Union Jack Oil PLC (AIM:UJO, OTCQB:UJOGF) can add between 4p and 6p to its valuation if the next Oklahoma well, Taylor-1, proves successful, that’s according to stockbroker Shore Capital.
The broker currently has a 29p per share tangible net-asset valuation for the company, and a new discovery in Taylor-1 could see that rise to between 33p and 35p, the broker said in a note on Tuesday.
The comment comes after Union Jack this morning told investors that Taylor-1, in Seminole County, Oklahoma, is expected to spud later this week - on or around October 31.
The Taylor-1 well will target an untested prospect identified in 3D seismic. It will primarily assess a Hunton Remnant prospect plus secondary targets in the Wilcox sands, which have a strong record of oil production in the region.
Estimates put the geological chance of success at around 40%.
Union Jack holds a 45% working interest in Taylor-1, and the well is operated by its partner Reach Oil and Gas.
“Overall, today’s update confirms the previously set schedule for further US drilling and underlines the rapid impact Union Jack’s expansion into the US in late 2023 has had on the business,” Shore Capital analyst James Hosie said in a note.
“UK operations remain profitable, with the company committed to pursuing its opportunities for growth in both the US and UK.”
Earlier today, Union Jack executive chair David Bramhill said in a note: "The management decision in late 2023, to focus on opportunities in the USA has already delivered rewards in a short period and I am pleased to report the imminent spudding of the Taylor well that has a good chance of success.
"One year on, our entry into the USA is already generating cash flow from the Andrews field and Mineral royalty portfolio where returns of 20%+ are being seen in respect of our original capital investment.”
Union Jack’s previous Oklahoma wells, Andrews 1-17 and 2-17, have to date produced 8,765 barrels of oil and 20,221,000 cubic feet of gas.
After Taylor-1, the next well on the company’s schedule is the Moccasin prospect which is described as being on trend with other significant discoveries and estimated to have a high geological chance of success.