[source: Union Jack Oil]
Union Jack Oil (UJO ) said it has plans to adopt a capital allocation and distribution policy to allow the payment of a dividend or implement a share repurchase programme in future.
The UK focused onshore hydrocarbon production, development and exploration company said this decision follows a recent review of its operational and financial plans for 2022.
To allow such distributions, it must reorganise its capital to create distributable reserves. The company, which has proposed a reduction in its capital subject to approval by shareholders, outlined that it intends to apply a consistent and disciplined approach to capital allocation.
The Board said this strategy will enable the group to manage its overall funding requirements whilst maintaining a strong balance sheet which is debt free throughout the oil price cycle.
Union Jack said the policy was consistent with the company’s progression into “a meaningful producing company, making appropriate distributions in order to reward its shareholders.”
Looking ahead, the company said it will continue to invest in the multiple growth projects it holds; this includes the Wressle development, West Newton, Keddington and Biscathorpe, all of which the Board believes will deliver significant future returns for shareholders, it stated.
Union Jack told investors that the decision to seek shareholder distributions comes as a result of its ‘excellent current performance,’ principally as a result of the firm’s Wressle development.
On Tuesday morning, Union Jack reported material landmark net revenues from the Wressle hydrocarbon development in North Lincolnshire on the western margin of the Humber Basin.
Since the re-commencement of production at the development, in which Union Jack holds a 40% economic interest, back in August 2021, the company has made US$3m in revenues.
Shares in Union Jack Oil were trading 10.59% higher this morning at 23.5p.
Current daily production figures at the development site range from 600 to in-excess of 700 barrels of oil per day from the Ashover Grit reservoir, constrained on a restricted choke.
The well continues to produce under natural flow with zero water cut while staged site upgrades are ‘progressing well,’ Union Jack told investors, adding that its business ‘continues to be cash flow positive covering all corporate, administrative and project operating costs.’
As at 21 February 2022, Union Jack Oil held cash balances of £6.1m and receivables of £2.07m. Oil revenues to 31 December 2021 are expected to be in-excess of £1.89m, up from £0.158m reported in the prior year. The company added that it continues to be debt free.
As a result of increasing revenues and the effect on cash balances, Union Jack detailed that it intends to make an early settlement to Calmar LP of £2,080,000, on or around 1 March 2022.
This will be in respect of previously reported acquisitions of 25% of PEDL180 and PEDL182 containing the Wressle development and will eliminate all major current trade payables.
Executive Chairman of Union Jack, David Bramhill, commented: “The revenues of in-excess of US$3,000,000 to Union Jack from Wressle, whilst under test production, are highly positive for the Company, which remains in robust financial health as the above figures illustrate.”
He added: “We believe that Wressle holds significant further upside which will be demonstrated over the foreseeable future, and we look forward to reporting on progress in respect of site upgrades and achieving optimum production rates in due course.”
In addition to the Wressle development, Union Jack has three other cash generating projects.
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