Oil sector analysis: Savannah Petroleum
5th October 2018 11:24
by Rajan Dhall from interactive investor
Financial markets analyst Rajan Dhall picks out the day's key industry news and runs the numbers to see what this share price might do next.
Savannah Petroleum
Savannah Petroleum confirmed Friday it has made yet another oil discovery in Niger. Zomo-1 is the fifth consecutive discovery to be made in the exploration campaign conducted by Savannah's Niger subsidiary in the R3 portion of the R3/R4 PSC Area in the Agadem Rift Basin, South East Niger.
As a preliminary result, the well has encountered a total estimated 5.4 metres of net oil-bearing reservoir sandstones. There is also the potential for more as additional pay is thought to exist in the well, but will require further technical evaluation and testing to confirm.
It took 20 days to reach target depth, and operations are expected to be completed "within 28 days of spud", both much quicker than expected. Importantly, no significant geological or drilling hazards were encountered.
Chairman Steve Jenkins said: "Following the Zomo-1 discovery, our maiden exploration campaign in Niger has delivered five discoveries from five wells and resulted in the discovery of more than sufficient oil to enable us to proceed towards our planned 2019 Early Production System.
"This is a fantastic achievement, and we expect the EPS to create a material new revenue stream for our company. Looking forward, 2019 is set to be an extremely busy time for Savannah Niger on the drilling front."
Chief executive Andrew Knott tells us to watch out for further updates on the upcoming Amdigh-1 well test and the next phase of exploration drilling which should begin in "early 2019".
Chart analysis
Looking at the weekly chart below, you can see the volume in recent months has picked up, supporting the latest move higher.
In the previous dip over the summer, it is positive that Savannah's share price did not test the significant low set between April and July 2015.
The current support of 26p has held nicely at least four times in the past few years, and it looks as if the fifth time is the charm because we could be heading to test 35p.
A key indicator here will be a break of 44p to make a new consolidation high. Only then is it possible to begin thinking about the 2014 IPO price of 56p and post-float high of 64.6p.
Past performance is not a guide to future performance
Rajan Dhall is a freelance contributor and not a direct employee of interactive investor.
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