Oklahoma's STACK oil play has been on the radar of oil companies the past few years as large independent producers like Devon Energy (DVN-NYSE), Continental Resources (CLR-NYSE), Marathon Oil (MRO-NYSE), Newfield Exploration (NFX-NYSE) and Alta Mesa (AMR-NYSE) have acquired large tracts of land. But it's not just the big players that are active there.
One small-cap company, Jericho Oil Corp. (JCO:TSX.V; JROOF:OTC), just announced results from its first well in the STACK region, and it has exceeded expectations. Through the Oklahoma STACK Joint Venture, the Wardroom 19-13-12 1H well "achieved a peak 24-hour rate of 957 oil-equivalent barrels (BOE) per day (68% oil) at 211 Boepd per 1,000 ft. The projected 30-day normalized rate (IP30) for this 4,518 ft perforated lateral well is 770 BOE per day (67% oil)."
According to Jericho, "oil productivity from the Wardroom is amongst the highest of any well to-date targeting the Meramec formation in the northern STACK on a per 1,000 lateral foot basis."
Comparable results by nearby operators confirm the potential of the area. Just two miles from the Wardroom well, a Staghorn Petroleum II well "achieved a peak 24-hour rate of 1,180 boepd, at 240 boepd per 1,000 ft."
"Jericho Oil's 2018 will be growth, growth and more growth." - Keith Schaefer
The company noted that the STACK JV "owns a 47% working interest alongside Staghorn Petroleum II LLC in the Wardroom. Current ultimate recovery projections place the potential rate of return at greater than 75%, assuming $60 per barrel and $3.00 per mcf."
Jericho noted that its 2018 development program "will focus on the continued delineation of its acreage footprint for both the Meramec and Osage formations and adding tuck in acquisitions that complement" the company's STACK acreage footprint.
Keith Schaefer, editor of Oil and Gas Investments Bulletin, recently profiled Jericho Oil, noting that the STACK, the lowest cost play in the U.S., is like the Permian, but with a lot more oil. Jericho was "the rare micro-cap that had cash in 2015/16, and was able to buy STACK assets for pennies on the dollar. It now has over 70,000 acres across Oklahoma."
"Jericho was able to acquire core STACK land for $2,300 per acre—a fantastic price then and an even better price now. Today, nearby STACK transactions are being valued at almost 10X that price, up to $20,000 per acre, Schaefer noted.
"Jericho Oil's 2018 will be growth, growth and more growth," Schaefer stated. He noted that there is some big money behind Jericho, including a legendary Oklahoma oil family, as well as the Breen Family Trust, which is affiliated with DowDupont CEO Ed Breen.
"Jericho is well positioned with excellent management and some of the strongest investors in energy." - Bob Moriarty
Jericho has moved from the land-buying stage to the drilling stage, Schaefer asserts, and notes that Jericho CEO Brian Williamson believes that "each well drilled proves up a minimum of seven surrounding drilling locations." According to Schaefer, "that will mean a HUGE increase in the reserve report for 2018—which will get the company its first big operating line of credit (read: non-dilutive capital)."
Schaefer believes Jericho is "the smallest company—backed by the biggest investors—in the lowest-cost oil play in the U.S."
Technical analyst Clive Maund noted on CliveMaund.com on March 8 that Jericho's shares "soared 25% higher (17% on US OTC) to a new high on huge record volume." He advised that "the enormous record volume on this break to new highs, which was a record by a huge margin, is a sign that it is probably headed much higher."
Bob Moriarty profiled Jericho Oil on 321 Gold on Dec. 27, 2017. He noted that Jericho's land package in the STACK would "allow for up to 160 drill locations." Looking at the results of three other companies that have drilled in the STACK, "well costs were about $4 million for each of the companies. BOEPD varied from 725-749 and the IRR varied from 65% to an incredible 74%. Jericho and their partner are right in the center of that STACK play," he stated.
"The Permian basin got both popular and expensive at the same time," Moriarty concluded. "STACK is a cheaper alternative with excellent potential. Jericho is well positioned with excellent management and some of the strongest investors in energy. Their business plan works and will continue to work for the future. I believe 2018 will be a major move forward for Jericho as they begin to drill their STACK wells."
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Disclosure:
1) Patrice Fusillo compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an employee. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
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