Union Jack Oil PLC (AIM:UJO, OTCQB:UJOGF), traditionally focused on UK onshore oil and gas production, is making strides in the United States as it diversifies away from the challenging UK regulatory landscape.
The company has already established a foothold in Oklahoma, where its first two wells, Andrews 1-17 and 2-17, are now generating revenue, according to a recent report from Shore Capital.
This shift marks a well-time strategic pivot as Union Jack seeks to balance its UK operations with growth opportunities in the US.
UJO's expansion into the US started in early 2024, and its American portfolio now accounts for one-third of the company's valuation, with plans to further increase this share, Shore noted.
US more supportive
The company is capitalising on the more supportive regulatory environment in the US to accelerate drilling and production.
Three additional wells in Oklahoma are scheduled for exploration by the end of 2024, with each potentially boosting the company's valuation significantly if successful, the broker told investors in a note.
Back in the UK, the company remains committed to its flagship Wressle oilfield in North Lincolnshire, where the company aims to double production with new development projects.
However, as Shore pointed out, legal challenges over environmental concerns have delayed these plans.
Union Jack is also involved in the West Newton gas field in East Yorkshire, which promises a low-emission alternative to imported gas, positioning the company to contribute to domestic energy supply with lower carbon emissions.
Regulatory concerns
Despite these UK projects, the regulatory and fiscal environment in the country remains a concern, particularly with the Energy Profits Levy impacting investment sentiment.
Union Jack has responded by using cash flow from its UK operations to fund its US expansion, and as of mid-2024, the company remains debt-free with £4.1 million in cash.
Shore Capital estimates that Union Jack’s shares have the potential to rise by 240% from their current price (based on a net asset value of 35p), driven by both US and UK operations.
The three Oklahoma wells, expected to be drilled by the end of the year, represent key near-term catalysts for the company’s growth.
American accent
Shore said: "Union Jack has made decisive steps to diversify away from being a purely UK onshore oil & gas company.
"In contrast to the bureaucratic UK regime, the company’s first wells in Oklahoma, USA, have rapidly moved from prospects to commercial production and are providing investors with a steady flow of catalysts as it pursues further growth in the USA.
"Union Jack remains a UK E&P, but it is increasingly one with a strong US accent."
In afternoon trading, the shares were trading sideways at 10.10p.