Junior oil and gas stocks are among the most popular stocks for private investors across the world. The promise of millions of barrels of oil and instant share price rises is hard to stay away from. Unfortunately because of this, its a very high risk game. However, a few of these minnows have delivered on promises and could deliver huge returns in a short space of time.
88 Energy(LSE: 88E) has been investigating the prospectivity of its Icewine acreage in Alaskas prolific North Slope. The company drilled the Icewine 1 well, which was targeting a deep unconventionalshale zone called the HRZ interval. After months of analysis the company released some hugely encouraging data last week and the shares are flying.
After much lab work, the company has found that the reservoir quality is above expectations, permeability is good and the rock mechanics have been de-risked further, which is incredibly important for unconventional reservoirs.The company believe itssitting on a highly prospective shale that may hold billions of barrels of oil. The shares have responded superbly from lows of 0.3p to highs of 3p.
Although theres more lab analysis to come, so far 88E is very happy with the results and hasbegun planning for a horizontal well. This horizontal well will again test the HRZ shale, but importantly will test the reservoir deliverability.
I think a huge price catalyst will be the reserves report, which could blow the roof off the shares. Its still a high risk share but if theres more good news then the share price will continue to rocket.
UK Oil & Gas(LSE: UKOG) is currently a hot stock in the junior oil and gas market. The company made a discovery in the Weald Basin in Southern England last year and hasbeen flow testing the reservoir recently.The Lower and Upper Kimmeridge zones flowed 456 and 900 barrels of oil per day, respectively. These flow rates were way above management expectations.
Importantly the companygot the well to flow without fracking the reservoir. This is great news and one that many didnt believe could actually happen. The Weald Basin may hold billions of barrels of oil, but theres still much disagreement over how much can be extracted.
UK Oil & Gas isnow seeking approvals to do an extended well test, which should provide further data on the reservoir performance over a longer time frame. All in all its a very encouraging sign for the company as itmoves towards possible development.
These two companies have bright futures ahead of them if the positive news continues. The oil price is an obvious problem to both but that should begin to recover in 2017.
Buying shares in junior explorers is a high risk game but shareholders of UK Oil & Gas and 88 Energy can tell you how lucrative it is if you get it right.
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Jack Dingwall has shares in 88 Energy. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.