Shares in Union Jack Oil (LON:UJO) and Europa Oil & Gas (LON:EOG) advanced on Monday after revealed a deal between them for the Horse-Hill-alike Holmwood exploration well, in the South East of England.
Holmwood is located about 12 kilometres to the Horse Hill oil discovery, and the plan is to test similar targets - which in the neighbouring well flowed at a rate of 1,688 barrels per day in testing.
The well will target oil in Upper and Lower Kimmeridge Limestones, as well as the Corallian and Portlandian sandstones.
The project has previously been estimated to host some 5.6mln barrels of prospective oil resources, though that includes only one of the above targets, and doesn’t include any estimates of the deeper targets which surprised to the upside over at nearby Horse Hill.
To earn its stake Union Jack will cover a portion of upcoming well costs. It estimates the net cost to the company at around £480,000.
David Bramhill, Union Jack executive chairman, in an interview with Proactive Investors described himself “really pleased to be involved” in the Holmwood venture.
The project is “on trend” and “drill ready” he adds, noting drilling is expected to start in the fourth quarter of 2016 or the beginning of 2017.
Europa chief executive Hugh Mackay, earlier today, said: “We rate Holmwood as one of the best undrilled conventional prospects in the UK: gross mean unrisked prospective resources of 5.6 mmbo; the presence of multiple payzones; and located in a prolific hydrocarbon producing region close to the Brockham oil field and Horse Hill discovery.”
UK Oil & Gas Investments, one of the main backers of the Horse Hil project, previously secured a farm-in to Holmwood via a deal with Egdon Resources.
Following the deal between Europa and Union Jack the Holmwood joint venture comprises: Europa (32.5%), UKOG (30%), Egdon Resources (18.4%), Warwick Energy (10%), Union Jack (7.5%), and Atwood Petroleum (1.6%).
This latest Holmwood deal sees Union Jack working again with Europa. The other project they have in common is Wressle - a new discovery in the east Midlands, where production could begin in the second half of this year.
Mackay highlighted: “Success at UK onshore prospects such as Holmwood should have a transformational impact on the revenue profile of oil and gas companies such as Europa.
“We expect to demonstrate this through our Wressle discovery in East Lincolnshire, which is expected to more than double our net production when it comes on stream, targeted in late 2016.”
Bramhill, this morning, added: “Participation in the Holmwood-1 exploration well is a strategic opportunity for Union Jack and wholly consistent with adding to our portfolio, high impact, drill-ready prospects.
“Encouragingly, the operator rates the Holmwood Prospect highly and believes it to be one of the best undrilled prospects in the UK.”
On AIM, Union Jack shares gained 6.45% to change hands at 0.17p, meanwhile Europa gained 6% to 4.37p.