United Oil & Gas PLC (LON:UOG) revealed it has received approval from the Jamaican Government to take forward the Walton Morant Licence, Jamaica, on a 100%-operated basis, with the initial exploration period also extended for 18 months.
The high growth oil and gas company, with a portfolio of production, development and exploration and appraisal assets said it has been assigned Tullow Jamaica Ltd's 80% equity in the Walton Morant licence for a nominal fee, leaving the company as operator and 100% equity holder.
It added that a portion of the licence has been voluntarily relinquished, leaving a more focussed area of around 22,400 square kilometres that still incorporates all of the identified prospectivity.
With the extension to the initial exploration period, United said it 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 the high-graded Colibri prospect and perform detailed interpretation of the numerous follow-on targets, including Moonraker,Thunderball, Moneypenny, Jaws, Goldfinger, Vesper, Oriole, Earspot and Rumpspot.
United said this cost-effective activity will be informed by the feedback from companies who have engaged with the company and the previous licence operator in the data room process to date.
It is believed this work will have a significant impact on the continuing farm-down process, the group added.
Potential to have a major impact
In a statement, Brian Larkin, United Oil and Gas’s CEO said: "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.
"The United team know this licence well, having worked on it for many years. Our experience and understanding of the licence and conviction about it was critical to the Jamaican Government's decision to grant us operatorship, 100% interest, and an 18-month extension. We are confident in the quality of this licence and in the opportunities that exist not only in the Colibri prospect, but across the full 22,400km2 area.”
He added: "We will move ahead with a cost-effective programme of activity, building on the significant work that Tullow and United had completed over the last two years and the feedback from a very active farm-down process. Our goal will be to further de-risk the asset, bring in partners and move ahead to plan a well on the Colibri prospect.”
United farmed into the Walton Morant licence in 2017. Since then, significant seismic survey work has been carried out on the licence, including the acquisition and interpretation of 2,250km2 of 3D seismic data and the re-interpretation of 3,650km of existing 2D seismic data.
Based on this new data, United invested in an updated independent Competent Persons Report for the licence in 2019. This identified a total gross un-risked mean prospective resource of 229 Million Stock Tank Barrels (MMstb) on the Colibri Prospect alone. In high-case scenarios, the gross unrisked resource estimates for Colibri suggest up to 513 MMstb could be recovered.
It is estimated that United will have acquired the results of approximately $30mln of investment by the previous operator in the licence.
In morning trade on Monday, United shares were 0.9% higher at 2.83p.
In a note to clients, analysts at Optiva Securities commented: "In our recent research note dated 5 June 2020, we established a core valuation of 8.1p per share for United despite several significant industry headwinds. This assessment was underpinned by the company’s 22% interest in the Abu Sennan producing asset in Egypt which has demonstrated very robust value in a lower oil price environment.
"To this valuation, we have now included prospective resources upside at Abu Sennan and with the future of Walton-Morant secured until early 2022 and within United’s full control; we have brought our risked assessment for Walton-Morant of 7.1p per share into our core valuation. As such, our updated valuation is now equivalent to 17.7p per share (see table overleaf). It is important to note that this metric assumes that United will hold an ultimate 50% interest (ideally carried over the cost of the exploration phase) at this stage following the anticipated introduction of one or more farm-in partners over the next 18 months."
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