Union Jack Oil PLC (AIM:UJO, OTCQB:UJOGF) shares traded positively on Thursday morning, up 2% at 18.75p, after its partner in the West Newton project published a new report.
The company owns a 16.665% interest in West Newton, where partner Reabold Resources today published the findings of a new feasibility report that confirmed the technical and economic viability of an initial single well development plan for the gas field in Yorkshire.
Such a plan would accelerate production and cash flow with limited capital expenditure, the company noted.
The feasibility study, commissioned by Reabold and conducted by consultant CNG Services, outlined an initial gas production operation from a single horizontal well, with processing through a modular plant.
It proposed that produced gas would be tied in from the West Newton A site to the National Transmission System via a 3.5-kilometre pipeline.
The report shows ‘highly favourable’ project economics with low initial capex requirements, estimated at £12 million, with the project NPV(10) described as attractive, at £33 million, and, it calculates an internal rate of return (IRR) at 29%.
"The CNG Feasibility Study highlights the opportunity to unlock significant near-term value from the West Newton project through the early production plan,” Reabold co-chief executive Sachin Oza said in a statement.
“The study confirms that the early production plan is both technically robust and economically attractive with a low capex requirement."
He added: "This phased development plan allows gas production to be brought to market within months of drilling, generating significant early cash flow whilst we progress the full field development plan.
“With the industry currently suffering from a lack of available development capital, the ability to achieve early production with limited capex is strategically extremely valuable.”
Reabold noted that the UK regulator has approved a revised work programme for West Newton, to include the re-entering and recompletion or the sidetracking of suspended wells by 2026 and 2027.
The joint venture partnership for West Newton is fully funded and plans to commence operational activity later this year, aiming for first gas production within 18 months of drilling the next well.
Oza added: “With the necessary approval from the NSTA for the revised work programme for PEDL 183 secured, Reabold can continue to progress this important UK gas project in the most optimal manner.”