Why the Jupiter Energy (ASX:JPR) share price more than doubled today

The Jupiter Energy Limited (ASX: JPR) share price surged today after it signed a key infrastructure deal. Such announcements don’t…

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The Jupiter Energy Limited (ASX: JPR) share price surged today after it signed a key infrastructure deal.

Such announcements don’t usually trigger such excitement among ASX investors. But the agreement will allow the junior oil explorer to unlock value in its Kazakh assets.

This explains the 123% surge in the Jupiter Energy share price to a more than one-year high of 7.8 cents at the time of writing.

Jupiter Energy share price surges on infrastructure deal

The binding framework agreement was signed with Kazakh registered Sleipnir Technologies. It sets a timetable for the development and lodgement of a detailed project development plan that will provide Jupiter Energy with the appropriate infrastructure to achieve 100% gas utilisation on the Akkar North (East Block), Akkar East and West Zhetybai oilfields.

Under Kazakh law, oil and gas wells can only be granted a Commercial Production License if they have the right infrastructure in place. Then only can the well operator sell to international markets.

Current output limited by license restrictions

Currently, Jupiter Energy can only sell oil to the Kazakhstan domestic market as it operates under a Trial Production Licence or during the “Preparatory Period” as it transitions to a full commercial license.

“During the ‘Preparatory Period’, Jupiter is able to produce from any well located on a field with an approved Commercial Production Licence without having the requisite gas utilisation infrastructure in place, only if all excess gas that is produced during production is used on the field for power, heating and the like,” said Jupiter Energy.

“Jupiter’s production is therefore already currently constrained on the Akkar North (East Block) and Akkar East fields as both fields are operating under ‘Preparatory  Period’ restrictions. 

“The West Zhetybai field has just commenced the approval process to transition from Trial Production to Commercial Production and when this approval process is complete, the West Zhetybai field will return to production, also under ‘Preparatory Period’ restrictions, until the appropriate 100% gas utilisation infrastructure is in place.”

Production output set to increase

The Akkar East and Akkar North (East Block) fields current produce around 225 barrels of oil a day. When the West Zhetybai field returns to production, the cumulative daily output from the three oilfields should increase to 340 barrels per day.

But following the successful commissioning of the gas utilisation infrastructure, Jupiter Energy should achieve cumulative daily production from the current wells of circa 700 barrels per day.

Additional oil production could then come from future, successful, drilling on the three fields.

Jupiter Energy and Sleipnir aim to lodge the project development plan with the the Kazakh Ministry of Energy by early 1Q 2022.

The big rise in the Jupiter Energy share price on Thursday pushes its one-year gain to 30%.

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