Union Jack Oil (UJO) , a UK-focused onshore hydrocarbon explorer, announced unaudited interim results for the 6 months ended 30 June 2023 (H1 2023).
Union Jack saw net production of 0.31 mboe/d in H1 2023, up from 0.26 mboe/d a year ago, driven by volumes from Wressle. The oil producer remained cash generative with £1.61m in gross profits, £0.57m in net profits on revenues of £3.58m. Free cash flow was £1.5m after capex of £0.7m, and EBITDA stood at £2.0m. Cash balances were £9.25m as of September 8, 2023 amid ongoing capital spending, with all of Union Jack's projects funded for at least another 12 months without fundraising or debt.
Union Jack's robust balance sheet is underpinned by its 40%-owned flagship Wressle project, which is among the most productive conventional producing UK onshore oilfields. Since August 2021, Wressle has produced 500,000 barrels of oil from the Ashover Grit formation alone at a most recent gross rate of 780 bopd. Wressle water cut remained at 3.7% for July and August.
The oil producer said it is planning more wells at Keddington, Wressle and West Newton, in addition to ongoing evaluation of new projects offering "short-term cash-flow, rapid payback and accretive value".
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Another good set of results from Union Jack Oil, underpinned by strong cashflows from Wressle. One of the most productive UK onshore oilfields, Wressle 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.
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, down from £10.8m a month ago, reflecting ongoing capex spending. 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.
Revenues from Wressle also support Union Jack's development of its other assets, with new wells planned at Keddington (55% interest), Wressle (40% interest), and West Newton (16.7% interest). Elsewhere, the company is pursuing planning permits for wells at Biscathorpe (45% interest) and North Kelsey (50% interest).
Overall, given the potential for a significant increase in production from Wressle in the near term, and ongoing development and expansion elsewhere in its portfolio, we expect Union Jack Oil to continue growing. Broker Zeus maintained its total risked NAV at 71p, compared to UJO's current share price of 20.25p.
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