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Northland Capital Partners View on the City Arian Silver, Europa Oil & Gas and Union Jack Oil

Published: 08:39 09 Feb 2015 GMT

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Union Jack Oil (LON:UJO) – CORP*: Wressle-1 flows  

Market Cap: £6m; Current Price: 0.25p 

  • Initial flow results from Wressle-1 well
  • Operator Egdon Resources (EDR.L) (25%) updated on the Wressle 1 well testing in PEDL 180, East of Scunthorpe where Union Jack Oil holds an 8.33% interest. Other JV partners are Europa Oil and Gas (EOG.L) with 33.3% and Celtique Energie Petroleum with 33.3%.
  • Test operations have been completed on the Ashover Grit, the first of three potential hydrocarbon zones.
  • A 9.5m interval was perforated and cleaned up and flowed 80 bpd of good quality 39-40o APR oil during an initial 16 hour period with 47mcf of gas and no appreciable water volumes..
  •  Down hole pressure data will be analysed to evaluate nature of the reservoir and increased production that could be achieved with pumping.
  • The Ahsover Grit will be isolated to allow testing of the two other zones, the Wingfield Flags and the Penistone Flags with further updates to follow.
  • With encouraging ‘free flow’ results it is intended to conduct longer term pumped flow testing.

NORTHLAND CAPITAL PARTNERS VIEW: Without stimulation or pumping and with two further zones to test this is an encouraging development. Having a near term cash producing well will significantly advance UJO’s business plan even in the lower oil cost environment. Wressle benefits from being a relatively low cost well and onshore in close proximity to infrastructure. UJO has additional potential remaining in the portfolio. We look forward to further updates that may help establish ultimate flow potential. 


Arian Silver Corporation (LON:AGQ) – CORP*: Repurchases NSR

Market Cap: £10.7m; Current Price: 31.5p 
  • Arian repurchases NSR for $750k
  •  Arian has repurchased a 2% net smelter royalty (NSR) on its San José Project in the silver belt of Zacatecas, Mexico.
  • The NSR originates from Arian’s previous earn-in agreement that culminated in 2010 leaving the previous operator with a 2% NSR. Arian previously had an option to purchase the NSR for $1m which expired in 2010.
  • Payments will be made in equal-staged instalments over the next six months.

NORTHLAND CAPITAL PARTNERS VIEW: Management has completed the repurchase of the NSR relating to the San José project. This looks a positive deal and represents a 25% discount to the previous option to acquire the NSR that expired in 2010. Importantly, this improves the economics for the San Jose project as the company nears first concentrate production. The company recently completed a significant body of work at the San José project to its current stage and the work completed to date is on schedule and under budget. The lead-silver circuit is currently being commissioned. With the zinc circuit due to be constructed in February and commissioning to commence soon after, we expect to see the Company reach its initial production target of 35,000t per month early in Q315. With the Company on the verge of moving San José back into production we believe Arian looks undemanding at these levels.  

 

Europa Oil and Gas (LON:EOG) – BUY: Wressle flows/board changes 

Market Cap: £11.3m; Current Price: 5.5p; Target Price: Under Review

  • Wressle Flows /Bill Adamson steps down as Chairman to be succeeded by Colin Bousfield
  •  Europa also updated on the Wressle well in which it has a 33% interest, as described in the UJO comment.
  • Europa also updated that Bill Adamson will step down from the role of Non-Executive Chairman after five years with the business to pursue his work in the voluntary sector.
  • Colin Bousfield a current non-executive director of the company will become Europa’s Non-Executive Chairman.

NORTHLAND CAPITAL PARTNERS VIEW: News of Wressle-1’s un-assisted flow is a positive fillip for the company and could add to its long standing UK production story which complements Europa’s large exploration prospects offshore Ireland and onshore France. Bill Adamson will be available to the board to affect an orderly handover to Colin Bousfield. Colin Bousfield has over 30 years’ experience in Energy and Finance, including most recently as Head of European Oil and Gas for the Commonwealth Bank of Australia until the end of 2013.


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