Is Now The Time To Buy Ithaca Energy Inc. & Falkland Oil and Gas Limited?

Are Ithaca Energy Inc. (LON:IAE) & Falkland Oil and Gas Limited (LON:FOGL) a buy after today’s news?

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Ithaca Energy (LSE: IAE) announced another strong well testing result today, while Falkland Oil and Gas (LSE: FOGL) said that it had cancelled a planned exploration well in order to save cash.

The market’s reaction suggests that both pieces of news are broadly positive — so is now a good time to buy into Ithaca and Falkland Oil & Gas?

Ithaca Energy

Ithaca has now completed flow testing the fifth and final well in its Stella field. This well was a little different to the other four wells, as it was designed to access the Ekofisk chalk reservoir, which lies underneath the main Stella Andrew formation.

The well appears to have been a complete success and has flow tested at more than 8,000 barrels of oil equivalent per day (boepd). This means that the combined flow test result from all five wells has been in excess of 53,000 boepd — nearly double the initial planned production of 30,000 boepd.

In my view, this confirms that the 30,000 boepd target is realistic and should be delivered promptly when Stella production starts up in 2016.

I have had concerns about Ithaca’s finances, but the firm’s recent results were fairly reassuring and I believe Ithaca could be a strong performer over the next two years — although if oil prices don’t recover by mid-2016, then Ithaca’s debt could become a big issue again.

Falkland Oil & Gas

Falkland Oil and Gas has made headlines recently, after the firm reported that its Zebedee exploration well had found both gas and oil in an area close to the previously discovered Sea Lion field, which operator Premier Oil plans to develop for production.

The firm has now decided, at partner Nobel Energy’s suggestion, to postpone a second well planned for the South and East Falkland basin, in order to save cash and hopefully benefit from lower drilling costs at a later date.

The revised drilling schedule means that after the current well, Isobel Deep, is completed, the next well will be Humpback, in which Falkland Oil and Gas has a 52.5% interest and which the companies believe contains unrisked gross prospective resources of between 250m and 650m barrels.

Falkland Oil and Gas shares have hardly moved following today’s news, but I believe it is positive, focusing the firm on its most prospective drilling targets. Now could be a good time to buy.

Of course, Falkland Oil and Gas remains a highly-speculative stock, as it’s heavily dependent on high-risk exploration results.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Roland Head has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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