Regal Petroleum well test disappoints

Regal Petroleum (RPT LN) is trying to stabilize its hydrocarbon yield at its newly drilled SV-53 well, the company said on March 5 in an operations update. After indicating an encouraging 1,187 boepd flow rate during initial testing in November, output has declined dramatically to just 140 boepd during the last four days. Regal will reportedly continue testing on the SV-53 well to identify the cause of the declined flow.

Meanwhile, Regal’s MEX-105 well has reached its targeted depths and is currently being cased. Overall, the company’s hydrocarbon production for January-February averaged 1,700 boepd vs 1,467 boepd in 4Q12.

Roman Dmytrenko: With its new wells in place (SV-53 and MEX-105), the company was planning to reach a 3,000 boepd hydrocarbon production by mid-2013 (or doubling yoy). With the disappointing SV-53 tests, achieving this production target looks uncertain, even though Regal will likely consider fracking to recover its SV-53 well’s declining output. So far, we are looking forward to an update on the MEX-105 initial tests results, which might bring some optimism to investors. In a worst-case scenario, if the MEX-105 tests fail to indicate sufficient natural gas flow rates, we expect Regal to report 1,550 boepd in hydrocarbon output in 2013 (flat yoy).