Source: Wilson HTM analysis and company dataMaverick Drilling &...

Source: Wilson HTM analysis and company data

Maverick Drilling & Exploration Limited – September quarterly

Announcement details:
? September quarter production of 532 bopd was down 11% on the prior quarter. Current production is 700 bopd. Cash received from oil sales of $US3.8m.
? 17 wells drilled, of which 5 were plugged and abandoned (success rate of 70%).
? A further 1,792 net acres were acquired over Blue Ridge, Nash and Boling Domes and the Edwards Reef prospect.
? Subsequent to the end of the quarter MAD announced a non-binding MOU with Gulf South Holdings to provide additional funding for development of MAD’s shallow salt dome acreage.
? Cash at call at 30th September of $US64.5m.

WHTM view:
? Initial analysis –
- On balance a reasonable result, although there may be some disappointment that the expected increase in drilling activity and production has yet to occur.
- Production rates were lower than expected due to natural decline exceeding tie-ins of new wells. MAD is increasing efforts to tie-in previously drilled wells, which should increase production from 1Q CY13.
- Drilling of new wells (at ~5 wells/month) was lower than expected (~14 wells/month based on guidance at the capital raising) due in part to MAD focusing on testing deeper perimeter wells while the Gulf South transaction was being negotiated, drilling of the Edwards Reef prospect and undertaking some contract drilling. We expected drilling rates will increase from December once the Gulf South agreement is completed.
- Commissioning of the two refurbished drilling rigs (Rig #11 and Rig #12) has been delayed by one quarter, with the target completion now 1st Quarter CY13. We believe this will limit the total number of wells that will be drilled during FY13 to ~140 (down from ~160), all things being equal. However, MAD purchased a further drilling rig (bringing the total to 7) in October, which will increase drilling capacity in CY13. As expected, MAD is seeking additional drilling and completion rigs.
- The drilling success rate during the September quarter of 70% was lower than the previous average (~80%), but it is too soon, based on small well numbers, to conclude this is significant.
- Crude prices averaged $US11/bbl above WTI for Blue Ridge Dome and $US6/bbl for Nash and Boling Domes, equal to or above our assumption of $US6/bbl.
- MAD has engaged Baker Hughes to assist in the process of optimizing stimulation and production processes for the Het Lime formations on Nash and Boling Domes.
- The Gulf South transaction, assuming this is completed as expected, eliminates the need for our previously estimated capital raising in CY13. This is positive for valuation due to reduced dilution.
? Earnings implications – Under review. Material changes unlikely.
? Investment view – Buy retained. Price target of $2.40/share under review. Current share price $1.09. TSR = 120%


Maverick quarterly oil production