Union Jack Oil PLC (UJO.L) Arden Partners lnitiation Research Notes

Union Jack is an E&P company focused on conventional assets onshore UK. The company holds a 16.7% stake in the high profile West Newton discovery near Hull, alongside a wider portfolio of assets.

There is a significant upcoming work programme across its key assets, including development, appraisal and exploration work. This provides for a full potential newsflow schedule and varied opportunities to create value through progressing and growing assets.

  • Material work programme. Union Jack has a planned work programme comprising up to two wells and at least one flow test on West Newton, development of Wressle, and potential exploration wells on Biscathorpe and North Kelsey. This makes for a full potential newsflow schedule and varied opportunities to add portfolio value, though exact timing could be influenced by coronavirus restrictions.
  • West Newton a significant asset for UK onshore. West Newton has the potential to be one of the largest fields discovered onshore UK, with resource potential across two horizons and both oil and gas, relatively low OPEX and CAPEX costs and a ready local hydrocarbon market. The asset has a significant profile both for investors and industry.
  • Wressle development a low-cost route to positive EBITDA. Wressle is expected to come onstream during H2 2020, driving our 2021 EBITDA forecast to £1.0m for net development CAPEX of £0.6m during 2020. Funded for planned programme. We forecast end 2019 cash of £6.7m, which we expect to fully fund Union Jack’s net CAPEX for its planned
    West Newton, Wressle and Biscathorpe work programmes.

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  • Valuation and recommendation. Our total NAV for Union Jack is based on its West Newton, Wressle, Keddington, Biscathorpe and North Kelsey assets, and returns a risked NAV of 0.55p, 1.53p unrisked. Based on the upcoming work programme, the high profile of West Newton, and our valuation, we initiate coverage with a Buy and 0.55p target.

 


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