Brookside eyes production & reserve growth with yet another oil hit

Brookside Energy is firmly on the road to expanding production after completing another successful production test at its Juanita Well in Oklahoma’s oil-rich Anadarko Basin.

Brookside Energy (ASX:BRK) has recorded a peak rate of 258 barrels of oil equivalent per day (BOEPD) during production testing of a secondary target sand within the Simpson Group in the Juanita Well. Importantly, it’s liquids rich, coming in at 78% oil.

These latest peak rates come close on the heels of an earlier, equally successful, production test on a lower zone that delivered high flow rates of 329 BOEPD (75% oil).

The Juanita Well is the first to be tested in the Bradbury Area of Interest (AOI), located within the Arbuckle Uplift in the Ardmore Basin and 20 miles west of the Company’s other Anadarko Basin producing asset, the prolific SWISH AOI.

The Anadarko Basin has attracted multiple majors and independents all chasing low risk unconventional hydrocarbons, particularly liquids. The Basin is currently producing 440,000 BOPD as well as plenty of natural gas.

Growing production and reserves

Each production test provides Brookside with more data not just on the well but also the local geology, helping to de-risk the project and identify future potential well locations.

Importantly, it allows Brookside to now work on a plan to establish commercial production on these two zones and reserves.

Managing director David Prentice told Stockhead exclusively that Brookside would establish production by comingling the two zones.

“Once we see what that configuration is capable of and have some months of production under our belts, we will be able to quantify and estimate an ultimate recovery for the two zones and what is ‘behind pipe’,” he explained.

“This will also help us to scope out the potential for additional offsetting wells in the area and the possibility of expanding our footprint in the AOI.”

Ultimately, with this additional data the company is hopeful of a significant expansion of this AOI and to eventually add to its already impressive reserve base in the lower-48.

Returning cash to shareholders

Management was already clearly confident of the potential of its oil prospective ground, which is why they recently launched a buyback of up to 500 million shares, roughly 10% of the shares on issue. Brookside says its focus is on generating the best returns for shareholders and not purely volume growth.

Brookside is well cashed up, with nearly $18m in the bank thanks to recent strong free cashflow generation from its producing SWISH AOI in the Anadarko Basin – a province recognised as a heavyweight among US shale regions in terms of oil and natural gas production.

The market currently values Brookside at an enterprise value (EV) of around $40m, which is a more than 80% discount to the Net Present Value of its producing SWISH assets. This makes the buyback of shares highly accretive for shareholders.

The latest successful production test in the Bradbury AOI provides further evidence of the strong position Brookside is in and its ability to boost cash flow even further in the not-to-distant future.

The company has been aggressively buying back shares since announcing it back in April. Independent Investment Research said in a recent research report that it is the equivalent of buying 100% of the turnover in Brookside since the start of February this year.

The company, which is building a multi-year production profile, is considering several pathways to grow production, including potentially introducing a partner to assist with funding.

This article was developed in collaboration with Brookside Energy, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.