Dragon Oil reports further successful well test in Caspian Sea - UPDATE
Dragon Oil (LON:DGO) today announced the successful testing of its latest development well, Dzheitune (Lam) 13/163.
This is the group's third successful well this year so far and it is part of a major development drilling programme.
The well was drilled to a depth of 2,703 metres. In initial tests the well flowed at 296 barrels of oil per day. But following a re-completion in different reservoir intervals Dragon achieved an improved production rate of 1,584 barrels of oil a day.
"I am pleased to report that the flow rate from the Dzheitune (Lam) 13/163 development well has improved significantly after we added perforations at different reservoir intervals," said chief executive Dr Abdul Jaleel Al Khalifa.
"We constantly seek to optimise production from existing as well as new wells using a range of techniques and it is satisfying to see an immediate positive impact on our production."
Dublin based broker Davy says Dragon Oil shares are cheap. Currently trading at 489p, the stock is priced at a 25 per cent discount to the broker's 632p net asset value, analyst Caren Crowley explained in a note to clients.
"Dragon has a fit balance sheet with $1.35bn in cash at management's disposal and no debt; and management has demonstrated great execution, delivering more than 25% growth in production in 2011," the analyst said in a note to clients.
"For 2012 and 2013, Davy is forecasting production growth of 25% and 20% respectively.
"This compares with management's guidance of 10-15% growth per annum over the next three years."
Crowley stressed that Dragon had already exited 2011 with production of 71,751 barrels a day, and it has added a further 5,000 barrels a day in since the start of the year.
Last Friday Dragon released the results from the first two wells of 2012.
The Dzheitune (Lam) 13/140A side-track produced at an initial rate of 2,123 barrels a day, while Dzheitune (Lam) A/165 well was completed as a dual producer and tested at a combined rate of 2,272 barrels.
Following that result Davy said that Dragon's target of completing between 15 to 20 new wells each year looks increasingly comfortable.
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