Samson Oil & Gas (ticker: SSN) reported operational and financial results for the three month period ended March 31, 2012.

Highlights included:

  • The Australia II 12KA 6, #1-29H well in Roosevelt County, Montana, has been fracture-stimulated and is currently waiting on construction of production facilities
  • The Gretel II 12KA 3 #1-30H well in Roosevelt County, Montana, has been drilled and fracture stimulated
  • Oil production increased 25% from previous quarter to 23,833 barrels.
  • Estimated revenue from oil and gas sales increased 25% from the previous quarter to US$2.4 million
  • A closing cash balance for the quarter of US$31.4 million

Roosevelt Project (Roosevelt County, Montana – Bakken Oil Shale) – Both the Australia II 12 KA 6 well and the Gretel II 12 KA 3 well have been drilled and fracture stimulated. Oil has been discovered at both locations. The Australia II 12 KA 6 produced approximately 600 barrels of oil during flow-back and the Gretel II 12 KA 3 is currently waiting on flow-black. Production facilities will be built over the next few weeks to support the commerciality of these two wells.

Hawk Springs Project (Goshen County, Wyoming – Conventional Oil and Niobrara Oil Shale) – The Spirit of America US34 #2-29 well is expected to spud on approximately May 1, 2012. This 11,000 foot vertical well will test two targets in the conventional Lower Permian and Pennsylvania age rocks. Drilling difficulties in the Permian salt section have caused delays, and a larger, more powerful rig will enable Samson to reach these targets, as previous efforts proved unsuccessful.

Production and Revenues – Oil production increased to 23,833 barrels in the quarter ended March 31, 2012, up 25% from the previous quarter. Total revenue increased to $2.4 million, also up 25% from the previous quarter and attributed primarily to an increase in production and an oil price increase to $91.07 per barrel, up from $85.28 per barrel in the previous quarter.

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OAG360 Comments:

Roosevelt should begin producing after the construction of production infrastructure in Montana, providing a growth catalyst for production in the next few quarters. The Australia II 12KA 6 well in Roosevelt County, Montana, produced approximately 600 barrels of oil during drill-out operations.

In addition to being one step closer to initializing commercial production in Roosevelt County, two more wells, the Australia III 12 KA9 and the Australia IV 12 KA 16, have been permitted in anticipation of a declaration of commerciality of the Australia II 12 KA 6 well.

Samson owns approximately 23,000 acres, subject to a 33.4% back-in by Fort Peck Energy (FPEC), and retains the option to acquire additional acreage within the project area potentially increasing its net acreage position to 31,000 acres after the exercised back-in. The accessibility of additional acreage without the added risk of committing capital before proving up the area and having to negotiate for additional acreage provides additional upside for Samson.

We maintain our liquidation value of $0.79 per diluted share solely for the undeveloped acreage in Roosevelt County. The oil discoveries in both the Australia II 12 KA 6 and the Gretel II 12 KA 3 wells are positive and advance’s Samson’s prospects in the Montana Bakken, but more definitive results are needed before calling the Roosevelt project a commercial development play.

Production from the Hawk Springs project in Goshen County, Wyoming, has been a contributing factor in growing production 25% quarter-over-quarter accounting for 5% of total net production in the March 2012 quarter. Samson is scheduled to spud the Spirit of America US34 well on May 1, 2012 and even though drilling difficulties have caused delays, a larger rig should be able to reach beyond the salt and bubble gum shale to test the Lower Permian and Pennsylvanian targets.

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