Several ways to hit the Union Jack Jackpot
“…With various other projects still on-going and a war chest full of cash the company have a variety of options should shareholders not hit the jackpot at West Newton…”
Union Jack Oil (UJO.L) is an AIM-quoted conventional oil and gas exploration, development, and production company with various onshore licence interests all in the UK, and based around the East Midlands and East Yorkshire.
The company strategy is the rapid appraisal and exploitation of assets currently owned. Simultaneous with this process, the Company’s management expect to continue to use their expertise to acquire further licence interests over areas where there is a short lead time between the acquisition of the interest and either exploration drilling or initial production from any oil or gas fields that may be discovered. The Company currently has interests in over a dozen licences in the axis areas of the East Midlands, Humber Basin and East Yorkshire.
Are they funded?
Yes! The company recently raised £7 million from an oversubscribed placing at a price of 0.16 pence per share. Union Jack points out that it was already funded for the recent drilling activity at West Newton and for the associated extended well test activities, and the cost to first oil production at the Wressle development that is expected to come on stream later this year. So, all in all, the company are sitting on around £11m of cash. Executive Chairman David Bramhill said: “The board is delighted with the result of this oversubscribed fundraising and thanks existing shareholders for their ongoing support and welcomes new investors to the share register’
What has recently been going on?
So, Union Jack has very recently announced the spud of its B-1 well on its West Newton asset to potentially give the UK one of the biggest oil and gas discoveries on shore ever seen. Its a phrase often used, but this really could be transformational for the company. This follows initial pilot drilling of the well to a depth of 74m, and a heavier rig has now taken over, targeting total depth of c.2,000m. Drilling is expected to take several weeks or so, and a result is really expected from November onwards. One would assume the company will be making regular updates as the well is being drilled, providing additional newsflow for the stock which should help build momentum upwards.
You would then think drilling of B-1 is to be followed by flow testing of B-1 and also the existing A-2 well. B-1 is targeting appraisal of the Kirkham Abbey formation successfully encountered in the A-1 and A-2 wells and exploration of the deeper Cadeby formation at what is believed to be a more optimal location for this level than previous drilling.
It is very pleaseing to see the West Newton work programme continue to move forward, as indicated by this additional drilling progress. The size and scale of West Newton really needs to be seen to be believed and this makes it Union Jack’s flagship asset, and the 2020/21 work programme represents a string of positive catalysts for the stock. The B-1 well has the potential to help prove up the potential of the Kirkham Abbey formation by supporting previous drilling results, while also offering the opportunity to add to this via the potential of the Cadeby formation. Positive results from either formation, from the initial well and subsequently from the planned B-1 flow testing, would be very impactful for Union Jack shares.
Is it just the “West Newton” Show?
No, far from it. With various other projects still on-going and a war chest full of cash the company have a variety of options should shareholders not hit the jackpot at West Newton. Don’t forget Biscathorpe which is another huge project and of course there is Wressle which could transform UJO.L into a profitable company on its own. Factor in the producing Fiskerton and Keddington projects with their cash flow and you can see this company is not a one trick pony.
The latest research note from City Brokers Arden Partners is an interesting read and well worth a look if your a Professional or High Net Worth Client. In brief, “…The company is well funded from its end June 2020 cash holding of £4.6m (zero debt) plus £7.0m from the recent placing. Based in particular on the full work programme and its potential materiality, we have a Buy recommendation and 0.48p target…”
As well as the above the company is also always on the look out for attractive acquasition opportunities from the ongoing Covid crisis and the fall out from Brexit which is also exciting. So with a plethora of news flow due, a dozen or so on-going projects and cashed to the hilt this looks a really interesting period for the company…
The author was paid for this article but does not hold shares in the company.