Coastal Energy Results are Worth Buying More on
The results from Coastal Energy last night are incredibly good. I have bought more of the stock this morning.
At Bua Ban the company announced that two wells, the B-06 and B-08, tested at 2,000bbl/d each. The company has, thus far, drilled 7 wells into the Miocene structure at Bua Ban North B. The company had estimated before these tests that they had found about 50MMbbls at Bua Ban North. With these results blowing away expectations, you have to wonder how much more is there. Keep in mind that Coastal’s year end 2010 reserves were 27MMbbls of oil. So they have basically tripled their reserves with the discoveries thus far at Bua Ban North B.
Below is a map of Bua Ban.
Now these estimates of recoverable reserves at Bua Ban North B, which are impressive in themselves, are before we even touch on the Bua Ban North A discovery, of which Coastal has already attributed about 10MMbbls of recoverable reserves. And the real big prize is if it turns out that Bua Ban North A and B are one in the same. If the two reservoirs are really one big reservoir, the reserves could double or more.
The new discovery at Songhkla was also a positive, though maybe not as big of a one.
The Songkhla H-01 well was drilled to a total depth of 9,256 feet TVD and encountered 32 feet of net pay with 20 percent porosity in the Oligocene interval. A drill stem test was performed and the well produced 1,000 bopd with minimal initial pressure drawdown of the reservoir. The crude has an API gravity of 29 degrees. The H-01 well has the potential to produce in excess of 3,000 bopd using an electric submersible pump (“ESP”). The Company has spudded an appraisal well to delineate the reservoir.
Its too early to know how big this reservoir is, but Coastal was attributing an unrisked OOIP of 6.7MMbbls for the Oligocene. It doesn’t appear that the Oligocene was the primary target, and so the release of the H-01 results could be taken somewhat negatively as there was no mention of the higher Miocene interval where Coastal had a much higher potential OOIP.
This morning Canaccord raised their target on Coastal to $14.75. This is based on a NAV of $14.75. First Energy already had a target of $18.75
I bought some more Coastal this morning at $10. Its tough to buy anything with this silly debt ceiling issue overhanging everything. But these results, in my opinion, are too good to pass up.