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Union Jack Oil upgraded by broker after West Newton discovery

Its 16.667% stake in West Newton could generate triple the current market value of the company, says broker

Union Jack Oil PLC - Union Ja
Union Jack holds stakes in three onshore oil developments across Yorkshire and Lincolnshire

SP Angel has upgraded its view on Union Jack Oil PLC (LON:UJO) on the back of the discovery of a “major onshore oil development” at its ‘jewel in the crown’ West Newton last month.

West Newton was originally seen as a gas play but a re-evaluation of the Yorkshire site identified a gross oil column of around 45 metres underlying a gross gas column of 20 metres.

Watch: Union Jack's three key projects have potential to 'substantially enhance' the company

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

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

Wressle is expected to receive planning approval from the local council on 5 November with oil tipped to flow at 500 barrels per day gross.

The results of the recently drilled Biscathorpe-2 well, meanwhile, have been misunderstood by the market believes the broker, especially the elevated gas readings.

“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.”

The broker's rating is now ‘strong buy’ with a target price of 0.66p or 200% upside from the current market price of 0.22p.

 

Quick facts: Union Jack Oil PLC

Price: 0.165 GBX

AIM:UJO
Market: AIM
Market Cap: £25.48 m
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