Shares in Reabold Resources (LSE:RBD) enjoyed a 6.9pc lift to 0.8p this morning after the business announced well workover progress in California hot on the heels of its acquisition of Gaelic Resources last month. The firms reported that workover activity in the Monroe Swell area, where it now owns a 50pc interest after buying Gaelic, is underway and showing ‘initial signs of success’.
Integrity Management Solutions, the contract operator at the site, is undertaking a four-well workover programming made up of the Doud A-1, A-2, A-3, and A-7 wells. Pumping units have been installed at all four locations, and well intervention work has been carried out at A-3 and A-1, with significant oil shows already present at both.
Reabold said A-3 has now been put into production, with the rate of oil production expected to increase over the coming days as the amount of recovered load water diminishes. A-1 will be put into production shortly, with well intervention work on A-2 and A-7 to follow.
Monroe Swell is one of the California-based leases partially acquired by Reabold last month when it bought 100pc of Gaelic Resources’ share capital in exchange for £3.1m worth of its shares, equal to a 12.9pc stake.
Through Gaelic, Reabold will have the right to earn-in to 50pc of Gaelic’s leases by drilling up to five wells by the end of 2019. The five-well programme earns an estimated NPV of $235m net against a cost of around $7m.
Other leases include West Brentwood, where a one-well programme is planned, and Grizzly Island, where the partners are planning to drill two wells. In today’s update, Reabold added that construction of the West Brentwood drilling location will take place this week. West Brentwood will be the first well to be drilled on the company’s California assets and is expected to spud in August.
Commenting on today’s news, Stephen Williams, co-chief executive of Reabold, said: ‘In addition to the early cash flow and impressive financial return metrics, a successful workover programme also provides much encouragement for the subsequent drilling activity that will take place on the California assets in the coming weeks and months.’
Sachin Oza, fellow co-chief executive, added: ‘We are delighted that California has already gone into production, and look forward to an extremely exciting next few months, with multiple drilling events taking place across our diversified portfolio of investments.’
The asset sits alongside Reabold’s stakes in UK-based Corallion Energy and Romania-focused Danube Petroleum, both of whom are on the cusp of drilling key assets. When we spoke to Williams and Oza at the beginning of June, Williams foreshadowed the recent busy period of newsflow, saying:
‘We have been able to go out and start building up to our next investment opportunity- this takes a little bit of time to get right. That means news flow is absent while we are getting those next set of investments ready to go. We have been in a sort of passive situation where we have been watching the share price moving without being able to do anything about it. We can’t talk about investments when they have not completed.
‘We expect to have a bigger portfolio than we do today by the time Corallion or Danube announce their first drill. At this point, we will have regular newsflow from our underlying projects, solving the situation we have had in the last few months where there hasn’t been that regularity of information. Reabold’s unique approach has already piqued the interest of many institutional investors, and we are entering a period of potentially transformational activity.’