Fremont Petroleum (ASX: FPL) achieved a 40% production increase across its oil operations for April, with the rise tipping the company into cash flow positive territory and triggering its share price to rocket.
As the oil price pushes past US$71 per barrel, Fremont picked the perfect timing to announce a surge in production, while lowering its costs.
Investors reacted positively to Fremont’s news and the oil price bounce back – fuelling Fremont’s share price to rocket more than 25% to hit A$0.01 by early afternoon.
The price was driven by huge volume, with more than 16.3 million shares traded in the less than three hours from market opening.
During April, Fremont reported oil production of 3,336 barrels, with its 100%-owned Pathfinder project in the US contributing 2,909bbl of oil and its Kentucky field adding the remaining 427bbl of oil.
This compares to total oil production in March of 2,002bbl.
According to Fremont, the increased production is due to the higher production from Pathfinder, where producing wells underwent low cost work-overs, and some idle wells were brought back online.
Work-overs have been finished across 13 wells to-date, with seven more to undergo treatment.
“Production for April is encouraging, and we expect further upside once the benefits of all work-overs are realised,” Fremont president and chief executive officer Timothy Hart said.
“Our priority at this time is to extract further gains from our Colorado [Pathfinder] assets and we will report on the outcomes of all work-overs shortly.”
Mr Hart added the company’s cash flow would continue to rise as production increases.
“We are now cash flow positive and we want to enhance this position by extracting maximum production from our fields.”
Although on the bounce back, the oil price is a far cry from its July 2008 peak of US$145.31/bbl before the global financial crisis sparked it to plummet below US$35/bbl.
In the intervening years, the oil price has remained volatile due to various market influences including over and under supplies, government policies, and world events.
Late last year, oil producing countries decided to extend production cuts till the end of this year to rebalance the market, which is currently in over supply.
The cuts appear to be working with the oil price lifting from US$63.42/bbl on 10 April to today’s price of US$71.69/bbl – a growth of 13% in one month.