Pantheon Resources’ (LON:PANR) assets in Texas have the potential for exceptionally attractive economics, according to WH Ireland in its first note on the Aim-listed US oiler.
On top of its recent West Double A Wells discovery, the company has three additional geologically comparable drill-ready exploration targets, one of which is currently being drilled.
Production, meanwhile, will use traditional low-cost vertical wells that can flow naturally without fracking due to the excellent natural attributes of the reservoir sands of the Eagle Ford formation.
WHI has applied a long-term commodity price for WTI (light oil) of $65/barrel and for US gas of $3.50/mmbtu.
On those numbers, it estimates the value of the VOBM#1 well (the first well) at US $23mln (after-tax), compared to a US$5mln cost. WHI notes that the company has identified another 36 well locations on the West Double A Wells discovery.
Best estimate of the gross recoverable resource potential from West Double A is 66.5mln barrels (33.2mln boe net to Pantheon). it said.
“On this basis, we estimate the discovery has an unrisked value of $247.2mln net to the company, or 77.3p/share of which we have included a risked value of 52.6 p/share in our target price.”
The well currently being drilled VOS#1 is targeting the LP2 Offset prospect, which had a pre-drill prospective recoverable resource estimate of 26.7mln barrels and a 10.8 p/share risked target price.
In addition, WTI notes there is also potential in the company’s shallower Austin Chalk formation, which it believes is an excellent prospect in its own right, and other offset prospects.
Jay Cheatham, Pantheon’s chief executive, also had extensive experience at ARCO, a specialist in the Eagle Ford and Austin Chalk formations.
In short, says WHI, Pantheon offers exposure to exceptionally high quality assets in an area of low political risk, with abundant infrastructure and favourable taxes.
Buy with a 91p/share target price concludes the broker.
Shares were 83.7p today.