In the last three years Jericho Oil shares have followed a pattern of rising early in the year only to suffer a correction later in the year. This year’s correction has been particularly pronounced with JCO shares getting cut in half after reaching an all-time high above C$1.30 in March:
The correction can largely be attributed to impatient investors selling after not receiving much in the way of news from Jericho between May and July. However, this sell-off has created opportunity for investors who can look to a future which could be very bright for Jericho. Catalysts are lining up as Jericho looks to increase production and develop reserves which will serve to increase the net asset value of JCO’s assets.
After spending 2 1/2 years assembling an attractive portfolio of assets at compelling valuations (largely based on US$40/barrel oil prices) Jericho Oil (TSX-V:JCO, OTC:JROOF) is focused on increasing production and generating cash flow in 2018. After increasing its STACK acreage footprint by ~75% to 16,000 net STACK acres over the last six months Jericho is planning to drill 4 new wells on its STACK acreage during the back half of 2018 in addition to several other notable plans aimed at increasing production and enhancing the net asset value (NAV) of Jericho’s asset footprint:
3-4 new high quality STACK wells completed by end of 2018.
Announcement of a drilling program in one of Jericho’s other assets (Osage Extension).
Continuous improvement in terms of operating results.
Strategic acquisitions that enhance the value of the existing portfolio.
Jericho’s Swordspear (Osage) well is currently flowing over 500 BOEPD and the well pressure remains high. There has been significant activity proximate to Jericho’s Osage well:
XTO (Exxon Mobil Corp.) two permits to drill an extended lateral targeting the Osage formation.
Alta Mesa completed 1 HZ well and filed 7 permits to drill.
Gastar completed an Osage formation HZ well with very strong initial production rate (24 hour): 1,139 BOEPD.
The STACK is hot and Jericho’s acreage is right in the middle of an area that is seeing substantial activity by major players such as XTO, Alta Mesa, and Gastar. Moreover, Jericho is partnered with best in class STACK operator Staghorn Petroleum.
In total Jericho has assembled a 55,000 gross acre asset portfolio at low-cost entry points, and it’s far from a stretch to value some of Jericho’s assets at 5-10x what the company paid for them in the last couple of years:
The current oil price environment calls for more aggressive drilling on Jericho’s highly prospective property package and Jericho has taken up the call. Between now and year end Jericho will drill an additional 3-4 wells on its STACK property package and begin a drilling program on its Osage Extension asset; this is by far the most aggressive the company has been in terms of exploration drilling in its short history.
I see Jericho moving to aggressively unlock and more clearly highlight the value of its asset portfolio over the next 6-12 months. With a move up to the TSX also increasingly likely over the same time frame, the combination of strong news flow and increased attention to the Jericho Oil story offers investors an attractive proposition to enter JCO after a sizable correction, right before the company enters a transformative phase in which considerable shareholder value could be unlocked.
The article is for informational purposes only and is neither a solicitation for the purchase of securities nor an offer of securities. Readers of the article are expressly cautioned to seek the advice of a registered investment advisor and other professional advisors, as applicable, regarding the appropriateness of investing in any securities or any investment strategies, including those discussed above. Jericho Oil Corp. is a high-risk venture stock and not suitable for most investors.. Consult Jericho Oil Corp’s SEDAR profile for important risk disclosures.
EnergyandGold has been compensated to cover Jericho Oil Corp. and so some information may be biased. EnergyandGold.com, EnergyandGold Publishing LTD, its writers and principals are not registered investment advisors and advice you to do your own due diligence with a licensed investment advisor prior to making any investment decisions.
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