Nigeria focused Eland Oil & Gas PLC (LON:ELA) shares gained on Thursday after the explorer told investors that the Gbetiokun-3 well has encountered oil-bearing reservoirs across multiple horizons and it will be completed as a producer.
In a statement, Eland O&G confirmed the completion of the drilling of the appraisal and development well.
It said it expects production testing will take place during the first quarter for the Gbetiokun-1 and Gbetiokun-3 wells into an early production system, which will have combined production at around 15,000 barrels of oil per day.
George Maxwell, Eland O&G’s chief executive, said: “The company has successfully completed the drilling of the Gbetiokun-3 well. Gbetiokun has the potential to deliver a significant increase in oil production from OML 40 and we look forward to updating shareholders on flow testing later this quarter."
The well is seen to have net pay of around 46 feet. Eland O&G noted that it will produce from the D9000 and E4000 reservoirs whilst it also noted that E7000, a secondary target reservoir, was encountered slightly deeper than expected.
Eland O&G added that the E7000 is currently being reassessed with a view to being targeted by future wells.
Additionally, readings in the D5000 reservoir section showed mobile oil, so further analysis will now be conducted to assess whether it can be developed commercially.
In a note to clients, analysts at Peel Hunt commented: “Expectations for a combined gross initial production rate on start-up during 1Q 2019 from Gbetiokun-1 and 3 stand at 15,000bbl/d, which would take overall gross production to c45,000bbl/d.
They noted: “Eland currently trades on FY18 EV/EBITDA of 2x and at a 21% discount to our estimate of Core NAV of £319m, or 146p/share.”
The analysts reiterated a ‘buy’ rating and 160p target price on Eland O&G shares, which in afternoon trading were up 4.3% at 121p.
-- Adds analyst comment, share price --