Union Jack Oil’s move into the US oil and gas sector with three royalty packages in Texas is the fruition of a management pledge last year to look at growth opportunities outside of the UK, sys SP Angel
The royalties are consistent with the company’s long-held wider strategy to gain exposure to attractive oil and gas investments, including alternative financial instruments that generate above-average returns, said the house broker.
“However, it is the potential for collaboration with an established local player (Reach) to gain direct participation in the drilling of a number of onshore US wells that provides the greatest potential for value creation.
“We think that investment of cash on the balance sheet into low-risk near-term recycling opportunities for production and cash flow growth has the potential to strengthen the company’s ability to continue shareholder distributions.”
Buy with a target price of 66p/share says the broker.