Oil & GAS | Jericho Oil

Original Source: https://www.allpennystocks.com/spotlight/35/jericho-oil-corp-tsx-venturejco-otcpkjroof.htm

If you’re into oil stocks and concerned about oil prices possible sinking, the place to look is Oklahoma and, more precisely, what is referred to as the STACK shale play in the state.  STACK is an acronym for “Sooner Trend (oil field), Anadarko (basin), Canadian and Kingfisher (counties) and is also inclusive of other neighboring counties, namely Blaine, Major and Garfield.  At approximately $32 per barrel, STACK plays have the lowest PV-10 breakeven value in the contiguous United States, making them high priority targets for majors and a handful of juniors that had the foresight to get in front of the trend.

The famous Anadarko Super Basin is part of this prolific region, pumping out about 5.4 billion barrels of oil in its history and still going strong today.  Yet, this and the surrounding region remains largely untapped and arguably the best oil-producing opportunity in the country.

Don’t just take our word for it; listen to what some experts have to say.  “We believe the STACK play has the potential to be the next franchise asset in the U.S. E&P.” (JP Morgan Upstream Equity Research, May 2016).  “We expect the SCOOP/STACK to provide the highest oil production [compound annual growth rate] for the rest of the decade among all major oil basins.” (Goldman Sachs Upstream Equity Research, June 2016).

SCOOP is and acronym for the “South Central Oklahoma Oil Province” play that is largely comprised of the Anadarko Basin.

With that in mind, it is with good reason that well-heeled oil majors like Marathon, Newfield, Sandridge, Chesapeake, Devon, Alta Mesa, Continental and more are working in this area today.  With its $2.4 billion market cap, Alta Mesa has been particularly aggressive in the STACK, acquiring 20,000 acres in 2017, with a particular focus on drilling the Osage formation, one of five primary formations in the STACK (along with Meramec, Oswego, Chester and Woodford).  XTO Energy (a unit of Exxon Mobil) has recently received two permits to drill in the Osage while Gastar Corp. recently completed a horizontal well with an initial production rate (IP) of 1,139 barrels of oil equivalent per day (BOEPD), lending more validation to the potential of the Osage formation.

An upcoming player in the STACK space is Jericho Oil Corporation (TSX-Venture:JCO) (OTC PINK:JROOF), a company that has methodically amassed 16,000 net acres in the northern STACK via a joint venture and an enviable portfolio of approximately 55,000 gross acres across central Oklahoma.  The Vancouver and Tulsa-based company is employing a business model that has them forging partnerships in Oklahoma, wherein the local partner can then use its experience to advance the projects more expeditiously and efficiently with the assistance of Jericho’s seasoned team of industry and business vets.  Current STACK production stands at 200 BOEPD (not including production from the first two wells mentioned below) and is just starting to percolate for Jericho, giving a hint of what may be right around the corner.

Jericho has not disappointed in the STACK with its first two wells, partnering with a best-in-class operator, referred to as the “STACK JV” by Jericho, and drilling a well in the Meramec in March with IP24 (24 hours of initial production) of 957 BOEPD.  At the end of July, the company disclosed a second well, this one called “Swordspear 23-10-15 #1H” in the Osage formation, with IP24 of 504 BOEPD, with production continuing to trend higher.  The STACK JV owns a 47.5% working interest in the Swordspear.  It is expected that wells in the Osage formation will reach peak production more slowly and subsequently have less rapid decline rates, meaning that these wells will flow more consistently for longer periods.

The Jericho well is only a couple miles north of the wells being drilled by XTO/Exxon, a fact that should be encouraging to Jericho shareholders, as the company has hundreds of possible drill locations in the Osage formation and across its STACK JV acreage.

To that point, the STACK JV has decided to participate in its second Osage formation well (Trebuchet 21-23N-10W #1H), which will help to better define the JV’s acreage position.  A spud date is anticipated for later this month and will represent yet another milestone being delivered by Jericho.

Preliminary estimates, supported by other public information on assets of bigger peers in the region (i.e. Alta Mesa, Longfellow Energy, Chaparral Energy), suggest a strong internal rate of return for wells in the STACK.  Based upon $65 per barrel oil, $3.00 per mcf natural gas and a $5.0 million completed well cost, Jericho estimates an IRR (Internal rate of return) in excess of 50 percent in the Swordspear.

As Jericho defines its resources, it is further looking to add tuck-in acquisitions to complement its existing STACK footprint.

To the east of the STACK assets, Jericho has holdings in the Cherokee Platform Basin, called the “Osage Extension,” in Noble, Pawnee and Creek Counties.  Current production is 275 BOEPD, with the 50/50 JV targeting the Mississippian Lime, Cleveland and Woodford formations.

Presently, the JV is using capital from the cash flow for testing a re-fracturing program and applying modern completion to generation 1.0 horizontal wells.

To the southeast of its STACK JV, Jericho has a substantial position in the SURE (Seminole Uplift Resource Extension) play in Pottawatomie, Seminole and Cleveland counties, Oklahoma.  Jericho again has a 50% interest in a joint venture.  Formations here are comprised of Hunton, Caney, Mays and again the deep and prolific Woodford.  A stunning 773 billion barrels of oil have been produced historically from the SURE region, 100 billion of which have been produced through vertical wells.

Current production from Jericho’s SURE assets are 400 BOEPD.  The geology shows the rock to be ripe for both vertical and horizontal modern fracturing stimulation, which has the company currently evaluating re-entry into the up-dip Woodford wells with modern techniques.

The simple fact is that Jericho Oil is an anomaly with its tiny C$0.65-cent-per-share price tag and C$83 million market capitalization as it rubs elbows with some of the world’s biggest oil and gas companies in Oklahoma.  The company has quietly built itself an impressive portfolio in a region with world-class reserves that has not only been producing for about a century, but forecast to be the next great play going forward.  The ability to acquire the portfolio of assets at low entry prices in ultra-low breakeven basins, speaks to the foresight of Jericho leadership, a team of successful businessmen with highly relevant backgrounds in business and energy.

Trading as high as $1.38 in March, Toronto-listed shares of JCO have been halved without cause.  Production is approximately 800 BOEPD and new test wells suggest that figure could easily double in the near term while even more wells are drilled.  The company is fundamentally stronger than ever, including over US$5.0 million in cash on hand and what can only be described as a catalyst-rich future, creating the type of opportunity that energy investors should take a much closer look at before things change, which can happen as fast as striking oil.

Forward Looking Statements

This report includes forward-looking statements that reflect current expectations about its future results, performance, prospects and opportunities. Jericho Oil Corp. has tried to identify these forward-looking statements by using words and phrases such as “may,” “will,” “expects,” “anticipates,” “believes,” “intends,” “estimates,” “plan,” “should,” “typical,” “preliminary,” “we are confident” or similar expressions. These forward-looking statements are based on information currently available and are subject to a number of risks, uncertainties and other factors that could cause Jericho Oil Corp.’s actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. These risks, uncertainties and other factors include, without limitation, the Company’s growth expectations and ongoing funding requirements, and specifically, the Company’s growth prospects with scalable customers, and those outlined above. Other risks include the Company’s limited operating history, the Company’s history of operating losses, consumers’ acceptance, the Company’s use of licensed technologies, risk of increased competition, the potential need for additional financing, the terms and conditions of any financing that is consummated, the limited trading market for the Company’s securities, the possible volatility of the Company’s stock price, the concentration of ownership, and the potential fluctuation in the Company’s operating results.


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