Union Jack Oil (LON:UJO) has expanded its portfolio of onshore assets through a deal with Egdon Resources (LON:EDR).
The British oil junior is acquiring 10% of licence PEDL005(R) which hosts both the Keddington oil field as well as exploration projects.
No cash will be paid up-front, instead Union Jack agrees to pay 20% of the cost of a side-track well planned later this year at Keddington, and will subsequently also be required to pay 20% of the cost of an exploration well on the Louth prospect, which is slated for either 2016 or 2017.
Union Jack said it will pay its allocation of Keddington costs from its existing cash resources.
David Bramhill, Union Jack’s chairman, said: “We are pleased about the addition of Keddington to our existing portfolio as it delivers an opportunity to be involved in a relatively low-risk oil production and development play with significant upside potential.
“The board believes this acquisition to be a natural next step in respect of our strategy as Union Jack transitions from an exploration company to a production company.”
Keddington currently produces between 30 to 35 barrels of oil per day, and it is anticipated that the new side-track well could increase output to around 125 bopd.
Union Jack has previously partnered up with Egdon in other projects such as Wressle, Biscathorpe and North Kelsey.
Production testing operations are currently underway at Wressle, a potential field development project which has been the focus for Union Jack investors.