US-focused shale oil producerCaza Oil & Gas(LSE: CAZA) is rising today, jumping as much as 9% in early trade after the company revealed an impressive production and exploration report.
The company reported that its initial Broadcaster well reached the intended total measured depth of approximately 15,818 feet, and was subsequently fracture stimulated in 40 stages beginning on 7 September.Under controlled flowback the producing rates are steadily increasing, and the well produced at a 24 hour gross rate of 2,621 barrels of oil equivalent.
These results make the initial Broadcaster well one of Cazas most successful wells, andthe company anticipates a higher peak rate to be achieved in the coming days. Oil and natural gas is already flowingto sales.Caza currently has a 25% working interest and an approximate 17.6% net revenue interest in the well. The well should add 462 barrels of oil equivalent production to Cazas existing production.
Whats more, within todays update Caza also provided updates on two of the companys other wells. The Lennox 32 State Unit #4H horizontal Bone Spring well, in which Caza has a50% working interest, is in the process of being drilled and isnearing itstotal measured depth of approximately 15,740 feet.
Additionally, Caza is preparing to start drilling at theMarathon Road 15 OB Fed #1H horizontal Bone Spring well, a direct offset to the very successful Marathon Road 15 PA Fed #1H horizontal Bone Spring well.
Commenting on todays update, chief executive officer W. Michael Ford said:
This is an exceptional result at Broadcaster, and we are pleased to report the news to our shareholders. As stated previously, frac technologies continue to improve in the Bone Spring Play without a material increase in costWe are on schedule and close to reaching total measured depth on the Lennox well and look forward to reporting the results of the scheduled frac in OctoberWe are also pleased to see operations have commenced on the second Marathon Road well and anticipate operations to commence on the next Broadcaster well in late Q4 2014.
Nevertheless, despite todays impressive well results, Caza is still an oil minnow with a long road ahead of it. Indeed, exploring for oil within the US shale regions has become a notoriously risky business lately, with many companies struggling to keep production stable and pay down debt.
But Caza seems to have plenty going for it. The company has identified an additional 300 more potential well locations within its Bone Spring acreage. If these well produce results similar to those reported today, Cazas shares could fly.
The company is already on the way to the big leagues, with City analysts estimating that the companys production will hit 2,000 barrels of oil equivalent production per day during the next few months. A new drilling programme is planned for October, so it looks as if the companys shareholders have got plenty to look forward to.
Only you can decide if Caza fits in your portfolio, Caza could be a good bet for investors with a high risk tolerance.
To minimize risk, investors should use a basket approach by building a portfolio with a combination of both risky oil companies and reliable dividend-paying stocks, reducing risk and allowing you to sleep soundly at night.
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Rupert Hargreavesownsshares in Caza Oil & Gas Inc. (CDI). 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.