Micro-cap oil explorer/producer Jericho Oil (TSX-V:JCO, OTC: JROOF) has spent the last three years assembling an impressive package of oil producing assets in Oklahoma. Jericho boasts a portfolio consisting of ~55,000 net acres in one of the hottest basins in the United States, including an interest in ~16,000 net acres in the STACK Play, one of the world’s top resource plays for horizontal development. While Jericho’s portfolio churns out nearly 1,000 barrels/day of oil production it’s the potential for growth through exploration where the real upside for Jericho shareholders exists.
In 2018 Jericho has been exploring more aggressively on its properties including drilling 3 STACK wells. Recently Jericho has begun talking about what it calls its “hidden gem”; Jericho’s “Osage Extension” play in northeast Oklahoma has company management very excited about the next few months. The Osage Extension is listed 3rd in Jericho’s “playbook” (its list of assets), however, this hidden gem could deliver substantial upside. Jericho has been studying the Osage Extension from a geological standpoint for many months and they are finally ready to drill it. Because the holes in the Osage Extension are shallower it will be cheaper to drill (sub-$3 million) than the STACK wells that Jericho has already completed this year.
Jericho feels that there is at least as much upside on its Osage Extension play and they will be tapping into this upside for roughly ½ the drilling cost of the STACK. The market has been focusing on Jericho’s STACK property package for much of 2018 and I believe most investors have forgotten about this hidden gem in the Osage Extension – it’s not something that Jericho has talked about a lot (because they were working to get a better understanding of it) and it’s not something which Jericho gives itself much reserve value for. That could change drastically over the next several months after Jericho begins drilling its hidden gem by the end of November.
The way to build a big oil company is through drilling and production growth. After spending 2 ½ years building a valuable portfolio of oil assets in Oklahoma (when oil prices were much lower than today’s US$67/barrel), Jericho is committed to unleashing the potential that these assets hold. JCO has begun to tap into this potential with its STACK wells and now the Osage Extension is next.
Jericho shares have strong support in the C$.50-$.55 area which roughly correlates to a US$50 million market cap (JCO has 128.6 million shares outstanding [~46% held by insiders]):
As Jericho progresses with its growth plans I expect to see a move back up to the next area of resistance near C$.75 (almost 50% above current levels) followed by a rally back to all-time highs (C$1.38) reached earlier this year after Jericho announced initial results from its first STACK well.
The market loves exploration news, especially exploration news that indicates production growth. Jericho’s hidden gem might be about to deliver just what the market wants. Shrewd investors have the opportunity to use the recent market weakness which has resulted from a tumultuous broader market environment to pick up Jericho shares at support just before Jericho begins drilling its hidden gem.
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