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Union Jack Oil builds up strong portfolio of UK assets

Snapshot

  • Minimises risks by sticking to onshore UK assets.
  • Built a portfolio of stakes between 7.5%-20% in projects
  • Wressle start-up a key catalyst
  • Enjoying success at West Newton project
oil rig

Quick facts: Union Jack Oil PLC

Price: 0.195 GBX

AIM:UJO
Market: AIM
Market Cap: £30.11 m
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What it does

David Bramhill, chief executive, explains that Union Jack Oil PLC (LON:UJO) has a very simple business model.

“We cherry-pick what we think are the nicest deals around and take an interest.

“We like 10% -20% stakes, so if something goes wrong, you haven’t killed the company.”

He reckons with onshore UK there is a 40% - 50% and sometimes even a 60% chance of success unlike offshore, where often he says it is an 8:1 bet.

“And we don’t do 8:1 shots,” he adds.

 

How it is doing

Financial results for 2019, released in early May, confirmed the onshore UK firm is fully funded for all its current drilling and well testing commitments in its full-year 2019 results statement.

AIM-quoted UJO had a £5.5mln cash balance at the start of May 2019 and it remains debt-free.

The latest addition to Union Jack's portfolio was a 16.667% stake in the West Newton gas discovery in Yorkshire.

The drilling programme at the West Newton project was a highlight of the first half with the company partnered in a successful conventional appraisal well which confirmed a 45-metre gross oil column plus a 20-metre of gas column.

An extended well test programme was recently suspended, temporarily, in order to incorporate the confirmed gas into the development planning.

In April 2020, the company confirmed that a testing programme has been greenlighted at the West Newton A-2 well.

Operations will begin once government guidance pertaining to coronavirus (COVID-19) allow, and once the required personnel and equipment become available.

Separately, the company recently noted that partner Rathlin Energy is safely advancing site operations at the West Newton B (WNB) property, in preparation for a future well programme.

At Biscathorpe,  an assessment was made of the previously-drilled Biscathorpe-2 well with independent consultants Applied Petroleum Technology confirming the presence of a 35-metre live oil column at the top of the Dinantian interval. The evaluation also indicated possible oil pay at the base of the Dinantian.

UJO believes Biscathorpe remains “one of the UK's largest onshore un-appraised conventional hydrocarbon targets.”

At Wressle, the inspectorate gave planning permission to the consortium ruling against North Lincolnshire Council.

The saga began last year when Egdon Resources lodged an appeal against the refusal of planning permission for the drill site from the local council.

 

Union Jack Oil's key assets

• PEDL 183 West Newton 16.67% ( Operator Raithlin ) 

• PEDL180 Development Wressle: 27.5% Awaiting development approval (operator Egdon)

• PEDL005(R) Production Keddington: 20.0% Existing production (Egdon)

• PEDL182 Exploration Broughton North: 27.5% Wressle (Egdon)

• PEDL253 Exploration Biscathorpe: 22% (Egdon)

“In addition, Union Jack's 20% working interests in the producing Keddington and Fiskerton Airfield oil fields provide us with oil revenues and exposure to additional workover and drill targets in our focused areas.”

 

What the boss says: David Bramhill

 "The company, during 2019 and to date, has advanced its key projects, and seen drilling and appraisal activity, supported by technical research input from our very competent technical team, resulting in an accretion in asset value and providing clarity on the next steps towards commerciality.

"I have no doubt that, even in these difficult times, given our attractive projects, we will achieve our goal of increasing production materially and becoming a significant mid-tier UK onshore producer in the medium term.”

He concluded: “Union Jack's wider asset portfolio is well balanced with the relevant components of production, development, appraisal and discovery and we are fully funded for all our planned commitments going forward. The future of Union Jack remains bright.”

 

What the broker says: SP Angel

SP Angel analyst Sam Wahab has a ‘strong buy’ rating for Union Jack, with a 0.7p price target suggesting substantial upside to the current market price.

“Union Jack’s investment case is relatively unique given its robust financial position and attractive project economics across its core asset base in our view,” Wahab said in a note.

“Shareholders will also be encouraged that the West Newton work programme continues despite current UK restrictions.

“West Newton is estimated to contain a base case of 146.4MMbbls of STOIIP and 211.5Bcf of gas – one of the largest UK onshore conventional discoveries.”

 

Latest video

 

Inflexion points

  • Wressle granted planning approval
  • Wressle can come on stream at 500 barrels per day
  • West Newton has potential to much larger than originally thought
  • Oil in place at West Newton is estimated at a base case 146mln barrels
  • Best case is oil-in-place of 283mln barrels.

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Union Jack Oil 'has all the right ingredients for a highly positive 2020' -...

Union Jack Oil PLC’s (LON:UJO) David Bramhill tells Proactive London's Andrew Scott they're fully funded for all its current drilling and well testing commitments. He says they had £5.5mln cash in the bank at the start of May and remains debt-free. Bramhill is confident the company can...

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