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UPDATE - Union Jack Oil: Technical report confirms significant potential at East Midlands licence

Union Jack Oil has revealed the results of a study that points to the significant shale potential of the northern section of its licence area PEDL201 in the East Midlands.
UPDATE - Union Jack Oil: Technical report confirms significant potential at East Midlands licence

--adds broker comment, share price --

Shares in Union Jack Oil (LON:UJO) jumped 26% following the publication of a study it commissioned that points to the significant shale potential of the northern section of its licence area PEDL201 in the East Midlands.

The independent technical review undertaken by Molten Limited points to a “mean gross unrisked deterministic in place volumetric estimate” of around 5.4bn barrels of oil and over 2.7 trillion standard cubic feet of gas.

These punchy figures are based on the potential thickness of the Bowland shales, which are predicted to be oil-bearing around PEDL201.

It has to be stressed that no drilling has yet been carried out on the licence area to tap the block’s conventional and unconventional potential – so this is simply a theoretical study of what may lie beneath the surface.

AIM junior Union Jack holds a 10% stake in PEDL201 and called the Molten study “very worthwhile”.

Work will get underway to assess the conventional hydrocarbon potential of the licence in the third quarter with the Burton on the Wolds-1 conventional well.

This is located in the southern half of PEDL201, so therefore outside of the shale-heavy Widmerpool Gulf, and is not considered prospective for shale oil or shale gas.

Before that (this month or next) the Wressle-1 well in nearby PEDL180 will spud.

Chairman David Bramhill said: "The interest in onshore conventional and unconventional oil and gas in the United Kingdom is gathering pace throughout our industry.

“The level of corporate activity within the sector is reaching levels not observed for decades.

“The board of directors considered it prudent to have the company's interest in PEDL201, where there is known shale potential, independently reviewed to identify the unconventional resource potential.

“This exercise has proved to be very worthwhile with compelling in place un-risked scoping volumetric estimates for both shale oil and shale gas.

However, the company's immediate priority remains to unlock the conventional exploration potential within our current licence interests.

“We look forward to the imminent drilling of two exploration wells, Wressle-1 and Burton on the Wolds-1, both targeting conventional reservoir objectives.”

Broker Northland added the report highlights the burgeoning UK shale resource with the potentially world class Lower and Upper Bowland formations that are thought to contain thick sections of organics-rich shale.

Union Jack is most likely to benefit by means of a farm-out, but UK shale is in its infancy and it will take time to assess the potential generally, said the house broker.

In the meantime, the spud of Wressle conventional well will kick off a busy period of drilling that will have a material impact on Union Jack’s prospects.

Shares rose  29% to 0.401p.

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