United Oil & Gas expects production growth as Egyptian success continues

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Walton Morant has the potential to have a major impact on United Oil & Gas and we are delighted to have successfully concluded an agreement with the Jamaican government to take on operatorship and to develop this licence for the benefit of all stakeholders.


Brian Larkin, chief executive


How is it doing


UOG bought Rockhopper Exploration’s Egyptian asset portfolio, which is its first production operation along with further development and exploration upside.


The ASH-3 well encountered 27.5 metres of net pay in the Alem El Buieb (AEB) reservoir. It was spudded on January 4 and reached a target depth of 4,087 metres on February 8, which was around five days ahead of schedule and was delivered under budget.


United said it expects an uplift in production as the well comes online. It added said that the ASH-3 well will be tested and completed in the coming days, and brought immediately online through the existing ASH field facilities.


In December, UOG said its working interest production from Abu Sennan was on target to exceed previous guidance of 2,300 boepd for the second half of 2020.


In Jamaica, the Walton Morant/Colibri prospect has just been estimated by consultant Gaffney Cline & Associates to contain 2.4bn barrels of potential resources.


The prospective resource is estimated across a total of 11 prospects.


Colibri, the most advanced of the prospects, is now estimated to host some 406mln barrels, up around 77% from prior estimates, meanwhile, the Thunderball prospect is another stand-out prospect with an estimated 603mln barrels.


United now has until January 31, 2022, before the drill-or-drop decision is required.


The company plans to complete a work programme to further de-risk Colibri and perform detailed interpretation of the numerous follow-on targets, including Moonraker, Thunderball, Moneypenny, Jaws, Goldfinger, Vesper, Oriole, Earspot and Rumpspot.


It is believed this work will have a significant impact on the continuing farm-down process, the group added.


What brokers say


Stockbroker Cenkos has repeated a ‘buy’ recommendation for United Oil & Gas PLC (LON:UOG), with an increased price target, following encouraging early results from the ASH-3 development well at the Abu Sennan licence in Egypt. Cenkos has a new price target of 26.6p, versus the current price of 3.24p.


“ASH-3 is the third successful well for the Abu Sennan block partners and UOG, with United enjoying a 100% drilling success rate since acquiring Rockhopper Egypt,” Cenkos analyst James McCormack highlighted in a note.


The analyst conservatively modelled production from ASH-3 at a rate of 2,271boepd gross, 500 boepd net to United over 2021. He subsequently expects production will pull back to 1,502 boepd, 330 boepd net, the following year.


“We believe these figures are conservative given that the ASH-2 development well came onstream at over 3,000 bopd (660 bopd net),” the analyst added.


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What brokers say


Stockbroker Cenkos has repeated a ‘buy’ recommendation for United Oil & Gas Plc (LON:UOG), with an increased price target, following encouraging early results from the ASH-3 development well at the Abu Sennan licence in Egypt. Cenkos has a new price target of 26.6p, versus the current price of 3.24p.


“ASH-3 is the third successful well for the Abu Sennan block partners and UOG, with United enjoying a 100% drilling success rate since acquiring Rockhopper Egypt,” Cenkos analyst James McCormack highlighted in a note.


The analyst conservatively modelled production from ASH-3 at a rate of 2,271boepd gross, 500 boepd net to United over 2021. He subsequently expects production will pull back to 1,502 boepd, 330 boepd net, the following year. “We believe these figures are conservative given that the ASH-2 development well came onstream at over 3,000 bopd (660 bopd net),” the analyst added.


Previously, UOG received a healthy price target from Cenkos following the independent person’s report on the Walton Morant prospect. Gaffney, Cline & Associates’ (GCA) report indicated resources of over 2.4bn barrels across eleven prospects and leads within the licence.


Based on a risked valuation of Walton Morant, Cenkos raised its share price target for United Oil & Gas overall to 21.2p from 18.1p and added that unrisked, the value of its assets is 108p.


Optiva also raised its price target for United Oil & Gas to 25.1p from 20.5p and noted that the current share price is more than covered by its valuation of the company’s 22% interest in the Abu Sennan producing asset in Egypt.

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