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Union Jack Oil builds up strong portfolio of UK assets

Snapshot

The core of the portfolio is in the East Midlands Basin and Yorkshire

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Quick facts: Union Jack Oil PLC

Price: 0.1655 GBX

AIM:UJO
Market: AIM
Market Cap: £20.04 m
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  • Union Jack Oil PLC’s philosophy is to try to minimise the risks of oil and gas exploration by sticking to onshore UK assets.

  • Using this strategy, it has built up a portfolio of stakes between 7.5%-20% in a string of licences.

  • The core of the portfolio is in the East Midlands Basin and Yorkshire, which includes Wressle, Biscathorpe and West Newton 

 

What it does

David Bramhill, chief executive, explains that Union Jack has a very simple business model.

“We cherry pick what we think are the nicest deals around and take an interest.

“We like 10% -20% 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.

How is it doing

The latest addition was a 16.667% stake in the West Newton gas discovery in Yorkshire.

The drilling programme at the West Newton project was a highlight of the first half with the company partnered in a successful conventional appraisal well which confirmed a 45-metre gross oil column plus a 20-metre of gas column.

An extended well test programme was recently suspended, temporarily, in order to incorporate the confirmed gas into the development planning.

 

At Biscathorpe,  an assessment was made of the previously-drilled Biscathorpe-2 well with independent consultants Applied Petroleum Technology confirming the presence of a 35-metre live oil column at the top of the Dinantian interval. The evaluation also indicated possible oil pay at the base of the Dinantian.

UJO believes Biscathorpe remains “one of the UK's largest onshore un-appraised conventional hydrocarbon targets.”

At Wressle, a planning appeal Public Enquiry is to be held on 5 November.

Union Jack Oil's key assets

• PEDL 183 West Newton 16.67% ( Operator Raithlin ) 

• PEDL180 Development Wressle: 27.5% Awaiting development approval (operator Egdon)

• PEDL005(R) Production Keddington: 20.0% Existing production (Egdon)

• PEDL182 Exploration Broughton North: 27.5% Wressle (Egdon)

• PEDL253 Exploration Biscathorpe: 22% (Egdon)

“In addition, Union Jack's 20% working interests in the producing Keddington and Fiskerton Airfield oil fields provide us with oil revenues and exposure to additional workover and drill targets in our focused areas.”

What the boss says: David Bramhill

"West Newton is a near term and potentially high impact project which, if successful would deliver a major UK onshore gas development.

"The well is fully funded from existing cash resources, and in preparation of success, also funded for any long-term gas production test, plus further technical and initial conceptual commercial studies."

What the broker says: SP Angel

SP Angel upgraded its view on Union Jack Oil PLC (LON:UJO) on the back of the discovery of the “major onshore oil development” at West Newton.

Union Jack has a 16.667% stake in West Newton and the broker estimates that on a net basis this might be worth three times the current market cap of £27.85mln, with UJO's share of the project estimated at £75mln.

Its two further onshore projects, Wressle and Biscathorpe in Lincolnshire, also have significant value said the broker.

“In the current climate, we continue to advocate those companies that pursue low-cost development/production strategies, and Union Jack has certainly delivered on this criterion, with transformational near-term running room in the stock to come in our view.”

Pirce target has been raised to 0.84p.

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Inflexion points

  • The result of a public inquiry over the rejection of planning approval for Wressle is due by the end of 2019
  • Wressle can come on stream at 500 barrels per day
  • West Newton has potential to much larger than originally thought
  • Oil in place at West Newton is estimated at a base case 146mln barrels
  • Best case is oil-in-place of 283mln barrels.

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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...

1 week, 2 days ago

4 min read