Approach Resources' (NASDAQ:AREX) Wolffork, Wolfcamp Shale Plays Needs More Visbility

The Wolffork and Wolfcamp Shale plays being worked by Approach Resources (NASDAQ:AREX) need more visibility before it can be known the level of risk or potential connected to the projects.

Global says, "AREX is testing two promising new play concepts - vertical, commingled Wolffork and horizontal Wolfcamp Shale - in the southern Midland Basin. If successful, there is substantial upside in the company's 98,000 acre position. However, given the early nature of the plays and the current valuation, we rate the shares of Approach Neutral.

"We recommend a wait and see approach as the company and other operators cut their teeth on the Wolfcamp shale play. With the recent pick up in activity, we expect to begin seeing some industry data to either de-risk, or disprove, the potential of the play. In all likelihood, as is often the case with early stage development of unconventional plays, initial results may be rather mixed. It often takes a few iterations before drilling and completion techniques can be refined in a play."

Approach Resources (NASDAQ:AREX) closed Friday at $26.26, level with their prior close. Global Hunter has a price target of $26 on them.