Union Jack Oil (UJO ), a UK-focused onshore conventional explorer, noted operator Egdon Resources' preliminary results for the year ended 31 July 2022, including operational commentary on a number of projects in which Union Jack holds material interest. These include Wressle (40%), Keddington (55%) and Biscathorpe (45%).
Wressle is Union Jack's current flagship asset. Union Jack holds a 40% interest in Wressle. Egdon is the operator of Wressle and holds a 30% interest in the project.
Egdon said that production at Wressle had significantly exceeded forecast expectations with zero water to date. At the same time, gas monetisation and Penistone Flags development were being prioritised at the project.
Edgon also said the outcome of an appeal on a Biscathorpe planning decision was expected around the turn of the year.
Plans for a development well at Keddington were also being finalised. Drilling is expected to commence in 2023 to further upgrade production.
Gas monetisation
As mentioned above, gas monetisation is currently being prioritised at Wressle. The implementation of a two-stage gas utilisation scheme is being progressed, which will enable Wressle's oil production limit to be lifted.
For the first stage of gas utilisation, the intention is the utilise the Ashover Grit gas for electricity generation and export. Initially, the site diesel generator will be replaced with a gas microturbine for site electrical power. Subsequently, a separate gas engine will be installed to generate and export up to 1.75 MW of electricity into a local private power network.
It is expected that installation of the microturbine will be completed by year end. The sourcing of a gas engine and equipment for step two is being expedited, Edgon said. Eventually, stage two of the gas monetisation plan will focus on gas export from the material resource in the Penistone Flags reservoir.
David Bramhill, Executive Chairman of Union Jack, commented: "We now have a clear focus on our forward strategy at Wressle to implement, as a priority, the monetisation of its gas reserves that also facilitates optimum oil production from the producing Ashover Grit reservoir. In parallel, the development plan and consenting process are being progressed to enable future production of the significant resources within the Penistone Flags reservoir."
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Gas monetisation at Wressle, in conjunction with increased oil production rates, will have a materially positive impact on the future value of Wressle field. Investors should also stay tuned to ongoing development of the Penistone Flags reservoir, which has 1.6mmboe of gross 2C resources, compared to existing 0.7mmboe gross 2P in the producing Ashover Grit and Wingfield Flags.
Wressle is already one of the most productive conventional-producing UK onshore oilfields, set to become second only to Perenco's Wytch Farm. Last month Union Jack marked a milestone as it recorded US$10m of revenues from Wressle after a little over a year following recommencement of operations at the site in August 2021.
Today, revenues from Wressle are fast approaching US$11m and the Wressle-1 well continues to peak at 1000 bopd. GaffneyCline's recent independent report sees steady production of c. 800 bopd for at least another 5 years.
Two weeks ago, Union Jack shares jumped 15% after the company announced a maiden dividend and share buyback programme. Shares are currently up 35% since that announcement. UJO shares are also up an impressive 134% YTD as Wressle continues to outperform and West Newton shapes up to be a second home run for the company. The announced share buyback programme should result in an increase in EPS and improve UJO shares' trading liquidity.
West Newton is set to become a second major revenue source for Union Jack after a Competent Person's Report (CPR) in September estimated an 85.5% geological chance of success for the project. Large-scale drilling of a horizontal well at West Newton is on schedule for 2023, with commercial production beginning as early as 2026.
Union Jack's unaudited revenues from 1 January to date are in excess of £6.846m, and unaudited 3Q results demonstrated another profitable period for the company. Union Jack remains debt-free and fully funded for at least another 18 months.
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