We met with the management team of Jericho Oil (JCO.V) to get a better understanding of the company’s business model and plans for the future.
Jericho’s plan consists of acquiring past-producing oil fields which have been ignored since the initial production was shut down or reduced to just a few barrels of oil per day. As all of these projects are conventional oil projects, Jericho isn’t required to do much more than just applying ‘new’ techniques to increase the oil flow rate.
The company has been quite successful so far as its first production platform in Kansas is operating above our expectations. The output has more than four folded from just over 800 barrels per month in March 2014 to almost 4,000 barrels of oil per month in December, and these numbers obviously speak for itself. On top of that, the Kansas asset should be profitable at the current oil price which isn’t something a lot of oil companies can say nowadays. Additionally, this increased production rate will also allow Jericho to unlock economies of scale and the potential to reduce the operating cost even further cannot be ignored.
Jericho plans to open no less than three production platforms and has acquired just over 2,000 acres of ground in Oklahoma with an average production rate of just 7 barrels of oil per day. Jerico will obviously try to duplicate the success it currently enjoys in Kansas and 2015 will be a very interesting year for the company. Depending on how fast it plans to continue to develop its Kansas and Oklahoma assets we wouldn’t be surprised to see the exit rate of the company’s oil production to be 10,000 barrels per month by the end of this year.
Jericho Oil is very thinly traded so we would recommend to work with limit orders.
> Click here to go to Jericho Oil’s website
Disclosure: The author holds a small long position in Jericho Oil but plans to increase it. Please see our disclaimer for current positions.
