Caza Oil strikes big at Broadcaster

Caza Oil & Gas has had an "exceptional result" at the Broadcaster 29-3H well in the Bone Spring play in New Mexico. In fact, results are so good that the share price has surged by 16% to 20.95p. But with the well already producing at 2,621 barrels of oil equivalent (boe) and flowing to sales, the upside here could be substantial.

"Caza tends to move in unfathomable ways, it will have a huge bounce then stay at a level for a while, at 8-9p it did, then moved up to 18-23p, this must be time for another serious bounce," writes Malcolm Graham-Wood, industry expert and founding partner of HydroCarbon Capital.

"The value of Caza has increased substantially with recent results and the market hasn’t noticed, soon the industry will as net production screams through the magical 2/- b/d, don't say you haven’t been warned, Caza is worth well in excess of 50p a share."

Management certainly think this is "a very strong well" and expect a higher peak rate to be achieved over the next few days. New frac technologies are paying off, and at little extra cost, says Caza, which has a 25% working interest (17.63% net revenue interest) in the well.

There's good news, too, on the nearby Lennox property from which results of the scheduled frac are due next month. A second well is about to spud at the Marathon Road property and the next Broadcaster well will follow towards the end of this year.

House broker Cenkos Securities is clearly delighted. "With multiple wells in the coming months, we believe that there will be opportunities for the market to rerate the stock. Caza still trades at a significant discount to RENAV (Risked Exploration Net Asset Value), and as such offers investors an opportunity to gain exposure to the Bone Spring play." It sticks with a 32p price target.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.