Nighthawk announces new Jolly Ranch investment

Nighthawk Energy (HAWK) moved to reassure investors as it announced that it would commence a comprehensive work-over programme focused on 15 wells on the Jolly Ranch Project in Colorado, US.

The project, of which Nighthawk is the operator and in which it holds a 75% working interest, had been plagued by under-investment over the past year as both Nighthawk and its partner were restricted by cash shortage.

"The low level of investment in 2011 has had a marked impact on production levels, a trend which Nighthawk intends to reverse during 2012," the company stressed. In fact, Nighthawk plans to invest an average of over $600,000 (c£378,000) gross per month in 2012, the highest level of monthly investment since January 2011, to increase the flow rate and sustainability of production from Jolly Ranch.

Two work-over rigs are currently being contracted and are expected on the Jolly Ranch in March of this year. The work-over programme is anticipated to extend through most of the second quarter of 2012, with a total gross cost of approximately $750,000.

"Investment in the project has been severely restricted over the past 12 months which has resulted in lower production levels and the need for remedial work on a number of wells. We will now change this with the commencement of a $7.5 million gross work programme this year," promised chairman Stephen Gutteridge.

However, Gutteridge warned investors that although he was confident of delivering a significant uplift on current levels, he would not be able to fully quantify the potential for increased production until results from the work-overs had been received.

In the second half of 2012, Nighthawk plans and has budgeted to drill five new wells to add to production and further establish the range and extent of the Cherokee shale on the company's acreage. Nighthawk expects at least one well to test the possibility of Niobrara shales in the northern acreage and also to drill a horizontal step out from an existing vertical well.

Subject to the availability of drilling rigs, the first of the new wells is currently anticipated to spud early in the second half of 2012. The current gross cost estimate for the drilling programme is $6.8 million.

"While it is good news to hear that the issues have been identified and the company has the resources to fund their [repair], now it is all about delivery," stressed broker FoxDavies.

Shares in the company, which have lost three-quarters of their value over the past year, rose slightly.

Interested in investing in oil and gas firms? Peter Temple's guide to analysing oil companies may come in handy...