United Oil & Gas Plc (LON:UOG) shares could more than double in value if an upcoming English exploration well is successful, that’s according to Optiva Securities analyst Barney Gray.
The company has a 10% stake in the Colter exploration well which is due to be drilled in the second quarter of this year, and, Gray reckons a discovery could be worth US$40mln or 8.8p per share to United.
Gray’s overall valuation puts the company’s worth at around US$61.7mln which equates to 15p per share (undiluted) – which compares to a current share price of 4.52p.
“It is very important to note that United is now fully funded for its exciting exploration and appraisal activities in the current year,” Gray said in a note.
He added: “It is also important to note that we have not yet ascribed any potential upside for United’s interest in Jamaica at this stage.
“However, the establishment of early prospective resource estimates for Walton-Morant in the event that the 3D survey yields positive results could enable us to instigate an indicative risked valuation for the asset representing several multiples of the current share price.”
Off the south coast, the Colter well will target an exploration prospect in the vicinity of the Wytch Farm field, Britain’s largest oil operation outside of the North Sea, and ahead of drilling the expectation is that Colter could be similar.
“We’re really excited about it because it could be potentially a mini Wytch Farm,” Larkin said.
He added: “I think it is a nice exposure for our shareholders. We like the risk profile, it fits with our strategy of low risk, near term activity opportunities in Europe.”
“We’re really excited about it and we’re looking forward to it.”
Larkin explains that a success in the well would be significant for the group’s valuation, and he highlighted a recent competent persons assessment of the project which saw the potential for 20mln of recoverable resources.
“It is certainly a material asset to us.”