Zephyr Energy PLC (AIM: ZPHR, OTCQB: ZPHRF) has demonstrated additional growth potential following its latest well-test success, according to City stockbroker Panmure Liberum, which has subsequently raised its target price for the stock.
The broker has reiterated a ‘buy’ recommendation and increased its target price to 13.7p from 13.5p.
“The successful testing of the State 36-2R well has shown new upside from potential savings with acid stimulation, also revealing broader potential throughout the Paradox Basin,” analyst Ashley Kelty noted.
“Zephyr is currently well-positioned with several opportunities for share revaluation based on upcoming news flow,” noted Kelty.
He described the recent outcomes as a resounding success.
“The production rates have exceeded expectations, with the well producing at 1,350 barrels of oil equivalent per day (boepd) during the initial testing phase, indicating that acid stimulation has greatly enhanced reservoir performance.
“It’s important to recognize that the horizontal section of the well is quite short, and there’s a substantial possibility for higher flow rates from longer horizontal sections in future wells,” Kelty explained.
He added, “The results are promising for the future wells’ deliverability and productivity, with potential reductions in time and capital expenditures also enhancing economic returns.
“These findings have presented several strategic options for the company in the Paradox area, including starting production from the existing well, drilling a new horizontal section, or partnering with another industry player for broader development.”
Kelty highlighted that this provides an advantageous scenario for the company, as all strategies are likely to be beneficial.
“Zephyr is financially equipped to bring this well into production soon, whether from the existing setup or by drilling an extended horizontal section.”
On Friday, in London, Zephyr shares closed 14% higher at 3.7p and have increased by approximately 37% since the start of 2024.
