The firm’s partner Salt Bush Energy Ltd is drilling a second farm-out well under the Wizard Lake farmout agreement in order to spud the existing HZ 13-4-48-27W4 well by mid-November.
In addition, Point Loma is expanding its production facilities to handle up to 5,000 barrels per day of fluid and 5 million cubic feet per day of natural gas to allow for full production of the existing two wells, the second farmout well and any future development.
Calgary-based Point Loma told shareholders that the first two wells drilled in the Rex oil pool have shown good deliverability, but production flow rates are restricted because of facility limitations.
The new facilities will eliminate the restriction on production flow rates and, in addition to the planned new well, will allow the company to demonstrate full-field development potential.
"This additional delineation well should further extend a top tier oil pool that is expected to add to the oil component of our production base, enhance the corporation's oil reserves and strategically position Point Loma as the Rex oil play continues to evolve in the area and across Point Loma's large land position," said Terry Meek, CEO of Point Loma.
The oil and gas company said that the next steps will be to put the two existing Rex wells and the upcoming one into production to the expanded facilities, which is expected to happen by the end of the year.
Point Loma said that its current landholdings support the potential for between 16 to 20 additional drilling opportunities based on internal mapping and projected well spacing. The two companies currently control 4,570 acres in the surrounding area.
Salt Bush will take on 100% of the drilling, completion and equipment costs in the 13-4 well, with Point Loma retaining a 25% working interest before payout and 50% after payout.
Mackie lauds expansion
In a Tuesday note, research firm Mackie hailed the positive impact that the expanded production facilities would have on the Rex’s output.
“The results of the Rex-1 and Rex-2 wells have far exceeded expectations and we look forward to the results of the Rex-3 extended reach horizontal well,” analyst Bill Newman wrote.
“Upon completion of the expansion of processing facilities we expect a boost in PLX’s production and cash flow. In addition, PLX has a large inventory of other high impact play types including a conventional Banff oil play, Mannville oil expansion plays, and the Duvernay shale oil resource play which provides additional upside for investors.”
Newman maintained a Buy rating and set a C$0.80 target on the stock.
Shares of Point Loma were trading at C$0.05 in Toronto on Tuesday afternoon.
--Updates with Mackie note--
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