Investors in Union Jack Oil PLC (AIM:UJO, OTCQB:UJOGF) have been told to expect further progress and expansion in the United States in the coming months.
Shore Capital, the UK stockbroker that’s the ‘house broker’ for Union Jack, today issued a note following the spudding of Union Jack’s second well in Oklahoma.
The broker highlighted that Union Jack could see the initial well result in just over a week and, if it’s a success, the well could be in production ‘within weeks’ – and, could achieve ‘payback’ on investment in a matter of months.
It is a low-risk and low-cost project, especially compared with projects in the UK.
“Andrews 2-17 is the latest step in management’s strategy to diversify into the US and away from its UK onshore roots,” Shore Capital said in the note.
“In addition to news flow from both the Andrews 1-17 and 2-17 well, we believe investors should anticipate further expansion of the company’s US portfolio in the coming months.”
The broker added: “we also note that revenues from the Wressle field in the UK remain robust with management’s latest update indicating that the asset has generated net revenues of c.$2m during the year-to-date.”
Andrews 2-17
Union Jack this morning announced the start of drilling at the Andrews 2-17 site, where the company has teamed up with its American partner Reach Oil & Gas.
It follows quick success with the Andrews 1-17 well, and, it is expected that the two wells will share production facilities.
The AIM-quoted firm has a 45% working interest in Andrews 2-17, which is estimated to have an 80% geological chance of success.
Drilling is expected to take about eight days, with the well reaching a depth of around 4,700 feet – followed, if successful, by eight days of completion including perforation and flow-back.
The 2-17 well is located ‘up-dip’ from Andrews 1-17 well, and it is expected to encounter a similar reservoir.
Union Jack’s share of the well costs are estimated at $340,000, already paid from existing cash resources.
It targets the Hunton Limestone, which is a major hydrocarbon reservoir in Oklahoma.
"The Andrews 2-17 well has a high chance of success and if proven commercial could be in production within weeks from spudding,” executive chair David Bramhill said in a statement.
“Similar low-cost development wells nearby demonstrate that rapid payback can be achieved within six months.
"The rate of progress from generating a drillable prospect, obtaining permission to drill and spudding in Oklahoma is remarkable.”
Bramhill added: “Our relationship with Reach continues to grow and over the coming months we expect to expand our drilling portfolio and establish an impressive inventory of wells to be drilled, all covered by high-quality 3D seismic data.”
Union Jack, meanwhile, noted that onshore UK its net revenues from the Wressle field recently passed the $20 million milestone.
“We remain of the view that the most productive phase of development, the material Penistone Flags formation awaits,” Bramhill highlighted.