Pantheon Resources PLC (LON:PANR) enjoyed a rebound after Monday’s sharp sell-off - what’s known in City parlance as a ‘dead cat bounce’.
The source of yesterday’s pain – which saw around a third wiped from the value of the company – was Pantheon’s inability to drill a time-and money-saving horizontal well on its Texas acreage.
The problem was the sandstone proved far more abrasive than expected, resulting in a series of equipment failures.
Chief executive Jay Cheatham said the “technique will not be repeated”.
At the same time a vertical frack on another well failed to live up to City analysts’ expectations.
That said, two followers of Pantheon believe the markdown that followed may have been punitive in the extreme.
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Reinstating his ‘buy’ recommendation and 193p price target (current price 93p), WH Ireland analyst Brendon Long said the stock had been ‘oversold’.
“Did we get ahead of ourselves in our valuation? Yes, because we assumed that the company would not run into drilling or operational challenges,” Long said in a note to clients.
“We have now included an 85% chance of success for all drilling operations and believe that with statistical history there is scope to move that upwards.”
Oil blogger and former analyst, Malcolm Graham-Wood, said he had a “very useful” phone call with Pantheon CEO Cheatham.
It led him to believe the market reaction was both “furious and somewhat overdone”.
“Both well operations were disappointing but neither can be classed as dusters, which is what the share price indicated,” he added.
At 12.15pm, the shares were up 4% at 93p, valuing the business at £200mln.