Shemen Oil & Gas Resources Ltd. surged in high volume to the highest in four months after the explorer said “significant signs” of oil were found at the Yam-3 well offshore Israel.
The shares of the company surged as much as 28 percent and closed 12 percent higher to 1.171 shekels, the highest since May 8, in Tel Aviv, bringing Shemen’s market value to 506 million shekels, or the equivalent of $139 million. Investors traded almost seven times the three-month average daily volume. The benchmark TA-25 Index declined 1.2 percent today.
Shemen said its operator, Caspian Drilling Company, reported indications of oil at the offshore Yam-3 well, 16 kilometers (10 miles) from the port city of Ashdod. Signs of a “high quality of oil” were found after drilling reached the target level of around 5,700 meters and after logging tests. Shemen will undertake production testing at the well, according to a filing to the Tel-Aviv Stock Exchange today.
“This is good news for Shemen but it is still too early to pop the champagne,” Noam Pincu, an analyst at Psagot Investment House Ltd. in Tel Aviv, said today by phone. “We have to see the results of the production tests to estimate the quantities and quality of oil at the site.”
Shemen shares have declined 29 percent this year after the company incurred drilling delays and additional costs at the Yam-3 well, forcing it to raise additional money from investors. The explorer is targeting as much as 120 million barrels of crude oil potential and 1.8 trillion cubic feet of gas potential, the company said in December. The U.S. Geological Survey estimates the Eastern Mediterranean’s Levant basin, of which Israel covers approximately 45 percent, holds about 1.7 billion barrels of recoverable oil.
Shemen holds a 77.69 percent stake in the Shemen 387 license, according to the filing today; Caspian Drilling owns 10 percent; Zerah Oil & Gas Explorations LP owns 7.5 percent and Zmiha Investment House Ltd. holds 4.8 percent.
Zerah shares advanced 5.6 percent to 0.113 shekel.