Saratoga Resources, Inc. (SARA) provided an update on its current Gulf Coast operations
Newport Beach, CA -- (SBWIRE) -- 12/21/2012 -- The company reported that it has completed workover operations in the QQ-24 well and has performed diagnostics work on the A-191 well to develop a plan to maximize production from the well. Additionally, SARA has contacted a rig to drill its QQ-209 "Buddy" development well.
Recall, development operations were resumed with funds from the firm's recent Senior Secured Notes offering of $25MM, after being postponed previously due to a lack of liquidity following cost overruns on well operations and the lingering impact of Hurricane Isaac, which resulted in the deferral of $7MM in revenue.
Management reported that the workover on the QQ-24 well came in under budget and ahead of schedule and the Buddy development well should be drilled by year-end.
Reiterate BUY and $7.00 price target.
In our opinion, SARA is undervalued on a proved reserve basis and development of the firm's PUD inventory is the key to unlocking its asset base. With the resumption of development operations, the firm appears to be moving in that direction.
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