Union Jack Oil PLC (LON:UJO) is expanding its ownership of the Wressle oil field development project, with a deal to acquire an additional 12.5% interest from Humber Oil & Gas Limited for an initial upfront payment of £500,000.
It sees the AIM-quoted firm’s stake in the Lincolnshire onshore oil project increase to 40%.
Wressle is slated to achieve ‘first oil’ and begin production later this year, and when that project milestone is reached it will be transformational for Union Jack’s production and revenue profile.
Production is anticipated at around 500 barrels oil per day. The transaction will see Union Jack’s share of Wressle’s reserves rise to over 1.24mln barrels.
“The terms of the Acquisition are compelling and this transaction is significantly asset value accretive from the outset, reaffirming Union Jack's commitment to the development of Wressle and will assist in delivering the company`s goal to become a mid-tier producer in the medium term,” David Bramhill, Union Jack chairman said in a statement.
“The development of Wressle continues apace and first oil is anticipated during H2 2020. When Wressle is commissioned and in production, it will result in an initial constrained production anticipated to be 500 barrels of oil per day gross, adding production of 200 barrels of oil per day net to Union Jack and transforming the company's financial position.”
Bramhill added: “We believe that when commercial oil production at Wressle is established, it will provide Union Jack with meaningful cash revenues. After taking operating costs into consideration, estimated net revenues are expected propel Union Jack to a profitable revenue-generating oil and gas production company.”
Union Jack is paying £500,000 to Humber to acquire the Wressle stake and it will also take on a future contingent payment, of £1.04mln, to Calmar LP (appointees of Celtique Energie Petroleum Limited, the original vendors in the acquisition by Humber) upon the establishment of commercial oil production.
A 2.5% net profits interest (NPI) royalty is also attached to the stake, following Humber’s prior transaction with Celtique.