As confidence grows behind the emerging new oil play in England’s Weald basin, WH Ireland has tipped UK Oil & Gas Investments PLC (LON:UKOG) to double in value.
The stockbroker has a ‘buy’ recommendation for UKOG and it has a 2.79p price target (current price: 1.41p).
UKOG’s main asset is its stake (31.2%) in the Horse Hill well, which was successfully tested at 1,688 barrels per day, and new results from another nearby well have further boosted prospects for the Weald basin play.
On Friday, Angus Energy Plc (LON:ANGS) said it will produce oil from the Kimmeridge shale at the Brockham well in Surrey.
This is the same horizon that produced 1,500 barrels a day at Horse Hill, some five miles to the south. Drill results revealed the characteristics of Brockham to be very similar and, in some respects superior, to those of the so-called Gatwick Gusher.
The two discoveries suggest the oil-bearing Kimmeridge limestone may be widespread across a huge swathe of the Weald Basin.
WH Ireland analyst Brendan Long, in a new note, highlighted there will be key value adding catalysts for UKOG and the Horse Hill project during 2017.
“We believe that UKOG’s assets are at the early stage of appraisal and that further appraisal and testing have the potential to unlock what we believe to be the most exciting potential new resource the onshore UK oil & gas sector has seen in decades," the analyst said.
“Over the year, UKOG anticipates that it will i) perform extended production tests on the Horse Hill-1 well ii) drill the 100% held Broadford Bridge-1 well to test the regional extent of the commerciality of the Kimmeridge Limestone play and iii) drill the Holmwood Prospect (30% UKOG) that will test the Kimmeridge Limestone whilst also targeting meaningful conventional exploration targets.”
In its valuation, WH Ireland estimates that the group’s conventional assets are worth 0.82p per share, and the ‘upside potential’ is estimated to be 2.24p per share.