Why Shares In Nighthawk Energy Plc Plummeted Today


Although we don’t believe in timing the market or panicking over every stock fluctuation, understanding how a business is performing, competing and changing is vital to sensible investment.

What: The share price of Nighthawk Energy (LSE: HAWK) — the  oil company that focuses on US fields, such as the Denver-Julesburg Basin in Eastern Colorado — has plummeted nearly 15% so far today, following the release of a drilling and production update.

The update included news that after completion of drilling of the Snow King 12-33 well to a depth of 8,500 feet, initial analysis indicates “significantly lower structure, possibly through faulting, with limited potential for additional production“. However, there will be further appraisal drilling in Snow King during this summer, with two wells already granted permission.

The company also reported that it had completed drilling of the Knoss 9-20 exploration well, to a depth of 8,600, but that the well will now be plugged and abandoned.

So What: Total gross oil production from all Nighthawk’s wells in the half-year to 30 June 2014 was 345,558 barrels (bbls), an increase of over 300% on the same period in 2013, with an average daily gross oil production from all wells in the calendar month of June 2014 of 2,062 bbls.  Nighthawk has an average net revenue interest of around 81.5% in the gross oil production.

The company has said that its John Craig 2-2 well encountered a Pennsylvanian gas condensate discovery, with a higher pressure of liquids content than is usually found in this area of the Denver-Julesberg basin. 

Once it has brought the John Craig 2-2 oil zone into production, Nighthawk says that it expects  total production from the John Craig area to be in the range of 250-300 bbls/day, with “significant upside” if its able to develop the gas condensate discovery on a commercial basis.

 What Now: Commenting on the update, Stephen Gutteridge, Nighthawk’s chairman, said:

The John Craig drilling campaign has confirmed commercial oil production potential in the Pennsylvanian formations. The gas condensate discovery in the John Craig 2-2 well is intriguing with very good flow rates, but will clearly require additional investment to commercially produce the discovery, and there are a number of options to evaluate before any final decisions are made.

“With the initial Snow King well still producing 400 bbls/day of oil, further development of this discovery remains a priority, despite the less than encouraging initial logs of the 12-33 well. Drilling of the next Snow King well is planned for August.

At 11.35p, Nighthawk’s share price is down close to 1% so far in 2014, albeit versus a FTSE All-Share index that’s down 0.23%. But the longer-term story is rather less favourable to the oil company, with Nighthawk’s share price down over 70%, compared with the FTSE All-Share’s 61% gain. 

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Jon Wallis has no position in any shares mentioned. The Motley Fool has no position in any of the shares mentioned.