[source: Union Jack Oil]
Union Jack Oil (UJO ), a UK-focused onshore conventional explorer, has provided a development and production update on its West Newton project.
The update was presented to the West Newton Community Liaison Group by Rathlin Energy Limited. Reabold holds a 56% interest in West Newton through its 59% interest in Rathlin Energy. Union Jack Oil holds a 17% interest in the site.
Data collected from West Newton wells and analysed by 3rd party labs has indicated that West Newton's formation is "very sensitive to aqueous fluids", and that previous drilling of the site with water-based mud has resulted in some damage to the Kirkham Abbey reservoir and its ability to flow.
In addition, analyses have determined that the use of dilute water-based acids during well testing have had an adverse effect on the flow characteristics of the Kirkham Abbey reservoir. Instead, tests show that drilling the reservoir with an oil-based fluid can minimise damage.
Rathlin has therefore made applications to the Environmental Agency for use of oil-based drilling fluids for both West Newton A and B sites, currently pending.
Rathlin notes that analyses show the Kirkham Abbey reservoir at West Newton to be predominantly gas (90% methane 90% + 5% ethane) with associated light oil (condensate). As a result, trucking requirements may be greatly reduced.
Development programme
Based on these results, Rathlin has contracted engineering consultants RPS to undertake a detailed reservoir and completion programme study. RPS has determined that drilling with an oil-based mud system horizontally to 1500m will significantly enhance future production.
Rathlin and partners are currently working to determine the optimum orientation for a horizontal well, to be drilled from either A or B sites. Steel casing and other long lead items have already been ordered and the availability of rigs capable of drilling 1500m horizontal wells is also being determined.
Commercial production from West Newton could start as early as 2026, Rathlin said.
View from Vox
While markets have focused on the negative aspects of the announcement, the update also highlights development progress made and lessons learned from 3rd party analysis, to ensure that both West Newton sites reach their full potential once production starts, as early as 2026.
Engineering consultants RPS have now modelled wells extending 1500m horizontally through the Kirkham Abbey reservoir. Using this orientation, the wells will have a much greater likelihood of encountering significant sections of the reservoir with open natural fractures, translating to higher production capacity.
Further good news is the discovery that the reservoir is predominantly gas (90% methane + 5% ethane), leading to lower trucking requirements. This will put less strain on the surrounding road network, leading to less interference with local residents and businesses, as well as allow for the installation of a pipeline to deliver natural gas directly to the National Grid.
Based on updated estimates, West Newton's anticipated recoverable resource will be enough to meet the daily gas demands of over 380,000 homes in the UK for years to come.
Domestically produced natural gas will remain a necessary part of the UK's energy mix as it seeks to reduce its reliance on Russian gas and ocean-transported LNG. This is also important for meeting the UK's 2050 net zero target as domestic UK gas production has less than half the carbon footprint of imported LNG.
In related news, Union Jack Oil's flagship Wressle project continues to solidify its status as one of the most productive conventional-producing UK onshore oilfields, set to become second only to Perenco's Wytch Farm.
To date, Wressle has produced over 225,000 barrels of oil with zero water cut, with an average rate of 300 bopd and instantaneous rates of over 1,000 bopd achieved. Union Jack is actively developing the site, approved for production through 2039, and recently increased its stake in Wressle to 40%. GaffneyCline's recent independent report sees steady production of c. 800 bopd for at least another 5 years.
Union Jack Oil has had a good year so far with shares currently up 100% YTD despite challenging economic and market conditions. Its recently published 1H 2022 results reaffirmed investors' confidence in the company, with £2.03m of maiden profit, £4.38m of revenues, no debt, and a strong £10.5m cash position recorded at the end of 1H22.
In addition, in August Union Jack was given the nod by the High Court for a Capital Reduction, creating additional distributable reserves of £21.5m, that may be used to pay a dividend and/or activate a share buyback programme.
The shares continue to trend upwards over the past three months despite heightened volatility over the past couple of weeks, in anticipation of the new Government rules on fracking.
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