What it does
David Bramhill, executive chairman, explains that Union Jack Oil PLC (LON:UJO) has a very simple business model.
“We cherry-pick what we think are the nicest deals around and take an interest.
“We like minority stakes, so if something goes wrong, you haven’t killed the company.”
He reckons with onshore UK there is a 40% - 50% and sometimes even a 60% chance of success unlike offshore, where often he says it is an 8:1 bet.
“And we don’t do 8:1 shots,” he adds.
Union Jack Oil's key assets
• PEDL 183 West Newton 16.67% ( Operator Raithlin )
• PEDL180 Development Wressle: 27.5% Awaiting development approval (operator Egdon)
• PEDL182 Exploration Broughton North: 27.5% Wressle (Egdon)
• PEDL253 Exploration Biscathorpe: 45% (Egdon)
• PEDL005(R) Production Keddington: 20.0% Existing production (Egdon)
How it's doing
In March, UJO acquired a royalty interest in revenues generated from three fields in the Central North Sea.
The royalty is a 2.5% interest over 20% of oil and gas revenues produced at the Claymore, Scapa and Piper complex.
Union Jack Oil said it is using its cash resources to buy the income stream for US$130,000 from Cambridge Petroleum Royalties.
AIM-listed Union Jack said the royalty is a cash-generating and high yielding investment with an average annual compound yield estimated at 16.5% over its life.
What the boss says: David Bramhill
"This compelling investment in a cash-generating royalty over the Claymore and Piper Complex's oil and gas revenues, plays strongly to the company's technical and analytical strengths in oil and gas and represents a low-risk entry strategy to the North Sea while generating superior investment returns.
"The royalty provides Union Jack with the benefits of an attractive cash flow stream and high yields from North Sea oil and gas production without the accompanying capital and operating costs associated with direct participation in the underlying oil field developments and infrastructure.”
What the broker says: SP Angel
Results at B1Z were much better than the forecasts beforehand said the broker, with at least 63m of saturated net pay though operator Reabold estimated it as high as 118m.
The well is also some just 2.5km away from the previously drilled WNA-1 and WNA-2 discoveries, SP Angel noted, suggesting that the prolific Kirkham Abbey reservoir extends across the project area.
More immediately also will be the Wressle field, which is expected to come on stream at a rate of 500 barrels per day (200net) in the first quarter of 2021.
Modelling has inferred a breakeven price of US$17.62/bbl, highlighting the compelling project economics on offer at the project in the current oil price environment said SP Angel.
Based on the West Newton outcome, the broker raised its price target to 0.88p from 0.82p and retains a strong buy rating.
Inflexion points
- Wressle can come on stream at 500 barrels per day
- West Newton has potential to much larger than originally thought
- Flow test at West Newton confirms potential