Union Jack Oil plc (AIM: UJO), a UK focused onshore hydrocarbon production, development and exploration company, is pleased to announce its audited results for the year ended 31 December 2020.
Operational Highlights
- Successful drilling of the West Newton B-1Z conventional appraisal well where initial petrophysical evaluation has demonstrated a gross hydrocarbon saturated interval of at least 118 metres within the Kirkham Abbey formation
- West Newton B-1Z and A-2 well tests are imminent
- Following the successful re-perforation of the Ashover Grit formation at Wressle, oil is free flowing and the Wressle-1 well has been placed on continuous production test and is awaiting a proppant squeeze
- 12.5% interest acquired in PEDLs 180 and 182, containing the Wressle discovery, bringing Union Jack’s holding to 40%
- Purchase of a 35% interest in the producing Keddington Oilfield PEDL005(R) acquired, bringing Union Jack’s interest to 55%
- Completion of the purchase of a further 15% interest in PEDL253 containing the Biscathorpe Prospect bringing Union Jack’s interest to 45% during January 2021
- Purchase of a 2.5% royalty interest in the North Sea Claymore Piper and Scapa oilfields
Financial Highlights
- Increased revenue of £158,004 (2019: £136,959)
- Operating loss of £1,883,893 (2019: £1,705,198), primarily as a result of higher administrative costs due to additional technical work in respect of West Newton, Wressle, Biscathorpe and Keddington
- Cash balance in excess of £5.7 million at 1 May 2021, not including loan receivables and royalty accruals of over £1 million due during 2021 and 2022
- Net assets increased by 35% to over £18 million from £13 million in 2019
- Fully funded for all current development and well testing commitments
- Company remains debt-free
David Bramhill, Executive Chairman, commented:
“My confidence in respect of Union Jack’s future remains highly positive.
“The Company, during 2020 and to date, has advanced its key projects, executed drilling, development and appraisal activity, supported by technical evaluation and analysis provided by our own highly competent technical team, that has resulted in an accretion in the Company’s asset value and provided greater clarity on the next steps towards commerciality.
“I have no doubt even in these unprecedented times, that given our attractive projects, we will achieve our goal of increasing production materially and becoming a significant, principally onshore mid-tier UK producer in due course. In the meantime, I am confident that the news stream arising from the ongoing progress at our ventures, will vindicate our optimism.
“Union Jack’s wider asset portfolio continues to be well balanced with the relevant components of production, development, appraisal and discovery.
“The Company remains in sound financial health, with a robust balance sheet, continues to be debt free, with ample cash reserves to fund its well testing and planned development commitments, offering shareholders ongoing and significant scope for growth.
“The future of Union Jack remains bright.”
For further information, please contact:
Union Jack Oil plc [email protected]
David Bramhill
CHAIRMAN’S STATEMENT
I am pleased to present to the shareholders of Union Jack Oil plc (“Union Jack” or the “Company”), the Annual Report and Financial Statements for the year ended 31 December 2020.
Union Jack’s strategy remains consistent with the objective of the Board to build a successful and sustainable, UK-focused, predominantly onshore hydrocarbon production and development business. In this respect, we have delivered demonstrable growth in asset value and 2020 has seen the continued expansion of our portfolio with what we consider to be high quality, asset value accretive project interests with substantial upside potential in our primary focus areas of the East Midlands, Humber Basin and East Yorkshire, with an expectation in 2021 of significantly increasing oil production and revenues.
The COVID-19 pandemic has meant very few, if any, companies and individuals have not felt the unwelcome consequences that have resulted from this unprecedented virus.
We continue to remain vigilant in the way we operate both technically and financially and we have tried our best to keep shareholders and our Joint Operating Agreement (“JOA”) partners informed of any changes being implemented to our operations in respect of the effects of COVID-19.
Notwithstanding COVID-19, reassuringly it has been business as usual, however, I would like to add that any forward-looking statements made within this report are made with good intent, as the effects of this virus, although perhaps are now better understood, remain unclear and expected to prevail in some form for the foreseeable future.
I am pleased to report that disruption to our projects due to COVID-19 has been minimal through 2020 and up to present time although the potential for any changes in working and planning in respect of our project interests remain possible, and we will continue to be guided by the regulatory bodies and our JOA partners in respect of COVID-19 best practice.
Marked progress was made in the year under review and in the post balance sheet events period up to the signing of these financial statements, with the highlights being:
Operational Highlights
- Successful drilling of the West Newton B-1Z conventional appraisal well where initial petrophysical evaluation has demonstrated a gross hydrocarbon saturated interval of at least 118 metres within the Kirkham Abbey formation
- West Newton B-1Z and A-2 well tests are imminent
- Following the successful re-perforation of the Ashover Grit formation at Wressle, oil is free flowing and the Wressle-1 well has been placed on continuous production test and is awaiting a proppant squeeze
- 12.5% interest acquired in PEDLs 180 and 182, containing the Wressle discovery, bringing Union Jack’s holding to 40%
- Purchase of a 35% interest in the producing Keddington Oilfield PEDL005(R) acquired, bringing Union Jack’s interest to 55%
- Completion of the purchase of a further 15% interest in PEDL253 containing the Biscathorpe Prospect bringing Union Jack’s interest to 45% during January 2021
- Purchase of a 2.5% royalty interest in the North Sea Claymore Piper and Scapa oilfields
Financial Highlights
- Increased revenue of £158,004 (2019: £136,959)
- Operating loss of £1,883,893 (2019: £1,705,198), primarily as a result of higher administrative costs due to additional technical work in respect of West Newton, Wressle, Biscathorpe and Keddington
- Cash balance in excess of £5.7 million at 1 May 2021, not including loan receivables and royalty accruals of over £1 million due during 2021 and 2022
- Net assets increased by 35% to over £18 million from £13 million in 2019
- Fully funded for all current development and well testing commitments
- Company remains debt-free
PEDL183 WEST NEWTON (16.665%)
Union Jack completed a farm-in in late 2018, on licence PEDL183, covering 176,000 acres and containing the West Newton A-1 discovery, with Rathlin Energy (UK) Limited (“Rathlin”).
Since that time the JOA partners have seen excellent success in respect of subsequent drilling campaigns with both the WNA-2 and WNB-1Z wells being recorded as significant discoveries with both wells suspended and awaiting testing during Spring 2021.
PEDL183 is located onshore UK, north of the river Humber, also encompassing the town of Beverley, East Yorkshire. The licence area is within the western sector of the Southern Zechstein Basin. The West Newton A-1 and A-2 and the recent B-1Z discoveries are on-trend with the prolific offshore Hewett gas complex.
In the UK, the carbonates of the Permian Basin have been our principal targets and produced offshore and onshore in the Southern North Sea Gas Basin. These reservoirs have been extensively explored and produced onshore in the Netherlands, Germany and Poland, which provide several direct analogues for West Newton and the overall licence area.
The WNB-1Z side-track appraisal well commenced during November 2020 and reached a Measured Depth of 2,114 metres.
A substantial hydrocarbon column in excess of 118 metres gross has been demonstrated within this formation.
18 metres of core was successfully cut and recovered from the hydrocarbon bearing Kirkham Abbey formation. Production casing has been run in preparation for the testing of this interval.
Highlights
Porosities of up to 14% observed on wireline logs. Hydrocarbon-water contact has yet to be encountered at West Newton
WNB-1Z well is approximately 2.5 kilometres south of the WNA-1 and WNA-2 appraisal wells, confirming extensive areal continuity of hydrocarbon trap and hydrocarbon reservoir
Well results provides a further material de-risking and is a significant step forward in determining the development potential of the West Newton project
Cased Hole Logging programmes and Vertical Seismic Profiling completed confirming the presence of a good cement bond of the production liner and good quality data retrieved which will be used in calculations towards reserve/resource quantification for the West Newton field and for the identification of future drill locations
The JOA partners believe that West Newton has the potential to assist in replacing the requirement for imported hydrocarbons locally while simultaneously developing indigenous energy sources, contributing to the economic welfare of the Humber region.
With the view of advancing this vision, Union Jack and its JOA partner Reabold Resources plc commissioned Gaffney, Cline & Associates Limited (“GaffneyCline”), an international energy consultancy to conduct a Carbon Intensity Study over the West Newton hydrocarbon project.
The GaffneyCline study highlighted the following:
The West Newton project has an AA rating for Carbon Intensity for its potential upstream crude oil production
Carbon intensities at West Newton are significantly lower than the UK average and compared with other onshore analogues
As the development proceeds and project knowledge increases, there is scope to even further improve the Carbon Intensity by reducing fugitive flaring and venting emissions through the use of the best available technologies
Union Jack’s mission and focus is to minimise the carbon footprint generated by its hydrocarbon developments in the most efficient way possible, whilst continuing to contribute positively to the growing demand for energy and hydrocarbon products in the supply chain.
GaffneyCline have also been appointed to compile a Competent Persons Report in respect of PEDL183 and the West Newton project.
All the results to date continue to support our belief that West Newton is a large scale, conventional onshore oil and gas development asset with potential offshore-sized resources in place.
The preliminary results to date vindicate Union Jack’s faith and financial commitment over the past two years to what management has always believed to be an exceptional UK onshore hydrocarbon enterprise and development opportunity.
The imminent well testing programme is the next important milestone in determining the development potential of West Newton.
PEDL180/PEDL182 WRESSLE DEVELOPMENT (40%)
Located in Lincolnshire on the Western margin of the Humber Basin, PEDL180 and PEDL182 contain the substantial Wressle oil development, with proven reserves and significant upside.
The Wressle-1 oil discovery was defined on proprietary 3-D seismic data. The structure is on trend with the producing Crosby Warren oil field and the Broughton B-1 oil discovery, both to the immediate northwest, and the Brigg-1 discovery to the southeast. All these wells contain oil in various different sandstone reservoirs within the Upper Carboniferous succession.
The well was drilled and logged and the presence of hydrocarbon pay was noted within the Penistone Flags, Wingfield Flags and Ashover Grit intervals. Subsequent testing of these intervals demonstrated flow from all three zones.
During January 2020, the JOA partners received the welcome news that, after several years of planning setbacks in respect of the development of the Wressle discovery, the Planning Inspectorate had upheld the appeal and granted planning consent for the development of this company changing project. The Inspector also allowed the application for an award of costs against the North Lincolnshire Council (“NLC”). Subsequently, the NLC has paid costs of £403,000. Union Jack has received its proportion of this payment from the Operator.
Excellent progress has been made at Wressle, culminating in the commencement of oil-flow at the end of January 2021, following the installation of cutting-edge, purpose-built surface facilities and the successful re-perforation of the Ashover Grit, one of three reservoir intervals. The well is currently undergoing test production with oil sold and transported to the Phillips 66 Humber refinery.
The well test results to date are in line with expectations and consent for a proppant squeeze in respect of the next stage of operations is awaited. At optimum production levels Wressle-1 is projected to produce at a gross rate of a constrained 500 barrels of oil per day (“bopd”), adding a net 200 bopd to Union Jack’s production profile.
Translated into 2P and 2C reserves and resources, using figures quoted from the Competent Person’s report compiled by ERCE during 2016, the net volumes attributable to Union Jack are as shown in the table as shown below.
