Union Jack Oil (LON:UJO) has marked another significant milestone with a commercial discovery at the Moccasin 1-13 well in Oklahoma, USA. According to a recent research note from SP Angel, the company is rapidly progressing with the installation of permanent production facilities, a move that underlines the strength of its US expansion strategy.
A Major Step Forward in the US
Union Jack’s foray into US onshore drilling has been nothing short of impressive. The Moccasin 1-13 well, where the company holds a 45% working interest, has delivered strong initial flow test results. Several hydrocarbon-bearing intervals were identified, with the primary target confirming itself as a significant oil producer. Importantly, the well has shown minimal associated gas and no formation water, reinforcing the high-quality nature of the reservoir.
The well’s operator, Reach Oil & Gas (55% WI), alongside Union Jack, is confident enough in the results to move swiftly towards full-scale production. The company anticipates oil recovery rates exceeding 40%, reflecting excellent reservoir permeability and promising future cash flow.
Moccasin: Proof of Concept in Action
SP Angel highlights that the success at Moccasin validates a crucial geological theory. The well targeted an untested structural prospect supported by 3D seismic data along the Wilzetta Fault, an area known for large oil accumulations. The discovery also demonstrates that hydrocarbons can migrate into structures west of the Wilzetta Fault from the Woodford Shale, a prolific oil source in the region. With additional zones yet to be perforated and tested, further positive updates could be on the horizon.
Expanding US Opportunities
Union Jack Oil’s strategy in the US continues to gain momentum. The company has now drilled three successful wells in Oklahoma in partnership with Reach, demonstrating a strong track record. The Moccasin discovery is expected to contribute significantly to cash flow, alongside Union Jack’s growing royalty portfolio, which has already delivered an impressive 31% rate of return.
SP Angel notes, “We anticipate further growth in the US portfolio and think that investing cash on the balance sheet into low-risk near-term US drilling opportunities for production and cash flow growth complements Union Jack’s existing profitable onshore UK production and development interests.”
Positive Outlook and Valuation
Despite the broader market challenges affecting UK onshore oil sentiment, SP Angel remains bullish on Union Jack’s prospects. The research firm reiterates its BUY rating with a target price of 66p per share, highlighting that the company’s US drilling success could significantly enhance investor confidence.
With strong production potential, increasing cash flow, and a diversified asset base across both the UK and US, Union Jack Oil is well-positioned for sustained growth. Investors will be watching closely as the company progresses towards full production at Moccasin and continues to expand its footprint in the US energy sector.
Final Thoughts
Union Jack Oil’s ability to execute a successful drilling programme in the US is proving to be a game-changer. As the company advances with production at Moccasin and pursues further drilling opportunities, its investment case remains compelling. The combination of robust cash flow generation and strategic diversification suggests that Union Jack is well on track for long-term success.
