[source: Union Jack Oil]
Union Jack Oil (UJO ) told investors in its results for the year ended 31 December 2020 that it remains “highly positive” in the future of the business as it looks back on a year of progress.
The UK-focused onshore hydrocarbon production, development and exploration firm said that during 2020 and the year to date, the group managed to advance key projects, execute drilling and advance development and appraisal activity, resulting in an accretion in its asset value which has provided “greater clarity on the next steps towards commerciality.”
Union Jack completed a farm-in in late 2018, on licence PEDL183, covering 176,000 acres and containing the West Newton A-1 discovery, with Rathlin Energy (UK) Limited ("Rathlin").
Since that time the JOA partners have seen ‘excellent success’ in respect of subsequent drilling campaigns with both the WNA-2 and WNB-1Z wells being recorded as significant discoveries with both wells suspended and awaiting testing during Spring 2021.
In particular, UJO successfully drilled the West Newton B-1Z conventional appraisal well over the period where initial petrophysical evaluation was shown to demonstrate a gross hydrocarbon saturated interval of at least 118 metres within the Kirkham Abbey formation.
The JOA partners believe that West Newton has the potential to assist in replacing the requirement for imported hydrocarbons locally while simultaneously developing indigenous energy sources, contributing to the economic welfare of the Humber region.
Analysts at Arden Research expect the flow testing of the B-1Z and subsequently A-2 wells to begin shortly, with a CPR (which Gaffney Cline has been appointed to carry out) to follow based on the new data, and then a further new well before the end of 2021, it said.
In 2020, revenue increased to £0.158m (FY19: £0.136m) while UJO incurred a slightly higher operating loss of £1.88m (FY19: £1.7m) as a result of higher administrative costs due to technical work in respect of West Newton, Wressle, Biscathorpe and Keddington.
As at 1 May 2021, Union Jack had more than £5.7m in cash, not including loan receivables and royalty accruals of over £1m due during 2021 and 2022. Going forward, the company highlighted that it is fully funded for all current development and well testing commitments.
Meanwhile, Union Jack also told investors that it remains fully debt free and that over the 2020 period, the group’s net assets increased by 35% to over £18m from £13m in 2019.
Commenting on the annual results published today, David Bramhill, Executive Chairman of Union Jack Oil stated that, "Union Jack's wider asset portfolio continues to be well balanced with the relevant components of production, development, appraisal and discovery.”
He said, "UJO remains in sound financial health, with a robust balance sheet, continues to be debt free, with ample cash reserves to fund its well testing and planned development commitments, offering shareholders ongoing and significant scope for growth.”
‘I have no doubt, even in these unprecedented times that we will achieve our goal of increasing production materially and so continue to make meaningful progress towards becoming a significant, principally onshore mid-tier UK producer in due course,’ he added.
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Analysts at Arden Research recently concluded that Union Jack is ‘well-funded’ from its end June 2020 cash holding of £4.6m (zero debt) plus £7.0m from the September 2020 placing.
In a research note, analysts said West Newton remains ‘the key asset’ for Union Jack, with the potential for the upcoming work programme to prove up a significant onshore resource and potentially open up development planning. As such, the flow testing programme, CPR and new well all represent key catalysts for Union Jack over the rest of this year, it said.
Rathlin, the operator of West Newton, believes the site has the potential to provide local feedstock to a Humber net zero project replacing the need for imported hydrocarbons while developing indigenous energy sources, contributing to the economic welfare of the region.
Shares in Union Jack Oil have increased by nearly 13% in value since the beginning of 2021. The stock was trading 1.81% lower this morning at 34.36p following the announcement.
Reasons to Follow UJO
UJO is an onshore oil and gas exploration firm with a focus on drilling, development and investment opportunities in the UK hydrocarbon sector, and currently holds interests in 13 licences in areas including, inter alia, the East Midlands, Humber Basin and East Yorkshire.
West Newton
The UK focused onshore hydrocarbon explorer holds a 16.665% interest in PEDL183, containing the conventional West Newton A-1 discovery well and WNA-2 appraisal well.
West Newton is located at the heart of the Zero Carbon Humber project area, which aims to promote decarbonising technologies across industrial activities in the wider Humber region.
In October 2020, it reported that the onshore West Newton B-1 ("WNB-1") well - the next well following the successful West Newton A-2 ("WNA-2") appraisal well - had been spud.
Results from the drilling of WNB-1 are expected to inform a subsequent programme of testing to establish the well's productive capability as well as future drill operations.
North Kelsey
In recent months, UJO also increased its stake in the North Kelsey project by acquiring an additional 30% from Egdon Resources, taking its stake in the exploration project up to 50%.
Further financial obligations will be equal between Union Jack and Egdon Resources, in line with both parties’ 50% stake in the North Kelsey Prospect which is located in Lincolnshire.
The North Kelsey Prospect is a conventional oil prospect along trend from and analogous to the Wressle oil development, which lies around 15 kilometres to the northwest.
The UK- focused group said the prospect has been mapped from 3-D seismic data and has the potential for oil in up to four stacked conventional Carboniferous reservoir targets.
David Bramhill, Executive Chairman of UJO, described North Kelsey as “a low cost, drill-ready onshore acquisition for Union Jack in our focus area, consistent with our strategy.”
He said a further stake in the project increases the group’s exposure to a “potentially value adding project” as well as expanding UJO’s balanced drilling and development portfolio.
Subject to a successful farm-out, North Kelsey-1 is expected to be drilled during 2021.
Wressle
In recent months, Operator, Egdon Resources U.K. Limited, commenced operations to re-complete and reperforate the well located at the Wressle hydrocarbon development site.
The Ashover Grit reservoir is expected to produce 500 barrels of oil per day at a constrained rate, increasing UJO’s net production by an additional 200 bopd when fully on stream.
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