10Oct 2015

Dalesmann discusses the merits of Union Jack Oil plc (AIM:UJO)

A lot can be gained from talking to any CEO, Directors of AIM Oil & Gas listed companies to see if they really do have an understanding of the Industry. Having worked in the game myself all my career, it is very hard to try and play lip services to an experienced industry guy.

Having talked to David Bramhill, Executive Chairman of Union Jack Oil (AIM:UJO) on various occasions about UJO and his personal background in the industry. We know he has directed and managed several energy companies, OilQuest Resources plc, subsequently acquired by EnCore Oil plc. Executive director of Nighthawk Energy plc and a non-executive chairman of Wessex Exploration plc.

The guy l talk to is the one who misses the hands on – offshore game having ticked up well over 20 years on projects for most of the big players like BP, Petrofina, ExxonMobil, Shell and numerous other international energy companies. Yet is fully focused of what Union Jack Oil plc hope to achieve in the cost affective onshore UK exploration that still remains an attractive prospect even in today’s low oil price environment.

I will post further updates on www.share-talk.com and I hope to do a Q & A session with Mr Bramhill in the near future

Let’s cover what people are looking at short – mid term

Partners in Wressle-1 discovery within PEDL180 in Lincolnshire are expecting in the near future the results of the re-processing of the 3D seismic data over the Wressle structure which will assist in finalising the Field Development Plan and identifying any further prospectivity. A big major factor PI miss, 3D seismic data is being used (Not 2D seismic data).

Alongside UJO we see some big partner’s involved Wressle-1 discovery within PEDL180 in Lincolnshire

Egdon Resources (Operator) 25.00%, Celtique Energie 33.33%, Europa Oil & Gas Limited 33.34% and Union Jack Oil 8.33% interest

Wressle-1 discovery within PEDL180 in Lincolnshire

I expect to see Wressle-1 PEDL180 in commercial production Q1 2016

Next up for UJO in Lincolnshire will be Wressle-2 PEDL182 once PEDL180 is producing-cash generating revenue.

Pre-drill gross mean Prospective Resources at Wressle as calculated by Egdon were estimated to be 2.1 million barrels of oil.

Wressle-1 which is being confirmed by the excellent flow results from the Penistone Flags, Ashover Grit and Wingfield Flags formations, which have test produced with an un-pumped aggregate of over 700 barrels of oil equivalent per day gross from all zones

Encouragingly, oil and gas has flowed from the Penistone Flags reservoir without any sign of water being present and the well test data(log data indicate that the elevation of the oil water contact is deeper than previously considered, highly positive situation) No water flowed during pumped Extended Well Test (EWT)

Plans are currently being finalised for a workover of the well in order to remove the existing completion, cement off the existing Zone 3a perforations in the Penistone Flags and radial drill horizontal (image below) bores to be followed by a short flow test to establish the nature of the fluids in this interval.

Reading the above paragraph we are looking at Brim used in the drilling of the well has hardened to form a layer (skin factor) above the Penistone Flags. In an Egdon Resources RNS they used the word “Radial Drill” yet UJO nor did any other partner’s in Wressle-1 used that term? I am sure most city analysts, privateers, bloggers missed that one little gem of a comment.

RNS Number: 0918Y “Plans are currently being finalised for a workover of the well in order to remove the existing completion, cement off the existing Zone 3A perforations, open new perforations into the lowermost parts of the Penistone Flags reservoir and drill short horizontal bores into the reservoir section by water jetting (” radial drilling”) to be followed by a short flow test to establish the nature of the fluids in this interval.”

Egdon are planning to test to the lowermost part of the Penistone Flags reservoir as illustrated below

“Radial Jet Drilling” Penetrate up to 300ft various directions at ANY given depth

A pump jack (also called nodding donkey, pumping unit, horse head is the above ground drive for a reciprocating piston pump in an oil well)

2016 looks a very interesting year for Union Jack Oil plc

On the exploration front, the Board looks forward to the drilling of the Biscathorpe-2 well within PEDL253. During the period, Union Jack increased its interest to 12%from an original 10&pct;. The exploration well is expected to be drilled Q4 2015 – Q1 2016. Union Jack will finance its share of the drill costs from existing cash resources

The North Kelsey Prospect, located within PEDL241, in which Union Jack now holds a 20% interest, has multiple targets and is also planned for drilling during 2016. PEDL241 is located within the proven hydrocarbon fairway of the Humberside Platform. Drilling of North Kelsey-1 is targeted to commence in Q4 2015

Keddington Oilfield: Planning permission is in place for a new appraisal/development well that is currently planned to be drilled as a side-track to the Keddington-4 well in Q4 2015. Should this well be successful, the UJO Board believes that the production rate at the Keddington has the potential to increase to approximately 125 barrels of oil per day gross. On completion of this transaction Union Jack will own a 10%in Keddington and the associated infrastructure and production facilities. Additionally, Union Jack will immediately receive 10%of all production revenues going forward.

On a closing note UJO looks to be in a very positive position for future growth without any major share dilution to current holders. 2014-15 has been an exciting time for UJO but I firmly believe this little micro AIM Company is about to grow very quickly in 2016.

Cash balances at time of writing stand in excess of £2.5 million, enough to cover the costs of our current planned drill programme and Wressle-1 well testing exercises. The Board intends to continue with the same low salary commitment going forward. Having talked to Mr Bramhill about cash burn, l think UJO must be one of the lowest cash burn AIM listed company. We are looking at a figure of about £240,000 per annum which proves their intentions to balance the books. This proves to me a commitment from UJO that they are retuning true shareholders value by adopting a low salary commitment.

Company is fully funded for the current planned drill programme

Company remains debt free

What’s not to like, put this on your watch list as I believe once production starts to flow, a Share Price re-rating will follow. Currently off everyone’s radar and the secret in this game is get in early before the herd arrives.

Author: Dalesmann

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