Drilling has begun for the ASH-3 development well at the Abu Sennan licence and it is expected to provide further impetus to a production operation that exceeded expectations through 2020.
The programme comes just weeks after the commissioning of a gas pipeline which unlocks additional production volumes.
United owns a 22% interest in the Kuwait Energy operated well which will target Alam El Bueib reservoirs, as a follow up to the ASH-2 production well which has yielded over 1mln barrels since coming online a year ago.
The well is currently flowing around 4,500 barrels of oil per day and a similar success in the ASH-3 well would be a catalyst for United.
Stockbroker Cenkos highlighted that the programme looks to build on the outstanding success of previous wells.
“The ASH-3 well represents the first in a multi-well exploration/development drilling programme scheduled for 2021,” Cenkos analyst James Mccormack.
He added: “The pipeline will increase recovery rates and reduce the need to flare gas from the ASH-2 well – significantly improving the environmental performance of the licence.”
Cenkos rates United as a ‘buy’ with a 21.2p price target which represents a very substantial 600% upside to the current market price of 2.82p.
Mccormack, meanwhile, also looked ahead to the programme subsequent to ASH-3.
“The second well in the schedule will be the ASD-1X exploration well, targeting the Abu Roash reservoirs in a four-way dip closed structure named Prospect D,” he said.
“Prospect D is located close to the producing Al Jahraa field and existing infrastructure, meaning that on success, the well can be brought into production quickly and cost effectively.”
Elsewhere, SP Angel analyst Sam Wahab said that United shareholders will be encouraged that the company is once again drilling in Egypt.
“This year will be a strong year of operational activity in the country with the drilling of further wells as part of UOG’s 2021 campaign, including the ASD-1X exploration well, that will follow after completion of ASH-3,” he said.
In this morning’s statement, United noted that the ASH-3 well will take 60 days to drill and test.
ASH-3 is targeting the Alam El Bueib reservoirs, at a depth of 3,600 to 3,950 metres, in a location up-dip of ASH-2.
United chief executive Brian Larkin, in a statement, said: “We are delighted that the ASH-3 well has been spudded, and look forward to updating the market in due course, once the well has reached the target reservoirs.
“There is clearly great potential in the ASH Field, and if the outstanding success that was achieved in the ASH-2 well can be replicated here, it will be a fantastic result for the joint venture partners.”
He added: “It is equally pleasing for the joint venture to be back drilling in Egypt again, after the deferral of the majority of the 2020 drilling programme due to the low oil price environment, and we look forward to the drilling of further wells as part of our 2021 campaign, including the ASD-1X exploration well, that will follow after completion of ASH-3.”