Walton Morant has the potential to have a major impact on United Oil & Gas and we are delighted to have successfully concluded an agreement with the Jamaican government to take on operatorship and to develop this licence for the benefit of all stakeholders.
Brian Larkin, chief executive
What it does
Established in 2015, the AIM-listed firm is an oil and gas exploration, development and production company with assets in Egypt, UK, Italy and Jamaica. The management’s strategy is to expand the current portfolio with value-enhancing acquisitions focused primarily on stable international jurisdictions. The company targets producing and low-risk development assets in Europe and the Greater Mediterranean region, and high-risk/high-reward exploration in Africa, South America, and the Caribbean.
How is it doing
In April 2021, the company announced it had achieved a positive outcome in its drilling of the ASD-1X exploration well in the Abu Sennan concession, in which it has a 22% working interest.
Preliminary results suggest the ASD-1X exploration well encountered a total of at least 22mln net oil pay interpreted across a number of reservoirs, including the Abu Roash C , Abu Roash E, Lower Bahariya and Kharita formations.
Well-testing is now planned, and if successful, will be followed by an application to the Egyptian General Petroleum Corporation for a development lease over this new discovery.
On the same day, United Oil and Gas (UOG) said the Italian government has given environmental approval for the development of the Selva natural gas field concession in Northern Italy, in which United Oil and Gas owns a 20% economic interest.
UOG bought Rockhopper Exploration’s Egyptian asset portfolio, which is its first production operation along with further development and exploration upside.
The ASH-3 well encountered 27.5 metres of net pay in the Alem El Buieb (AEB) reservoir. It was spudded on January 4 and reached a target depth of 4,087 metres on February 8, which was around five days ahead of schedule and was delivered under budget.
United said it expects an uplift in production as the well comes online. It added said that the ASH-3 well will be tested and completed in the coming days, and brought immediately online through the existing ASH field facilities.
In December, UOG said its working interest production from Abu Sennan was on target to exceed previous guidance of 2,300 boepd for the second half of 2020.
In Jamaica, the Walton Morant/Colibri prospect has just been estimated by consultant Gaffney Cline & Associates to contain 2.4bn barrels of potential resources.
The prospective resource is estimated across a total of 11 prospects.
Colibri, the most advanced of the prospects, is now estimated to host some 406mln barrels, up around 77% from prior estimates, meanwhile, the Thunderball prospect is another stand-out prospect with an estimated 603mln barrels.
United now has until January 31, 2022, before the drill-or-drop decision is required.
The company plans to complete a work programme to further de-risk Colibri and perform detailed interpretation of the numerous follow-on targets, including Moonraker, Thunderball, Moneypenny, Jaws, Goldfinger, Vesper, Oriole, Earspot and Rumpspot.
It is believed this work will have a significant impact on the continuing farm-down process, the group added.
What brokers say
Incorporating these two bits of news, Cenkos now value the shares at 28.4p (previously 28p) with uplifts also in the Core NAV (the discounted forecast future net cash flows from on-stream fields (Abu Sennan) and those fields due onstream (Selva).
The estimate does not include any incremental production from the ASD-1X exploration well, with the current share price offering very little value to the rest of United’s full-cycle portfolio.