Why Ithaca Energy Shares Soared

Is this meaningful? Or just another movement?

The Motley Fool

Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on big changes — just in case they’re material to our investing thesis.

What: Shares of oil and gas explorer Ithaca Energy (TSX: IAE) surged 16% today after announcing successful test results from its important Stella development well.

So what: Management said that the first well in the Stella field, “A1”, flowed at a max rate of 10,835 barrels of oil equivalent per day (“boepd”), representing a big step forward in lowering the risk profile of the entire development. In fact, the max rate of 10,835 boepd corresponds to 26 million standard cubic feet per day (“MMscf/d”) of “liquids rich” gas, confirming the presence, high quality, and deliverability of the reservoir sands.

Now what: While management didn’t change its capital expenditure and start-up schedule for Stella, I’d expect things to proceed a bit faster than expected now. “This well and the highly successful test are outstanding results for the Company,” said CEO Iain McKendrick. “When these results are combined with progress that has been made on both the successful execution of the 2013 subsea installation works and the FPF-1 modifications programme, the development can be seen to be confidently driving forward at pace.” Of course, with the stock now up about 50% from its May lows, Fools will need plenty of energy savvy to estimate just how much of that bullishness is already baked into the price.

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Fool contributor Brian Pacampara does not own shares in any of the companies mentioned above.  The Motley Fool does not own shares in any of the companies mentioned above. 

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