephyr is in good shape at present with multiple opportunities for the shares to be rerated on near-term news flow”.
Kelty described the recent result as a resounding success.
“The rates were well ahead of expectations, given the well flowed at 1,350boepd during the initial phase of testing, thus showing that the acid stimulation has significantly improved reservoir performance.
“It is worth noting that the horizontal section is very short, and the scope for materially higher flow rates from longer horizontal sections in future development wells is significant.”
The analyst added: “The results have positive read across for the deliverability and productivity of future wells, with potential savings in time and capex also delivering improved economic returns.
“This result has opened up multiple options for the company to monetise and develop the Paradox area, with management. considering whether to commence production from the existing wellbore, drill a horizontal section or work with another industry partner on a wider development for the Paradox Basin.”
Kelty said it is a great situation for the company to be in, as all options will be accretive.
“Zephyr has the financial capability to bring this well into production in the near term, whether from the current well or through drilling a longer horizontal section.”
In London, Zephyr shares traded 14% higher on Friday changing hands at 3.7p and are up some 37% in 2024 to date.