Canaccord Genuity (TSX:CF, LSE:CF) analysts repeated a 'Speculative Buy' rating and 105p price target on Southern Energy Corp (TSX-V:SOU, AIM:SOUC, OTC:MAXMD) following news the first of three wells the company has drilled on its Gwinville Field, targeting the underdeveloped Selma Chalk reservoir, has delivered very encouraging initial results.
The analysts noted that well, GH 19-3 #2 is flowing at an initial 7.7 million cubic feet per day (MMcf/d), substantially ahead of expectations, and as it continues to clean up, further improvements can be expected. The #2 well is already tied into the production facilities, and so total company production has increased by 60% to around 3,200 barrels of oil equivalent per day (boe/d) - 96% gas - with negligible additional operating cost impact.
In a note to clients, the Canaccord analysts said: "We think this is an excellent start, with the well still cleaning up and appearing to improve as that continues."
READ: Southern Energy announces ‘transformational moment‘ following successful early flowback performance in Gwinville field
They added: "It is still early in the process of assembling production data, but the indications are that well #2 is already performing considerably better than any previous Selma Chalk well in the area. Stimulation operations on well #3 and #4 have also been completed, and we can expect results from those in the coming weeks.
"Beyond this initial phase, the company is now planning a much more extensive drilling programme to grow production from this field/reservoir at a time of high gas prices."
The analysts pointed out that a full development campaign is expected to start in Q4 2022.
Contact the author at jon.hopkins@proactiveinvestors.com