President Trump has a knack at taking to Twitter and calling for increased output to drive the price of oil down. There’s no denying that he can be successful in his tactics, but, regardless of his efforts, the energy sector has seen a nice recovery in prices since West Texas Intermediate crude went into a tailspin from over $75 a barrel in October to as low as $42.36 in December. Prices have been subsequently uptrending to around $60 and there is still plenty of headroom for additional gains.
In fact, as we recently detailed to our AllPennyStocks.com Pro members, April has historically been a good month for the energy sector, outperforming others in the S&P 500.
Most of the majors, like Chevron (NYSE:CVX) and Exxon Mobil (NYSE:XOM) have followed the crude recovery, but smaller companies are coming around more slowly, creating an opportunity to find producers that can be profitable at current – or even lower – levels as value plays.
Jericho Oil (TSX-Venture:JCO) (OTC:JROOF) certainly fits that bill.
The company is focused on the Meramec and Osage formations in the STACK region, an oil-rich area that is comprised of the Sooner Trend, Anadarko (basin), Canadian and Kingfisher (counties) in Oklahoma.
Widely trumpeted for its incredible reserves, this region of the U.S. has attracted all the oil big boys that are now neighbors to Jericho, including the likes of Newfield Exploration Co. (NFX:NYSE), Continental Resources Inc. (CLR:NYSE), Devon Energy Corp. (DVN:NYSE), Chesapeake Energy Corp. (CHK:NYSE), Gastar Exploration Ltd. (GST:NYSE) and Marathon Oil Corp. (MRO:NYSE).
Jericho has assembled an interest in 55,000 net acres across Oklahoma, including an interest in approximately 16,000 net acres in the STACK Play through a joint venture that Jericho holds 26.5% ownership.
At the end of last month, Jericho disclosed preliminary 2018 full-year partnership production totaling a record 297,000 barrels of oil equivalent from its projects. That was a 33% improvement from 2017’s total.
Here’s the kicker. On top of the record production, Jericho slashed production operating costs by a whopping 30% year-over-year, taking production operating expenses to just $17.00 per barrel of oil equivalent in 2018.
What is surprising about Jericho is that while the company is stronger than ever and still expanding its development work to bring more wells online, shares have been more than halved in the last year from a high of $1.38. Finally, though, the time looks right for JCO to start a recovery of its own. A base has formed at 38 cents and 46.5 cents was hit this month as the stock price climbed back over its 50 day moving average, a bullish signal.
The recent advance has cut through the one-year downtrend line as shown in blue in the image below.
Technically, there is little resistance in the way for JCO from the current level until a 16% rise to 50 cents. Then it’s another 20% jump until resistance at 60 cents. More importantly, technical traders will start looking for some higher highs and higher lows to be put together to signal that this downtrend is over and that it is time for the stock to start making up some lost ground.
The fundamentals provide plenty of reasons to love this company and now the chart is setting up to lend further credence to upside potential from these depressed levels.
