Union Jack Oil, a UK-focused onshore hydrocarbon explorer, said it has made an initial investment in Beacon Energy.
Beacon is a full-cycle oil and gas company with a portfolio of production, development, appraisal, and exploration onshore German assets through its wholly owned subsidiary Rhein Petroleum.
Union Jack holds 430 million ordinary shares of no par value in Beacon, representing 3.22% of Beacon's issued share capital following completion of its recent fundraise.
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Union Jack's initial investment in Beacon is in line with its stated growth strategy aiming to expand in "foreign jurisdictions with politically safe regimes". The purchase is not surprising given Union Jack's recently announced strong financial performance in H1 on the back of consistent cashflows from its flagship asset at Wressle.
Beacon's onshore assets in Germany hold significant upside potential and are a natural fit for Union Jack's existing onshore portfolio in the UK. In the near term investors should look forward to the testing of Beacon's Schwarzbach-2 well.
Union Jack's ambitious M&A strategy is fueled by strong revenues from Wressle, one of the most productive UK onshore oilfields. The asset is now generating in excess of US$1m a month for UJO, outputting 780 bopd with peaks of 1000 bopd. An ongoing gas monetisation programme and development of the Penistone Flags formation (which contains 2.0mmboe of gross 2C resources) should have a materially positive impact on production starting in H2 2023. Cashflow has been further complemented by Union Jack's 55%-owned Keddington oilfield where planning is underway for a side-track well.
Union Jack continues to be highly cash generative, covering all G&A, operational and contracted or planned capex costs, including drilling activities and work programme commitments for at least the next 12 months. The company remains debt free with cash at £9.25m as of September 8 2023. Additionally, Union Jack's buy-back programme has so far acquired 4.6% of shares in issue, improving EPS accordingly. Over £3m has been returned to shareholders via dividends and buybacks since October 2022.
Earlier this month, broker Zeus maintained its total risked NAV at 71p for UJO, compared to the company's current share price of 20.75p.
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