2nd Bone Spring Production Ramping Up in Permian Basin

When we last wrote about Cross Border Resources (OTCQX: XBOR) on January 31, the stock closed at $1.85 per share. Just two weeks later, it’s surged nearly 24% to close at $2.29 per share.

One catalyst for the move is XBOR’s strong start this year. The Company exited January 2012 producing 500 barrels of oil equivalent per day (“BOEPD”), a 19% increase for the month and an acceleration of the Company’s 55% jump in production rates during 2011.

Further driving the investor interest around XBOR is the late-January completion of its Cimarex Energy (NYSE: XEC) operated SE LUSK 33 #3H (37.5% working interest), which recorded a peak 24-hour production rate of 1,173 BOEPD. Located in the 2^nd Bone Spring of the Permian Basin, this horizontal well is expected to have a meaningful impact on XBOR’s production.

According to a report from EnerCom, an oil and gas consulting firm, “institutional investors are closely monitoring horizontal well results out of the 2^nd Bone Spring formation.”

This is good news for XBOR shareholders. The Company has a growing presence in the 2^nd Bone Spring. In addition to SE LUSK 33 #3H, XBOR and Cimarex are working toward completion of SE LUSK 33 Fed #2H, an immediate offset to the #3H well. Overall, at 160-acre spacing in its Turkey Track operating area, in the 2^nd Bone Spring, XBOR has more than 25 gross drilling locations, which equates to 5+ net wells.

Using a variety of valuation methodologies, including reserves, production and acreage, XBOR shares should currently be valued as high as $3.69 per basic share, or $3.05 per diluted share. Investors that accumulate shares here in the low $2 range are getting a great value with substantial upside. In fact, RedChip analysts issued a strong buy rating in December with a price target of $5.00 for XBOR. To learn more, read the full report here.

Disclosure: The subject security is a client of RedChip Companies, Inc. RedChip Companies, Inc., employees and affiliates may have positions and affect transactions in the securities or options of the issuers mentioned herein. For full financial disclosures for all RedChip clients, please visit http://www.redchip.com/disclosures.asp?src=rcv.