[source: Union Jack Oil]

Half Year results to the 30th June 2021 highlight a similar financial performance to that in the previous six month period.  

However, investors should not the significant increase in contributions from the Wressel development, reflecting a period of pre-proppant squeeze, of approximately US$300,000 revenue net to the Company from test production, which clearly augurs well for the future cash flow projections. 

EBITDA loss of £0.8m (1H20: £0.9m loss)reflects higher oil prices and Wressle production balanced out by higher G&A costs. 1H21 Free Cash outflow was £2.5m, reflecting £1.6m of CAPEX during the period. 

As at 30 June 2021, the cash on the debt free balance sheet was £4.7m

Key Assets 

The Company currently generates income from portfolio assets, namely, Wressle, West Newton and Biscathorpe; plus the addition of an attractive royalty revenue stream. 

Key to the future value of UJO is the Wressle development where UJO has a 40% carrying interest. Importantly, flow rates following successful proppant squeeze of the Ashover Grit reservoir, significantly exceeded initial expectations of the 500 barrels of oil per day well with flow rates between 19 August 2021 to 9 September 2021 delivering circa. US$0.3m net to Union Jack from test production during this short period. 

Elsewhere, at West Newton, the Company testing is now underway at West Newton-A2 well, where a 65 metre hydrocarbon column was previously discovered. Initial petrophysical indicates a gross oil column of 45 metres, underlying a gross gas column of 20 metres. The WNA-2 well exhibits encouraging porosities on logs and in core. Natural fracturing is also confirmed by an imaging log run across the entire Kirkham Abbey interval. 

Even the initial result of the Biscathorpe-2 well has subsequently turned full circle due to the perseverance of the technical teams and their research has demonstrated that PEDL253 can now be considered a viable hydrocarbon play and that Biscathorpe remains one of the largest untested conventional onshore prospects within the UK. 

The JV commissioned independent consultants Applied Petroleum Technology (UK) Limited ("APT") to perform a detailed geochemical analysis of drill cutting samples taken from 20 intervals in the Biscathorpe-2 well. The key result from the report was the likely presence of a 68 metre, live oil column with API Gravity of 33º to 34º in the top of the Dinantian interval.

David Bramhill, Executive Chairman, commented: "The period covered in this Half Yearly Report has seen important progress made at our three key project interests, namely, Wressle, West Newton and Biscathorpe plus the addition of an attractive royalty revenue stream. Developments at our three material projects where we have meaningful economic interests have generated a steady stream of encouraging news flow, which we expect will be continued based on current activities.

In the subsequent period to this Half Yearly Report, we have seen Wressle production rates well in excess of our projected 500 barrels of oil per day with a corresponding expectation of its potential to deliver material future revenues. Given these encouraging initial test results at Wressle, Union Jack management is of the opinion that, if Wressle is only half as good as we anticipate, then we will be hearing much more about this development for many years to come.”

View from Vox 

Assuming sustained deliverability, at current production rates Wressle is set to become the second ranked onshore oilfield in the UK next to Wytch Farm with upgrades to the infrastructure at Wressle beyond the existing 500bbl/d, generating significant cashflow for UJO. 

With considerable unrealised value at the Company’s other assets including Biscathorpe, Keddington and Kelsey and the new royalty at Claymore, the shares are currently trading at a significant discount to the 90p target price set by analysts at Arden. 

If future Newsflow points to the remaining upside at Wressle from the Wingfield Flags and Penistone Flags reservoirs, both of which have already demonstrated their ability to flow oil to surface during testing of the original discovery well, the shares could re-rate upwards rapidly from here.

Reasons to  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.    

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.  

From 19 August 2021 to 9 September 2021, Wressle has contributed approximately US$300,000 net to Union Jack from test production during this short period 

Assuming sustained deliverability, at current production rates Wressle is set to become the second ranked onshore oilfield in the UK next to Wytch Farm 

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. 

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.     

Subject to a successful farm-out, North Kelsey-1 is expected to be drilled during 2021.     

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