Shares in Reabold Resources (LSE:RBD) rose 3.5pc to 0.8pc this morning after the business revealed that it has successfully put a well into production at its 50pc-owned West Brentwood licence in California. The move follows successful drilling and testing of the well, called VG-3, which saw it deliver an initial rate of 200bopd and 60,000scf/d.
Integrity Management Solutions (IMS), Reabold’s contract operator in the US, is initially using temporary production facilities at the well. These will provide the information needed to build permanent facilities that will also feature fixed oil storage and wash tanks.
Reabold entered the US in June with the acquisition of US-focused oil and gas firm Gaelic Resources for £3m, paid in shares. Through Gaelic, the company has the option to participate in West Brentwood and two additional near-term, high-impact Californian leases called Monroe Swell and Grizzly Island. These sites are estimated to have an NPV of up to $235m net to Reabold.
As a result of VG-3’s success, Reabold and its US partners have decided to prioritise a second well at West Brentwood. The well is expected to spud before the end of the year with the aim of accelerating cash flows generated from the licence. Following this, drilling will take place at Grizzly Island in the New Year.
Elsewhere in today’s update, Reabold said IMS is upgrading and smoothing the existing well pad at Monroe Swell in anticipated of re-drilling a well called Burnett 2. Reabold said this will allow easier and safer access for an incoming rig. IMS has also submitted a notice of intent re-drill at the licence, which Reabold’s expects to reach approval in the ‘near future’.
Stephen Williams, co-chief executive of Reabold, said: ‘VG-3, Reabold’s first drill, was a significant success for the company and has provided Reabold with production and cashflow, as well as considerable optionality as we continue to develop our California portfolio. West Brentwood, which we gained exposure in June 2018, has performed in line with our highest expectations and, with VG-3 now in production, we anticipate strong cash returns on our investment. California is an exciting portfolio for Reabold, and we look forward to receiving yet more results before the year-end.’
When we spoke to Williams and his fellow co-chief executive Sachin Oza last month, the pair said Reabold’s rapid progress in California means the assets are already contributing financially. Williams added that this has been a welcome boost for the business as it awaits progress across the rest of its portfolio:
‘California has moved forward very quickly, and it has been useful to get something into production while we wait for the slightly slower wells in the UK and Romania. The successful well at West Brentwood is currently being completed and will soon be producing. The plan is then to drill two more wells in California this year and several more in 2019. The specific programme for next year has yet to be signed, but we are confident that the US will continue to quickly bring in cash.’