Freedom Oil and Gas [ASX:FDM] increased by around 20% this week. Shares are currently trading at 0.34 cents, down from 0.35 cents yesterday.
Why the share price rise?
The current surge comes after an increase in the price of oil. Oil prices have climbed to US$65, a record-high since December 2014. In February 2016, oil traded as low as US$26.21.
This price increase is significant for the industry, it means that the extraction of oil is once again profitable.
Freedom also announced last week that they have secured a new contract for Four Well Horizontal Drilling Program in Eagle Ford Shale.
Michael Yeager, Chairman and CEO of Freedom said,
‘We are pleased to have secured a high quality drilling rig from Precision Drilling, a top-tier drilling contractor. This arrangement allows us to move forward with the second phase of our Eagle Ford Shale development program’.
In relation to the new contract in Eagle Ford Shale, he further noted,
‘In addition to de-risking additional acreage and increasing our cash flow, the production from these four additional wells is expected to position us to begin accessing our Reserves Based credit facility with Wells Fargo Bank. We are then expecting to drill a more continuous program using the Wells Fargo facility and our operating cash flow.’
What now for Freedom?
The wells are expected to be completed in the second quarter of this year, followed by full development of the drilling program.
Freedom anticipates well results and costs to continually improve as more wells are drilled and more knowledge is gained. Technological enhancements in the last two years have resulted in industry improvements of 30-40% already. Freedom is confident that their upcoming contract will follow the success of the first two Eagle Ford Shale Horizontal wells.