Success with Union Jack Oil PLC's (AIM:UJO, OTCQB:UJOGF) latest wells has the potential to derisk a growth story that could, according to house broker Shore Capital, see the AIM-quoted share more than double in value.
At 10.82p today, Union Jack shares are up close to 24% in 2025 so far, and the small-cap has now put investors on notice that a pair of potentially significant well results will be reported in the coming weeks.
Union Jack this morning announced that the Moccasin 1-13 well, in Oklahoma, was successfully drilled down to a target depth of 5,690 feet.
The well, 45%-owned by Union Jack, was drilled on budget and it identified several zones of interest and test intervals. Production casing has been run and cemented, and, testing is slated to start in the coming days (around 3 February).
At the same time, the firm is also waiting on the complete set of results from the Taylor 1-16 which was drilled in Oklahoma in late 2024.
Shore Cap analyst James Hosie, in a note, highlighted the company’s prior success in the American state, with the Andrews wells drilled last year.
Taylor and Moccasin can each be worth around 2p per share to Union Jack’s value, Hosie said, but, more significantly he points out that the Oklahoma play can together transform the explorer’s value as the whole project is derisked.
“Our 35p per share risked total net asset value for Union Jack includes c.2p per share for each of the Taylor and Moccasin wells,” Hosie said.
“This assumes gross recoverable resources of 1.25 million barrels oil equivalent per well with a 33% probability of commercial success.”
The analyst added: “Successful production tests and commitment to rapid development at either well – as observed at the company’s Andrews 1-17 and 2-17 discoveries – would prompt us to derisk the discovery and add it to our 15p per share core net asset value.”
Compared to the broker’s on-paper ‘NAV’, the share’s market price of just under 11p suggests there’s much more to come if the American wells continue to be successful.
Elsewhere, in the UK, the Wressle and Keddington projects continue to underpin Union Jack’s cash flow.
"I am pleased to report that the company remains in a robust financial position having paid all major outgoings including drilling and completion costs for its current USA activities,” Union Jack chair David Bramhill said in today’s statement.
"We continue to generate material revenues in the UK from our flagship project at Wressle (Union Jack 40%), where approvals to proceed with the next stage of development are awaited.
“These revenues are expected to be boosted by Keddington production (Union Jack 55%), where restart is expected in early 2025.
"Cash generation in the UK is complemented by our entry into the USA which we announced in early 2024, with cash flow from the two Andrews' wells discoveries (Union Jack 45%), plus additional revenues from our US Mineral royalty portfolio that provides a constant and pleasing rate of return of over 31% on our investment.”