Union Jack Oil (LON:UJO) has raised £5m by way of a placing and subscription at a price of 0.15p/share. The proceeds will be deployed across the Company’s interests in highly accretive projects including the drilling and testing of two further appraisal wells and the acquisition and reprocessing of new seismic data at the Company’s flagship West Newton project. In addition to West Newton, Union Jack has other material conventional assets in its balanced portfolio including Biscathorpe and Wressle which will see strong activity over the coming months, either of which could be transformational for the Company in their own right. Our updated TP purely reflects the equity dilution following yesterday’s placing, with all other metrics remaining the same. We therefore maintain our STRONG BUY recommendation, setting a new 0.70p TP (from 0.84p).
West Newton – potential to be the largest onshore UK discovery Recently updated volumetrics for West Newton indicate a significant upgrade to the 2017 figures contained within the current Competent Persons Report. The headline numbers estimate an in-place Base Case of 146.4MMbbls of oil and 211.5Bcf of gas; and an in-place Upside Case of 283MMbbls of oil and 265.9Bcf of gas. The estimated resource volumes therefore firmly categorise West Newton as having significant ‘company maker’ potential in our view.
Fully funded for 2020 West Newton appraisal and testing programme The placing enables Union Jack to progress the technically and financially compelling West Newton project under a planned two well drilling (B-1 and B-2) and testing programme for H1 2020 which could add significantly to the earlier successes seen at the A-1 and A-2 discoveries. The Company also has the necessary funding to complete a seismic acquisition programme over other structures that have been highlighted over the licence area, that could hold significant additional upside potential.
All eyes on the upcoming planning approval at Wressle As previously announced, North Lincolnshire Council did not present evidence at the 7 November Public Enquiry. We would expect a final decision to be made after 12 December UK general election, but before the end of 2019. If successful, first commercial oil is expected to flow at a constrained rate of 500bopd gross, and therefore could generate c.US$3m per annum net to Union Jack in the current oil price environment (c.US$60/bbl).
Biscathorpe could yield as much as 40MMbbls gross Funds are anticipated to be used to drill a side-track well at Biscathorpe (UJO 22% WI), where revised petrophysical analysis of the suspended Biscathorpe2 results (drilled in Jan/Feb 19), confirmed the likely presence of a 35m column of good quality, high API gravity oil. Union Jack plans to drill a side-track well at Biscathorpe, which could yield as much as 40MMbbls gross, another transformational hydrocarbon accumulation to complement West Newton.