Greenfields Petroleum Corporation (CVE:GNF) has retained a buy rating from Casimir Capital, in the wake of the Houston-based oil and natural gas junior’s successful raising of $9.6 million for the development of core properties in Azerbaijan.
In the note issued Wednesday, analyst Ryan Galloway pegged stock in the company, currently trading at $3.20, to rise to $7.25, a target level reiterated from an earlier analyst note in May.
Greenfields successfully raised aggregate proceeds of $9.6 million, of which $6.8 million was non-brokered. The company issued roughly 2.8 million shares in total at $3.40 per share, representing a dilution of approximately 15 per cent to existing shareholders prior to the raise.
The proceeds are primarily intended for funding Greenfields’ share of capex at Gum Deniz and Bahar, fields on the Bahar project.
Galloway pointed out that production was trending positively, with the average for June of 1,686 barrels of oil equivalent per day (boe/d) up from the 1,453 boe/d average recorded for the month before and well up on the average for the first quarter of the year, which came in at 1,011 boe/d.
In particular, he notes that the GD716 oil well was “progressing nicely” and was on track to hit total depth within a week.
Galloway continued that should another well capable of producing 700 or more barrels per day (bbls/d) be hit that would provide “further confirmation of the oil redevelopment potential” of the area. “In addition, the Bahar 209 workover is testing a new gas zone (IX) and could see some large flow rates from a bypassed zone.”
Also noted is the move to reduce general and administrative expenses with the goal of improving cash flow by the end of the calendar year, with the company going forward with internal reorganization work in a bid to see these expenses reduced by up to a third, a move expected to narrow the gap between the valuation on proven and probable reserves, which was $6.41 per share, and cash flow. The analyst estimates cash flow at $0.97 a share for 2013, growing significantly to $2.31 per share for 2014.
The oil and natural gas exploration and development company, which seeks to exploit previously discovered but undeveloped international oil and gas fields, also known as ‘greenfields’, has booked interest in 23 wells (7.6 net) at the Gum Deniz offshore oil and gas field and 7 wells (2.3 net) at the 76, 500 acre Bahar project offshore oil and gas field, both in the Caspian Sea off Azerbaijan, as of December 31, 2012.