Maverick Drilling & Exploration (MAD) – Initial Blue Ridge Dome...

Maverick Drilling & Exploration (MAD) – Initial Blue Ridge Dome high impact discovery

Announcement details:
• MAD’s first high impact test on the Blue Ridge Dome in Texas has encountered an over-pressured zone, resulting in the well “blowing out” (i.e. the pressure in the well was higher than expected, blowing the drilling mud out of the hole).
• The well has been brought under control with the use of higher weight mud.
• Given the higher pressures encountered the current well will be sealed off and a replacement well drilled 10 metres to the west of the current hole.

WHTM view:
• Initial analysis –
1. This is a positive result overall, with the over-pressured zone pointing to the potential for much high production rates from the replacement well than previously experienced at Blue Ridge Dome.
2. MAD had already been drilling with ~20% higher than normal mud-weights, anticipating the expected formation pressure from the high impact target. The actual pressure has turned out to be ~10% higher again (total of ~30% higher than the top-of-dome wells).
3. The extra cost by the time the replacement well is drilled will be only the $175k spent to date on the first well; negligible in the scheme of things.
4. The result points to better than expected potential for the remaining Blue Ridge high impact wells. MAD will incorporate a higher mud weight in its future drilling plans.
• Earnings implications – No material changes at this stage; this will be reassessed following sufficient production history from a number of the high impact wells.
• Investment view – Buy recommendation retained, price target of $2.40/share currently under review following receipt of 2013 interim results last week.