A potential gusher combined with increasing production makes Maverick Drilling & Exploration (ASX: MAD) a high risk punt that just might pay off.
Maverick Drilling & Exploration shares lead the gainers in the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) yesterday, jumping 10% higher in advance of the company’s latest high impact and production report.
Last month, the company reported its first high impact test on Blue Ridge Dome resulted in the well blowing out, Chairman Don Henrich describing the development as “exciting.” Maverick plugged the well and immediately began drilling a replacement well, 10 metres away.
Although the word wasn’t used, obviously the Maverick team are hoping they’re on the cusp of discovering a good old fashioned “gusher.”
Today the company updated investors on progress, saying the replacement well is over half way to its 6,000 foot planned depth. It’s likely another few weeks before we get to hear results.
Maverick also provided a production update, with average barrels of oil per day now topping 1,000. There have been hiccups along the way, and I’ve criticised the company for taking their eye off the production ball, but when you zoom out and look at the big picture, it looks far more palatable.
Maverick shares have jumped over 23% from the end of February, and with some justification. Still, at around 70 cents, they are down over 50% from their peak of last year.
On a reserves basis, Maverick shares are still ridiculously cheap. Reserves don’t pay the bills, but add the potential of a significant near-term discovery to oil production that is trending nicely upwards, and you’re looking at a high risk punt that just may pay off.
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The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool General Manager Bruce Jackson owns shares in Maverick Drilling & Exploration.
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