Hanson Westhouse, broker to Nighthawk Energy (AIM: HAWK), restated its buy stance on the oil and gas explorer and producer, and retained its pre-tax net asset value per share valuation of 101 pence.
Nighthawk Energy released an independent technical review of the Devon Oil Field last week, and it was in response to this update that Hanson Westhouse commented today. The Devon project covers an area of approximately 3,000 acres and is located in Bourbon County, Kansas.
The broker noted several points about the report, including the fact that the field was already producing approximately 115 barrels of oil equivalent per day (‘boepd’) before a water injection programme commenced at the field. It is standard practice to inject water into wells to enhance production and recovery rates. The water injection is anticipated to increase production at each well to between 5 and 20 barrels of oil per day (‘bopd’) and increase recovery factors to 15-25%.
The technical review, completed by Oilfield Production Consultants Limited, also reported a most likely probabilistic Oil in Place (‘STOOIP’) of 26.25 million barrels, with an upside case of 59.89 million barrels and downside case of 7.31 million barrels. All calculations omitted gas reserves. Based on the review, Hanson Westhouse calculated a mid-case recoverable reserve to Nighthawk Energy of 4.2 million barrels.
“Since OPC states that the main reservoir is geologically continuous over a large area including the entire acreage owned by Nighthawk, we consider the chances that the volume of oil in place is higher than the most likely case to be very strong. This would imply higher recoverable reserves for Nighthawk,” Hanson Westhouse noted.
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