logo-loader
viewUnion Jack Oil PLC

Union Jack Oil jumps as it acquires additional 12.5% interest in Wressle discovery

Union Jack isn’t paying anything upfront for the additional interest: it will hand over £1.04mln to Celtique only once first commercial oil production at Wressle has been established

onshore oil drilling rig
The other parties involved at Wressle are Egdon Resources (30% and operator), Europa Oil & Gas (30%) and Humber Oil & Gas (12.5%)

Union Jack Oil PLC (LON:UJO) has acquired a further 12.5% in the PEDL180 and PEDL182 licences in North Lincolnshire, which are home to the Wressle discovery and the Broughton North prospect.

The additional stake takes Union Jack’s total interest in the licences to 27.5%.

The onshore UK explorer is paying £1.04mln for the interest, although this is only due once commercial oil production is established at Wressle.

Commercial production at Wressle to be “transformative” for UJO

“The acquisition has an immediate positive impact on Union Jack by instantly increasing its reserves and resources base by 83% to in excess of 855,000 barrels of oil equivalent,” said executive chairman David Bramhill.

“The justification for Union Jack acquiring an additional interest in Wressle is the transformative economic impact to the company, as we believe that when commercial oil production at Wressle is established, it would provide Union Jack with cash flows of approximately US$4 million per annum in the current oil price environment.”

He added: “After taking operating costs into consideration, that are estimated to be below US$15 per barrel, such net revenues would propel Union Jack into a material revenue generating oil and gas production company.”

Union Jack remains in a “robust financial position”: it has cash reserves of US£2mln and is fully funded for its existing drill commitments in 2018.

In a note to clients, analysts at SPAngel said: “By making the consideration liable on first oil the wily management team at UJO has structured a transaction that not only limits exposure to development risk but also allows for the use of alternative financing to fund it, such as a working capital line, potentially eliminating the need for equity.”

They added: As a result of this transaction, but before the details of the NPI are known, our valuation rises to US$62.7mm (0.76p), which is net of 2.5% NPI, although we estimate that the NPI to UJO will be at least half this, potentially less.”

In morning trading, Union Jack Oil shares were up 9.5% at 0.12p.

 -- Adds analyst comment, updates share price --

Quick facts: Union Jack Oil PLC

Price: 0.1525 GBX

AIM:UJO
Market: AIM
Market Cap: £23.55 m
Follow

Add related topics to MyProactive

Create your account: sign up and get ahead on news and events

NO INVESTMENT ADVICE

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is...

In exchange for publishing services rendered by the Company on behalf of Union Jack Oil PLC named herein, including the promotion by the Company of Union Jack Oil PLC in any Content on the Site, the Company receives...

FOR OUR FULL DISCLAIMER CLICK HERE

Watch

Investor Update: Union Jack's West Newton potential confirmed

Headlines from the Proactive UK newsroom. Union Jack Oil (LON:UJO) has been informed by the operator that the Kirkham Abbey reservoir in the West Newton project area contains a base case 146mln barrels of oil and up to 283mln barrels in a best case. The liquid element is much higher than...

4 weeks ago

2 min read