United Oil & Gas PLC (LON:UOG) shares shot up more than 30% on Wednesday as the group revealed the latest successful well result at the Abu Sennan concession in Egypt.
The El Salmiyah-5 well has encountered some 120 metres of net hydrocarbon pay across four intervals which, as United highlighted, makes the main target materially larger than was previously believed.
Testing of the Kharita Reservoir achieved a rate of 8,700 barrels oil equivalent per day, comprising 4,100 barrels of oil equivalent per day (boepd) plus 18mln cubic feet of gas per day, the company said in a statement.
READ: United’s Egypt deal is “gift that keeps on giving”
It is another significant boost to United’s production profile following the recent ASH-2 well success, also at Abu Sennan, and it further amplifies the pay-off from last year’s transformational acquisition of the Rockhopper Egypt business.
United told investors it now expects that its net production from 22% owned Abu Sennan will increase to over 2,500 boepd in the coming weeks, from around 1,700 boepd.
"As a development well into a known field, the El Salmiyah-5 well was always expected to encounter hydrocarbons,” said Brian Larkin, United chief executive.
“However, with a headline figure of c. 8,700 boepd achieved on test from the primary target in the Kharita, it is fair to say the results have significantly exceeded our pre-drill expectations.”
“When coupled with the outstanding result from the ASH-2 well, which was announced in January, and which is still producing at over 3,000 bopd, from a production point of view, the timing of our entry into the Abu Sennan licence could not have been better.”
Larkin added: “Importantly, with operating costs of around US$6.5/bbl, this production is highly profitable at today's oil prices.”
The United boss also said the company believes that Abu Sennan retains “significant additional potential”.
On AIM, United shares surged 0.77p or 36% higher following the well result to trade at 2.9p per share.
United acquired Rockhopper’s Egypt subsidiary in 2019 for US$16mln and by December it was boosted significantly by the ASH-2 well result.
In a recent note, Cenkos analyst James McCormack noted that the deal has transformed the company into a full-cycle E&P, by adding low-cost production.