By: Dylan Sikes - AllPennyStocks.com News

Wednesday, April 29, 2015

Oil prices have made a nice recovery since spot West Texas Intermediate crude hit $42.41 in March, printing as high as $58.63 this month. There’s still debate about another dip in prices and when/if oil prices will climb and sustain levels above $60 again. In order to mitigate risk in energy investments, the common underlying theme for those looking to play the oil space is to look for low-cost producers who can deal with cheap crude prices and grow their company through discounted acquisitions. Jericho Oil Corp. (TSX-Venture:JCO) (OTCQX:JROOF) fits that bill, as the Vancouver-based company targets shallow, long-life conventional oil stripper wells in legacy onshore U.S. basins for revitalization, workovers and stimulation. In short, the company targets overlooked and undervalued properties to bring back to life. Jericho’s producer wells can produce oil for 15-20 years at an all-in cost to the company of less than $40 per barrel, with an IRR (internal rate of return) in the 50%+ range.

With the closing of its initial Oklahoma acquisition last month – which is producing oil and also has natural gas production potential – Jericho has acquired a 50 percent interest in approximately 5,600 acres in Oklahoma and Kansas. While low oil prices are bad for some, it actually plays into Jericho’s hands to acquire property at discounted prices. The “patiently aggressive” acquisition strategy is reaping production rewards in only one year. Since the company re-commenced trading on the TSX-Venture exchange last March, production has increased dramatically with a rise from less than 50 barrels per day to 134 barrels of oil per day in March. Most of the production is in Kansas (124 bopd), but investors should be attuned to increased production from the new Oklahoma assets going forward.

Today, Jericho disclosed its year-end Reserve Report for the period ended December 31, 2014 for its Kansas properties, and the growth in assets is worth noting. From March - December 2014, Jericho invested $5.201 million (including acquisition costs for Kansas assets). The results were Proved plus Probable (2P) reserves of $13.613 million, or 797,064 barrels of oil. Year-end Proved (1P) reserves totaled $8.247 million, or 496,584 barrels of oil. Proved Developed reserves totaled 244,392 barrels of oil, representing a stark increase of 311% over acquired Proved Developed barrels of 78,573.

The reserve life index totaled 40.2 years of 2P reserves; 25.1 years for total 1P reserves; and 12.3 years for Proved Developed reserves (based on annualized fourth quarter 2014 average production of 54.3 barrels of oil per day for Jericho’s 50% Working Interest). Proved Developed reserves accounted for 49% of the total Proved reserves.

“[We] have grown Proved Developed reserves by over 300 per cent, production by 150 per cent and set up a long-life of drilling inventory for future cash flow,” said Allen Wilson, chief executive of Jericho Oil, in today’s statement. “Moreover, we are pleased we were able to demonstrate, albeit under severe pricing conditions, our capital efficient strategy and strong reserve value growth to our shareholders. Nothing is more exciting to me than fully executing on the strategic plan and business model we laid out to shareholders when we recommenced trading on the TSX-V in March 2014.”

In December 2014, cumulative production on Jericho projects was about 3,850 barrels. Based on current levels in Kansas and the addition of the Oklahoma properties, the company is maintaining a solid growth curve and executing on its business model as it stays on the hunt for more acquisitions.

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