This new debt agreement with the Commonwealth Bank of Australia, which could grow to $100 million depending on production increases and reserve additions, will reduce borrowing costs and overshadows a slight decline in monthly output such that the shares advance 10.5% to 10.5p.
Average gross oil production for July from Nighthawk's 100%-owned Smoky Hill and Jolly Ranch projects was 2,007 barrels of oil per day (bopd), down fractionally on June's 2,067 bopd. Production was affected by planned pressure build up tests on two wells at the Arikaree Creek area and routine maintenance work on a further two wells.
The potential for additional reserves and production has been identified across Arikaree Creek and Nighthawk says it is now implementing plans to develop and produce these reserves. The initial step will be a short horizontal well, the Big Sky 6-11 well, which will be hydraulically fractured and tested and is expected to spud in the fourth quarter.
Information gained from the Snow King 13-33 and 12-33 wells has confirmed the potential for substantial additional production from the development of the Snow King structure. Nighthawk will shoot new 3D seismic, to confirm additional drilling locations, and a multi-well programme is expected to commence before the end of 2014.
Broker Westhouse Securities reiterates its 'buy' rating and 16.5p price target. It comments: 'While the lower production month-on-month is slightly disappointing, the additional production potential identified in the Upper Mississippian in Arikaree Creek and the news of the substantial RBL facility should boost confidence in the medium-term growth prospects of the company.'