Jeffrey Tan  10/10/2019, 11:48am

SINGAPORE (Oct 10): Analysts are optimistic over the prospects of oil explorer and producer Interra Resources, following the company&rsquo s announcement that it will commence drilling at an onshore oilfield south of Central Kalimantan.

  Interra has a 67.5% working interest in the Indonesian oilfield known as Kuala Pambuang block (KP) through Mentari Pambuang Internasional, the operator of the 1,631 sq km block.

  &ldquo We believe Interra Resources is at a key inflexion point,&rdquo SAC Advisors analyst Terence Chua writes in note dated Oct 8.

  &ldquo Firmer oil prices and contract extensions have led to a turnaround in profitability which we have already seen in their last two quarters, and this has already exceeded our FY18 forecast,&rdquo he adds.

  On Oct 7, Interra announced that KP will see a vertical well drilled to a planned total depth of about 1,100 metres.

  The well, known as KP-1, is expected to intersect oil reserves that were discovered before World War II by a subsidiary of the Royal Dutch Shell, the company said.

  Three prospective oil reservoirs were discovered by the Royal Dutch Shell subsidiary, in particular in the shallow clastic sandstone (Warukin formation) and two deeper limestones (upper and lower Berai formation).

  According to Interra, the unrisked prospective resources as at Jan 1 for the entire block is estimated at the low case of 67 million stock tanks barrels best case of 305 mmstb and high case of 1,288 mmstb.

  &ldquo If the drilling results of KP-1 are commercially successful, then these prospective resources may be upgraded and re-classified as reserves,&rdquo said the company.

  &ldquo In addition, resource volumes in other prospective areas that have been identified by seismic will most likely have their classifications upgraded,&rdquo it added.

  SAC Advisors has maintained its &ldquo buy&rdquo rating for the stock with target price of 8.9 cents. The TP is based on a conservative target 6.4 times EV/1P reserves, which represents a 50% discount to the industry average.

  Shares in Interra last traded at 2.6 cents on Oct 9.