United Oil & Gas reserves replacement impressive, says Cenkos


United Oil and Gas PLC (LON:UOG) continues to be undervalued especially after the last reserves upgrade in Egypt says broker Cenkos.

An updated reserves report, published by Gaffney, Cline & Associates (GCA) indicated net 2P reserves had increased by c24% year-on-year to 3.7mln barrels equivalent (3.1mmbbls of oil and 2.8Bcf of gas).

Given the net c0.73mmboe produced in 2020, this indicates a reserves replacement ratio for 2020 of 198%.

Upside comes from both a further c3.9mmboe of 3P reserves and 21 exploration prospects, said Cenkos, with an aggregate net prospective resource of 5.7mmbbls.

At 5p, or the same as Cenkos’ Core NAV estimate, the market has assigned no value to the rest of United’s full-cycle portfolio said the house broker.

It has a risked exploration NAV of 27.8p and a ‘buy’ recommendation.

Optiva noted that the 24% increase in gross 2P reserves from 13.5 mmboe at the end of 2019 to 16.8 mmboe at the end of 2020 represents a highly commendable near 200% reserves replacement ratio.

“With the current figures not yet including recent drilling success, we anticipate further progress in this regard over the current year.”

Optiva has a target of 24p compared to a market price of 5.15p, up 3%, today.


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