Union Jack Oil has a simple business model. ‘We cherry-pick what we think are the nicest deals around and take an interest,’ says David Bramhill, chief executive.
As the name suggests, these are in the UK and all onshore.
‘We like 10 per cent -20 per cent stakes, so if something goes wrong, you haven’t killed the company,’ says Bramhill.
Analysis from the operator suggests that the Kirkham Abbey reservoir at West Newton might prove to be among the largest oil discoveries so far made onshore in the UK.
According to the latest update, Kirkham Abbey contains 146.4million barrels of oil in place and 211.5billion cubic feet (bcf) of gas on a base or most conservative estimate.
In the best-case scenario, these numbers rise to 283million barrels of oil and 265.9 bcf of gas. Even at the base case level, the numbers are a significant upgrade to the 2017 figures contained in the current competent person’s report.
‘The estimated resource volumes therefore firmly categorise West Newton as having significant ‘company maker’ potential in our view,’ according to SP Angel, Union Jack’s broker.
An ongoing extended well test of A-2 is underway, which will more accurately measure how much is being produced.
Next year will also see more appraisal drilling with wells at B1 and B2 that SP Angel suggest has the potential to boost the value further as the geology of the Kirkham Abbey reservoir becomes better understood.
A 3D seismic programme over other possible prospects within the licence area is being considered.
West Newton, though, is only one of three potentially game-changing irons in the fire for Union Jack. At Wressle, Union Jack has a 27.5 per cent working interest.
Last week, a public inquiry into whether to allow the Wressle development concluded within three days instead of the six days originally set aside. North Lincolnshire Council presented no evidence at the inquiry.
Shortly after the inquiry’s conclusion Union Jack said it expected to get a verdict after the general election on 12 December but before the end of the year.
If development is allowed, first commercial oil is expected to flow at 500 barrels per day gross, which brokers suggest would generate around $3million a year in revenues net to Union Jack with an oil price around the $60 a barrel mark.
Union Jack also has a 22 per cent stake in the Bicscathorpe development in Lincolnshire, where an independent reassessment of a well, drilled earlier in the year, has identified a 35million column of good quality oil.
However, the consortium members think the main target at the prospect has yet to be tested.
‘The primary target reservoir at Biscathorpe, the Basal Westphalian sandstone, was likely absent at the Biscathorpe-2 location and remains untested by the well.’
Next steps will be either a sidetrack to the suspended Biscathorpe-2 well or reprocessing 3D seismic data to identify a new location.
Union Jack still believes Biscathorpe remains one of the UK’s largest onshore unappraised conventional hydrocarbon targets.
The company’s net cash in September amounted to £2.8million and if Wressle is given the go-ahead that will give a boost to cashflow reasonably quickly.
Oil production in the UK is a political issue but Wressle, like Union Jack’s other two main assets, is conventional and none of its projects will involve fracking now or in the future, it says.
SP Angel upgraded its price target for Union Jack to 0.84p following the West Newton oil estimates. That compares to a market price of 0.24p, valuing the company at £30million, and that points to a lot of upside for the stock if it is right.
Source link www.dailymail.co.uk/money/investing
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