# Union Jack Oil revenues increased by over 1,000% during 2021

- Link: https://www.directorstalkinterviews.com/union-jack-oil-revenues-increased-by-over-1000-during-2021/4121064816
- Published: 2022-05-16T07:17:48+01:00
- Author: Giles

**[Union Jack Oil](https://www.directorstalkinterviews.com/company/union-jack-oil-plc/ujo.l)
plc** ([LON:UJO](https://www.directorstalkinterviews.com/company/union-jack-oil-plc/ujo.l)),
a UK focused onshore hydrocarbon production, development and exploration company,
has announced its audited results for the year ended 31 December 2021.

**Operational Highlights**

•    Successful proppant squeeze and coiled tubing exercise at Wressle resulted 
in an instantaneous flow rate of over 1,000 barrels of high-quality oil per day (“
bopd”) being achieved with zero water cut

•     Wressle-1 pressure test analysis by ERCE indicates potential flow rates of
between 1,200 to 1,500 bopd are achievable

•     Wressle Revised Field Development Plan submitted to the North Sea Transition
Authority (“NSTA”) for approval

•   Results from West Newton EWT confirm substantial hydrocarbon discoveries within
the Kirkham Abbey formation

•      Independent RPS Group (‘RPS’) review predicts initial average production 
rates of up to 35.6 million cubic feet of gas and 1,000 bopd from a horizontally
drilled well at West Newton

•      Planning granted at West Newton for both A and B site works and three year
permit extension

•      Completion of purchase of a further 15% interest in PEDL253 containing the
Biscathorpe Prospect, bringing Union Jack’s interest to 45%

•      Carbon Intensity Study on Biscathorpe Project rated AA by Gaffney Cline

•      Purchase of a 2.5% royalty interest in the North Sea Claymore, Piper and 
Scapa oilfields

•      Appeal against planning refusal at Biscathorpe submitted to Planning Inspectorate

**Financial Highlights**

•    Oil revenues increased by over 1,000% during 2021

•    Maiden gross profit on oil sales achieved

•    Cash balances and near-term receivables of £7,545,575 as at 9 May 2022

•   The Company is currently funded for all operational and contracted or planned
CAPEX costs, including any budgeted drilling activities for at least the next 12
months

•    Debt free

•    Early settlement payment made to Calmar LP in respect of deferred consideration
on acquisition of 25% interests in PEDL180 and PEDL182, containing the Wressle development

•    Company solicitors progressing legal work on Capital Reduction to enable the
Company to execute a share-buy-back programme or dividend payment. Appropriate resolutions
relating to this are included in the Notice of Annual General Meeting for shareholders
to consider within the Annual Report

•    The Company’s AGM will be held at 11.00 a.m. on 23 June 2022, at the offices
of Osborne Clarke, 2 Temple Back East, Temple Quay, Bristol, BS1 6EG

> **David Bramhill, Executive Chairman, commented:**
> “My confidence in Union Jack’s future remains highly positive.
> “During 2021 and to date, the Company has advanced a number of its key projects,
> especially at Wressle which, as stated earlier, have been transformational financially
> with substantial revenues and indications that the Wressle journey has only just
> commenced.
> “The latest results at West Newton are highly encouraging regarding the prospects
> of the significant hydrocarbon discoveries made to date and their development 
> potential, following an extensive testing and investigative programme conducted
> on both sides of the Atlantic by industry leading geological and geochemical consultancies.
> “I remain confident that future news arising from our well-balanced portfolio 
> containing relevant components of production, development, appraisal and exploration
> will continue to vindicate the Board’s unflinching optimism in respect of our 
> Company’s focused strategy.
> “In closing, I believe our Company is in sound financial health with a robust 
> balance sheet. Union Jack continues to be debt free, with significant cash reserves
> and substantial future revenues expected.
> “The Company is currently funded for all G&A, OPEX, and contracted or planned 
> CAPEX costs, including any budgeted drilling activities, for at least the next
> 12 months.
> “The future of Union Jack remains bright.”

**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 2021.

After several years of consistent determination and promising results, Union Jack
is now witnessing a sea change in its business and prospects, where production from
Wressle has materially transformed the financial position of our Company.

Union Jack’s focused strategy has been vindicated and, coupled with the Board’s 
consistent objective to build a sustainable UK onshore production and development
hydrocarbon company, is now well within our field of vision.

Our belief is that the upside opportunities at the Wressle project make it an exceptional
conventional development where revenue potential is expected to help fund the growth
of Union Jack over the next decade and beyond.

During April 2022, we announced that landmark production of net total revenues from
Wressle had reached US$5,000,000 following the successful proppant squeeze and coiled
tubing operations completed in late August 2021.

At West Newton, our other flagship project, following independent laboratories’ 
reviews and investigation of extensive data by technical consultants, we are greatly
encouraged and look forward positively to the commencement of further drilling operations
in due course. Our view remains buoyant on the prospect of being able to deliver
a successful development at West Newton.

Cash balances remain at a high level and, with expected substantial future revenues,
the Company is currently funded for all G&A, OPEX and contracted or planned CAPEX
costs, including any budgeted drilling activities for at least the next 12 months.

Substantial progress was made during 2021 and has continued into 2022. This progress,
coupled with a robust oil price and Wressle oil production, have generated considerable
revenues and, given the Board’s expectation of ongoing future material cashflows,
we believe it is now appropriate to initiate plans for a Capital Reduction to allow
for the payment of a dividend or to implement a share-buy-back programme to reward
our shareholders.

Further information can be found on our informative website www.unionjackoil.com,
launched during 2021, presenting a professional information package on our projects,
designed to inform shareholders and attract new investors to the Company.

In addition, Union Jack hosts an active twitter account (@unionjackoilplc).**

**WRESSLE DEVELOPMENT PEDL180 AND PEDL182 (40%)**

Wressle has quickly exceeded our pre-production expectations of 500 bopd and continues
to outperform since the resumption of production following the successful proppant-
squeeze and coiled-tubing operation during August 2021.

Instantaneous rates of over 1,000 bopd have been achieved. Early restrictions on
production rates are being successfully addressed through ongoing modifications 
to the site facilities, including installation of a secondary separator and progressive
upgrades to the gas incineration system which have culminated in the installation
of a larger capacity enclosed ground incineration unit.

Further work is planned in the near-future which is designed to improve the site
facilities, that will allow an increase in production rates in due course.

Production from Wressle is currently averaging over 300 bopd from the Ashover Grit
reservoir net to Union Jack based on our 40% interest.

Since production commenced at Wressle-1 in early 2021, the cumulative production
of high-quality oil is in-excess of 150,000 barrels with no formation water produced
to date.

**Gross and Net Volumes of Wressle Hydrocarbons Attributable to Union Jack**

|   | Gross Volumes |   |   | Net Volumes Attributable to Union Jack’s 40% interest |   |   | 
|   | OIL MMSTB | GAS BCF | OIL EQUIV MMBOE | OIL MMSTB | GAS BCF | OIL EQUIV MMBOE | 
| 2P Ashover Grit and Wingfield Flags | 0.62 | 0.2 | 0.65 | 0.25 | 0.08 | 0.26 | 
| 2C Penistone Flags | 1.53 | 2 | 1.86 | 0.61 | 0.8 | 0.75 | 
| Broughton North Mean Unrisked Prospective Resources | 0.51 | 0.51 | 0.6 | 0.2 | 0.2 | 0.24 |

_Source: CPR by ERCE (2016)_

When the planned gas monetisation project is complete, it is expected that the overall
oil and gas production rate will be able to increase significantly. Pressure test
analyses conducted by ERCE, an independent petroleum consultant, indicated potential
flow rates for Wressle-1 of between 1,200-1,500 bopd.

The likely preferred gas monetisation approach is to export the gas via a short 
pipeline of approximately 600 metres into the local gas distribution network. This
will require normal planning and Environmental Agency (‘EA’) regulatory consents
and is likely to be completed in time for winter demand. This export route will 
also be available in the longer term for the development of the Penistone Flags 
reservoir where detailed work is underway to develop the material Contingent Resources
of 1.86 million barrels of oil equivalent (“boe”) gross.

During April 2022, the Operator submitted a revised Field Development Plan (‘FDP’)
to the NSTA for approval.

The FDP, if and when approved by the NSTA, would be a significant milestone for 
Union Jack.

During the remainder of 2022, and assuming receipt of all regulatory approvals, 
ongoing major development works at Wressle will include:

**•**     Completion of the installation of the permanent production facilities

**•**     Implementation of the gas to grid development to monetise the gas and 
provide optimum oil production

**•**     Advancement of the development plan and consenting process to enable production
from the Penistone Flags reservoirs

Environmental monitoring throughout the Wressle operation has shown no measurable
impact on surface or groundwater quality, no related seismicity and that noise has
been within the permitted levels.

Union Jack has independently commissioned Gaffney Cline, an international energy
consultancy, to deliver an updated Reserves and Resources Report prepared in accordance
with the Petroleum Resources Management System (‘PRMS’), a standard developed by
the Society of Petroleum Engineers.

The Gaffney Cline report will:

**•**     Incorporate 1P/2P/3P reserve volumes for the Ashover Grit and Wingfield
Flags reservoirs

**•**     Highlight and discuss any additional potential reservoirs

**•**     Generate an indicative 2C production profile for the Penistone Flags reservoir

**•**     Prepare a 2P+2C production profile that will illustrate future field potential

The Board has increasing confidence that the Gaffney Cline Report, which will be
published in due course, will highlight the material upside potential of this economically
attractive conventional hydrocarbon development.**

**WEST NEWTON APPRAISAL PEDL183 (16.665%)**

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.

Union Jack entered into a farm-in during 2018 with Rathlin Energy (UK) Limited (‘
Rathlin’) the Operator, and since that time the West Newton A-2 (‘WNA-2’) and West
Newton B -1Z (‘WNB-1Z’) drilling programmes have yielded substantial hydrocarbon
discoveries.

Throughout 2021, the focus was on operations and data acquisition from the West 
Newton A and West Newton B well sites and advancing a forward plan for the West 
Newton A development.

After extensive planning in early 2021, completion and testing operations were initiated
on the WNB-1Z well. WNB-1Z was drilled in late 2020 and reached a total depth of
2,114 metres. Test operations commenced in May 2021 and focused on the Kirkham Abbey
Formation and, completing and testing the lower section, before moving onto the 
upper section. A total of 44 metres was perforated in the target zone. During testing
operations, both liquid hydrocarbons and gas were recovered to the surface from 
the two intervals. Recoveries confirmed the presence of good quality gas with indicated
methane content of approximately 90%, ethane of approximately 4.5% and heavier end
gases present in lesser concentrations. Following operations at WNB-1Z, equipment
was mobilized to WNA-2 to resume well testing.

The WNA-2 well was drilled and cased to a total depth of 2,061 metres during the
spring of 2019 and initial completion operations were undertaken during the summer
of 2019. The original testing programme was suspended when both oil and gas were
encountered in the target formation, as opposed to the predominant gas saturation
anticipated in the original testing programme. The operations were suspended to 
allow the redesign of the test programme to efficiently and safely evaluate the 
potential oil column. Following approval, testing operations commenced in September
2021. During these operations, both gas and liquid hydrocarbons were recovered to
surface. The gas samples were similar to those recovered from other wells, including
WNB-1Z and WNA-1, and are consistent with the initial tests performed at WNA-2.

Following the completion of the West Newton EWT, the Operator commissioned RPS, 
a highly regarded independent consultant to produce a review that assessed well 
productivity potential from the West Newton project and the investigation of optimised
drilling and well completion methodologies.

The RPS review concluded that the Kirkham Abbey reservoir could deliver substantially
higher production rates from horizontal wells as compared to vertical wells. The
review also concluded that, based on RPS modelling, most of the acid stimulation
carried out during the EWT interacted with only a small section of the perforated
intervals due to the permeability contrast across the Kirkham Abbey formation.

The highlights of the RPS review are as follows:

**•**     Predicted initial average production rates of up to 35.6 million cubic
feet of gas per day (5,900 barrels of oil equivalent per day) from a horizontally
drilled well situated within the gas zone, based on the data from the WNA-2 well

**•**     Indication of initial average potential production rates of up to 1,000
barrels of oil per day from a horizontally drilled well situated in the oil zone
based on data from the WNA-2 well

Fluid analysis performed by Applied Petroleum Technology (UK) Limited (‘APT’) confirms
that hydrocarbon liquids recovered to surface are low specific gravity, low viscosity,
light oil or condensate with an API gravity ranging from 45.9 to 49 degrees and 
that gas recovered to surface is good quality with a high thermal value.

During the 2021 completion operations at WNB-1Z and WNA-2, a significant amount 
of reservoir data including fluid and gas samples, pressure data, and flow data 
was acquired. Following an extensive investigative programme conducted on both sides
of the Atlantic by industry leading geological and geochemical consultancies, this
information is being utilised to determine optimum drilling, completion and development
designs for the Kirkham Abbey reservoir. This information gathering exercise will
also help determine the next steps in the future development and exploration programmes.

Analysis and re-evaluation of well data and seismic information continues to support
our belief that the West Newton project represents a significant resource of high-
quality light oil and natural gas, and that the West Newton area has the potential
to be a significant hydrocarbon producer.

In preparation for a decision on a potential development of the West Newton discoveries,
the Operator submitted a revised planning application for the development of the
West Newton A site to the East Riding of Yorkshire Council (“ERYC”). This was approved
by the ERYC Planning Committee by a vote of ten to one during March 2022. The development
plan that was approved includes the drilling, completion, and associated production
from an additional four wells from the current surface location, plus an extension
of the permit period at the West Newton B site for an additional three years.

**KEDDINGTON PEDL005(R) (55%) AND FISKERTON AIRFIELD EXL294 (20%)**

The producing Keddington oilfield is located along the highly prospective East Barkwith
Ridge, an east-west structural high on the southern margin of the Humber Basin.

A subsurface review conducted by the Operator has highlighted a viable target to
the east of the field, with up to 180,000 barrels of incremental oil production.

With planning consent already in place, Keddington presents an opportunity to increase
oil production via a relatively inexpensive development side-track from one of the
existing wells. In addition, near-field exploration targets exist at Keddington 
South and Louth, with Mean Prospective Resources of 635,000 and 600,000 barrels 
of oil in place respectively.

Fiskerton Airfield oilfield has continued production during the period. Focus remains
on maximising production from existing wells and cost management.**

**BISCATHORPE PEDL253 (45%) AND NORTH KELSEY PEDL241 (50%)**

PEDL253 is situated within the proven hydrocarbon fairway of the South Humber Basin
and is on-trend with the Keddington oilfield, Saltfleetby gasfield and the Louth
and North Somercotes Prospects.

While drilling the B-2 well there were hydrocarbon shows indicated by elevated gas
readings and sample fluorescence, observed over the entire interval from the top
of the Dinantian to the Total Depth of the well, with a total of 68 metres interpreted
as being oil-bearing in the petrophysical analysis.

A geochemical analysis of the gas data and hydrocarbons extracted from drill cuttings
was commissioned by the Joint Venture participants and carried out by APT. The results
of this analysis confirm a hydrocarbon column of 33-34 API gravity oil in the Dinantian
Carbonate and a proven live oil column, comparable with that produced at the nearby
Keddington oilfield.

Following the results of the APT exercise, a probabilistic assessment of the Dinantian
oil volumes was modelled with volumetric assumptions as being ‘filled to spill’ 
with resulting gross Mean Stock Tank Oil in Place (‘STOIIP’) calculated to be 24.3
mmbo with an upside case of 36 mmbo.

In addition to the Dinantian, there remains the original target within the Westphalian
where evidence for a thickened sandstone reservoir exists.

The Operator has estimated, in accordance with the PRMS Standard, that the gross
Mean Prospective Resources within the Westphalian are 3.95 mmbo, with an upside 
case of 6.69 mmbo. Economic modelling demonstrates that the Westphalian target is
economically robust, especially in the current oil price environment.

Union Jack’s technical team believe that Biscathorpe remains one of the largest 
unappraised onshore discoveries within the UK.

During November 2021, a planning application for a side-track drilling operation,
associated testing and long-term production at the Biscathorpe site was refused 
by the Lincolnshire County Council Planning Committee.

The decision on a future development at Biscathorpe will now be decided by the Planning
Inspectorate, to whom appeal documentation was submitted in April 2022.

North Kelsey is a conventional oil exploration prospect on trend with, and analogous
to the Wressle development, which lies approximately 15 kilometres to the northwest.
The prospect has been mapped from 3-D seismic data and has the potential for oil
in four stacked Upper Carboniferous targets. The Operator estimates that gross Prospective
Resources range from 4.46 to 8.47 mmbo, with a Mean Resource of 6.47 mmbo.

An application to extend the existing planning consent to drill the North Kelsey-
1 well was refused by the Lincolnshire County Council Planning Committee in March
2022. An appeal is expected to be made in the near-future against this decision.**

**OTHER LICENCE INTERESTS**

Union Jack has interests in a number of other non-core projects, namely PEDL118 (
Dukes Wood), PEDL203 (Kirklington), PEDL201 (Widmerpool Gulf), PEDL181 (Humber Basin)
and PEDL209 (Laughton).

These licence interests have all been fully impaired and are at various stages of
relinquishment with the exception of Dukes Wood and Kirklington where geothermal
upside potential is being investigated.

**NORTH SEA ROYALTIES**

During March 2021, the Company purchased a 2.5% royalty interest over the Claymore,
Piper and Scapa oilfields located in the Central North Sea from Cambridge Petroleum
Royalties for a consideration of £93,610, including working capital adjustments.

The Company benefits from an indirect contractual exposure to North Sea oil and 
gas production revenues without any ongoing capital investment, decommissioning 
or joint venture operating costs.

Included within this transaction is the right to receive income from the Claymore/
Piper Complex for the rest of its operating life, estimated independently to be 
at least the next 15 years, at no additional capital or operating cost to Union 
Jack.

Management viewed this initial purchase as an attractive, cash generating and high
yielding investment, consistent with Union Jack’s wider strategy and objective to
explore alternative financial instruments to generate revenues, whilst remaining
within the UK hydrocarbon sector.

This transaction has generated an accrued income of more than £170,000 to date. 
These monies are being held in escrow by the Operator, Repsol Sinopac until a Royalty
Manager is appointed.

During the period the Company has been in direct discussions with Repsol Sinopac
and the other royalty holders with a view to advancing the potential acquisition
of further royalty interests and accelerating the payment of the amounts already
generated.

**CORPORATE AND FINANCIAL**

The significant revenues received from Wressle have already transformed the financial
well-being of the Company and significantly strengthened its balance sheet.

During March 2021, the Company consolidated its ordinary shares on a 200 for one
basis and the new issued share capital was 99,079,532, each with a nominal value,
post-consolidation of 5 pence.

During September 2021, £3,000,000 was raised before expenses, further bolstering
our cash reserves, ensuring that Union Jack continued to retain its ‘going concern’
status in its accounts.

The Company remains debt free and had cash balances and short-term receivables at
9 May 2022, of £7,545,575. The Company is currently funded for all operational and
all contracted or planned CAPEX costs, including any budgeted drilling activities
for at least the next 12 months.

Revenues from oil sales of £1,894,875 reported in 2021, compared to £158,004 during
2020, have had a dramatic effect on our Income Statement, resulting in the Company
reporting a gross profit for the first time.

Net revenues of £2,877,081 registered to date during 2022 already comfortably exceed
the revenues for 2021.

Subsequent to the year end, in March 2022 early settlement of £2,083,333 was made
to Calmar LP in respect of the prudent deferred consideration on acquisition of 
25% interests in PEDL180 and PEDL182 containing the Wressle development.

During 2021, the Company agreed to a share swap in the shares of its holding in 
Elephant Oil Limited, a UK registered unquoted company in exchange for shares in
a new entity, Elephant Oil Corp., registered in Nevada, in the United States of 
America. Elephant Oil Corp. has applied for its shares to be traded on NASDAQ in
the near-future.

Post year end, and given the current stage of the Company’s development and its 
improved cash position, a decision was made by the Board to undertake a Capital 
Reduction exercise to allow the payment of a cash dividend to shareholders or enable
a share-buy-back programme. Appropriate resolutions are included in the Notice of
Annual General Meeting for shareholders to consider.

I would like to take this opportunity to thank our shareholders for their continued
support, as well as my colleagues, co-directors and advisers who all provide invaluable
advice and continue to champion the development of the UK onshore hydrocarbon industry
for the benefit of Union Jack, its shareholders and the wider economy.

**NET ZERO CARBON POLICY**

The UK is committed by law to reach Net Zero carbon emissions by 2050. Union Jack,
by its own policy and strategy, are not the operator of any of its projects or assets.
Therefore, the Company will only work with operators who have a firm commitment 
to safety, environmental and social responsibility in all aspects of their operations.

Regardless of the fact that the Company has chosen not to be an operator, we are
subject to the same scrutiny as any other hydrocarbon producer.

We remain pro-active in the quest for Net Zero and to demonstrate this Union Jack
commissioned Gaffney Cline, an international energy consultancy to conduct Carbon
Intensity studies on Biscathorpe (PEDL253) and West Newton (PEDL183), two of our
core projects. The results of these studies were highly encouraging with Gaffney
Cline concluding that both sites achieved an AA rating for Carbon Intensity.

Union JackÕs focus is to minimise emissions and the carbon footprint generated by
its hydrocarbon interests in the most efficient way possible, whilst continuing 
to contribute positively to the growing demand for energy and hydrocarbon products
in the supply chain.

As the demand for energy increases post COVID-19 and the global economy recovers,
hydrocarbons will continue to play an important part in ensuring the energy security
of the UK. Union Jack’s development interests are located close to areas with a 
high demand for energy and as a consequence, the Company believes that locally produced
hydrocarbons provide the benefit of displacing, to some extent, imported hydrocarbons.

Union Jack supports the operators’ strategies that mitigate the effects of climate
change and will continue to align itself with the best standards of Carbon Management
Practice wherever possible.

**OUTLOOK**

My confidence in Union Jack’s future remains highly positive.

During 2021 and to date, the Company has advanced a number of its key projects, 
especially at Wressle which, as stated earlier, have been transformational financially
with substantial revenues and indications that the Wressle journey has only just
commenced.

The latest results at West Newton are highly encouraging regarding the prospects
of the significant hydrocarbon discoveries made to date and their development potential,
following an extensive testing and investigative programme conducted on both sides
of the Atlantic by industry leading geological and geochemical consultancies.

I remain confident that future news arising from our well-balanced portfolio containing
relevant components of production, development, appraisal and exploration will continue
to vindicate the Board’s unflinching optimism in respect of our Company’s focused
strategy.

In closing, I believe our Company is in sound financial health with a robust balance
sheet. Union Jack continues to be debt free, with significant cash reserves and 
substantial future revenues expected.

The Company is currently funded for all G&A, OPEX, and contracted or planned CAPEX
costs, including any budgeted drilling activities, for at least the next 12 months.

The future of Union Jack Oil remains bright.

**David Bramhill**

Executive Chairman

16 May 2022

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