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Cenkos says United Oil & Gas is a ‘buy’ after third Egyptian well success in a row


Stockbroker Cenkos has repeated a ‘buy’ recommendation for United Oil & Gas PLC (LON:UOG), with an increased price target, following encouraging early results from the ASH-3 development well at the Abu Sennan licence in Egypt.

Cenkos has a new price target of 26.6p, versus the current price of 3.24p.

Earlier today, United told investors that 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.

READ: United expects production uplift from ASH-3 well

“ASH-3 is the third successful well for the Abu Sennan block partners and UOG, with United enjoying a 100% drilling success rate since acquiring Rockhopper Egypt,” Cenkos analyst James McCormack highlighted in a note.

The analyst conservatively modelled production from ASH-3 at a rate of 2,271boepd gross, 500 boepd net to United over 2021.

He subsequently expects production will pull back to 1,502 boepd, 330 boepd net, the following year.

“We believe these figures are conservative given that the ASH-2 development well came onstream at over 3,000 bopd (660 bopd net),” the analyst added.

United 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.

The drill rig will move to the north, to drill the ASD-1X exploration well.

ASD-1X is targeting the Abu Roash reservoirs in the 4-way dip-closed Prospect D structure. It could be quickly brought into production, subject to results.

“We are very encouraged with the initial results of the ASH 3 well and we are delighted that it has been delivered safely, ahead of schedule and under budget by our licence partners,” said Brian Larkin, United chief executive.

“We anticipate the well will deliver a further uplift to our low-cost production base, an encouraging result ahead of the spudding of our forthcoming exploration well and the remainder of our 2021 work, all of which is fully funded from operating cash flow.”

“To date the ASH Field has produced close to 2 million barrels of oil, with current production rates at over 5,000 boepd, and we believe significant further potential exists within the licence.”

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