Stock Picks Update: Spartan Exploration (TSE:SPE)

Spartan Exploration (TSE:SPE) is my biggest holding and risks to grow even more. As such an update is provided for this excellent Cardium/Bakken player with the latest news.

Spartan Exploration recently closed its offering for gross proceeds of $17.25 million. It also announced expanding its capital budget by $20 million to $51 million for the 2010 calendar year. As part of the increased budget, the Companys 2010 drilling program will increase from 8 net Cardium horizontal wells to 13.75 net wells. Approximately 75% of Spartans Cardium horizontal wells are to be drilled on the Companys northwest Pembina lands. The remaining 25% of the program is to be drilled on the Companys southeast Pembina lands.

To date, Spartan has drilled a total of 10 (7.55 net) Cardium horizontal wells, with a 100% success rate. Four (3.47 net) of the wells are currently on production and the remaining six (4.08 net) wells are expected to be on production by the end of the third quarter or early in the fourth quarter. Spartan now anticipates 2010 fourth quarter average production of 1,500 boe/d and exit production of 1,800 boe/d (81% oil and liquids).

So far they have drilled 7.55 net wells, only 3.47 are on production. If on average each well is producing around 250 boe/d then 7.55 * 250 = 1888 boe/d by the end of the 3rd Q or beginning of the 4th Q. (in the last quarterly update wells were averaging 333 boe/d with a range of 200 to 500 per well)

Based on the capex expansion they will be drilling +6.2 net wells extra. If they are able to bring 1 of these wells to production prior to years end the company will beat its own exit production forecast easily. In my opinion, the exit production will be 2000+ boe/d. Following this years successful drilling the average production should also rise above 2000 boe/d for 2011. Nothing beats under-promising and over-delivering!

For those amongst you who follow analyst ratings, here are the latest targets (last closing price $2.90):

Company Analyst Target Previous Target Date
Spartan Exp. StoneCap $5.90 $5.75 14 Sep 2010
Spartan Exp. GMP Securities $5.50 $5.25 14 Sep 2010

Execution + oil prices above $70 will be a recipe for a higher share price in the very near future. For more information on SPE click on the following link Spartan Exploration (TSE:SPE).

Do you know of a company with similar prospects you would recommend?