“The odds are never in your favour.”
That is Union Jack Oil and Gas’ (LON:UJO) executive chairman David Bramhill’s assessment of oil exploration in general, rather than a reference to blockbuster film The Hunger Games.
His philosophy to try to minimise the risks is by sticking to onshore UK assets, where UJO oil has built up a portfolio of stakes between 7.5-20% in a string of licences.
East Midlands the cake, Weald Basin the icing
The core of the portfolio is in the East Midlands Basin, which includes the Wressle-1 oil discovery, a share of production from the Keddington oil field and a raft of drill-ready exploration and appraisal targets.
Union Jack Oil is also involved in the ongoing exploration in the Weald Basin in Sussex, where wells at Horse Hill, Brockham and Broadford Bridge are generating lots on interest, through a stake in the Holmwood licence.
It’s a portfolio he’s pretty comfortable with, Bramhill told Proactive.
“We have a very simple business model. We cherry pick what we think are the nicest deals around and take an interest.
“We like 10% -20% sakes, 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.
Closeology is word he uses a lot. Essentially if licences next door are making discoveries, there is a good chance something will found on yours as well
In the Weald Basin, Holmwood (7.5%) is 12km is just a few miles recent discoveries by UK Oil and Gas and Angus Energy, while the East Midlands has been an oil producing address for decades.
Onshore UK an overlooked province
Bramhill believes onshore UK is still relatively unrecognised as an oil province, but offers plenty of opportunity nonetheless.
Though returns may not match those seen offshore, “Onshore can make it happen, big time”, he says pointing to a former company, OilQuest, that eventually was acquired by Premier Oil. Nighthawk Energy and Wessex Exploration are also former stomping grounds.
Currently Wressle’s operator Egdon is navigating through the planning appeal process having had one application rejected earlier this year. If approved, Wressle (15% UJO) is expected to come on stream at 500 barrels per day.
No such problem exists at Biscathorpe where planning permission has been granted for a second well and where Bramhill sees a lot of upside for UJO.
BP originally drilled it in 1987, but the new well will be a few yards further up.
"Hopefully the oil column is a lot thicker here," he adds.
“Every well drilled on trend has come in, so fingers crossed, we are in the right area.”
Indeed he can’t wait for well it to be drilled.
In the meantime, talks are ongoing about the acquisition of some producing assets to add to the modest existing production from Keddington.
UJO raised £1.4mln in February and has cash to fund deals even after its pro-rata commitments on the existing portfolio.
What the broker says
Barney Gray, at joint house broker Turner Pope Investments, wrote recently that Union Jack’s acquisition of additional interests in Wressle, where first production is expected in late 2017, demonstrates the company’s confidence in this development project.
“Coupled with exposure to over 2.0 mmboe of net unrisked prospective resources from upcoming exploration wells on the Holmwood and Biscathorpe prospects, we believe that Union Jack’s balanced portfolio has the potential to deliver valuable accretion to shareholder value over the next twelve months.”
Union Jack Oil's Portfolio (Sep 2017)
- PEDL180 Development Wressle: 15.0% Awaiting development approval (operator Egdon)
- PEDL005(R) Production Keddington: 10.0% Existing production (Egdon)
- PEDL143 Exploration Holmwood: 7.5% Paying 15% of exploration well (operator Europa)
- PEDL182 Exploration Broughton North: 15.0% Wressle exploration upside (Egdon)
- PEDL253 Exploration Biscathorpe: 12.0% Paying 24% of exploration well (Egdon)
- PEDL201 Exploration Burton on the Wolds: 10.0% Unconventional oil and gas targets (Egdon)
- PEDL241 Exploration North Kelsey: 20.0% Paying interest of 30% (Egdon)
- PEDL005(R) Exploration Louth Prospect: 10.0% Paying interest of 20% (Egdon)
- PEDL339 Exploration Louth Extension: 10.0% Paying interest of 20% (Egdon)
- PEDL005(R) Exploration North Somercotes: 10.0% Paying interest of 20% (Egdon)
- PEDL209 Exploration Laughton: 10.0% Further prospects under review (Egdon)
- Source: Turner Pope