United Oil & Gas targets upgraded as City analysts see more upside

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Stockbroker Cenkos has lifted its price target for United Oil & Gas PLC (LON:UOG) on the continuing success of the Abu Sennan assets in Egypt.

Cenkos repeated a ‘buy’ recommendation for United and set a new price target of 19.1p, up from 17.1p. The new target suggests more than 500% upside to United’s current market price of 2.8p.

United this week released interim results confirmed a successful period.

Net production averaged 1,975 barrels of oil equivalent per day, and, boosted by the ASH-2 and ES-5 wells the rate reached 2,716 boepd by the end of June.

Cenkos analyst James Mccormack, in a note, highlighted that the Abu Sennan acquisition has been key to United’s growth.

READ: United confirms successful half boosted by growth in Egypt

“The significant production and reserve additions delivered as part of the 2019-20 drilling campaign emphasises the considerable upside that still remains in the block,” Mccormack said.

The analyst noted that unlocking gas resources as a possible upcoming catalyst for the AIM-quoted share.

“At Abu Sennan, the installation of a gas pipeline at ASH will commence shortly,”

“On completion, the pipeline will deliver up to 1.5MMscf/d of gas and significantly reduce flaring from the field. Discussions are underway with the Abu Sennan partners on a potential ASH-3 well in early 2021 as well as the 2021 committed exploration well.”

Elsewhere, Optiva Securities also upped its target to 20.5p following United’s results.

“In spite of the twin headwinds of the current Covid-19 pandemic and a slump in global oil prices, the company is now a full cycle oil and gas company with a diverse portfolio of production, near-term development projects and appraisal opportunities in Egypt, Italy and the UK,” Optiva’s Barney Gray said in a note.

“These assets are complemented by potentially high impact exploration plays in the UK and particularly Jamaica which could provide significant longer-term growth opportunities.”

Gray added: “The next twelve months promise further activity including the recommencement of development drilling operations and an upgrade to gas infrastructure on the ASH field in Egypt in addition to a potential exploration well on the same asset in 2021.

“United also expects to commission a new CPR on the Walton Morant licence in Jamaica covering at least 10 targets additional to the Colibri prospect in H2 2020. This has the potential to enhance considerably the prospectivity of the licence ahead of a drill decision and a parallel farm-out process.

“With events remaining on track and the provisional award of two exciting UK North Sea assets containing confirmed discoveries, we are increasing our valuation of United from 17.7p to 20.5p per share.”

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