TIDMUJO
RNS Number : 1038Q
Union Jack Oil PLC
04 June 2018
Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have
been deemed inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 until the release of this
announcement
4 June 2018
Union Jack Oil plc
("Union Jack" or the "Company")
Acquisition of Additional 12.5% Interest in the Wressle
Hydrocarbon Discovery
Union Jack Oil plc (AIM: UJO), a UK-focused onshore hydrocarbon
production, development and exploration company, is pleased to
announce that it has acquired a further 12.5% in the licences
PEDL180 and PEDL182 containing the Wressle discovery ("Wressle")
and the Broughton North Prospect, for a Deferred Consideration of
GBP1.04 million from Celtique Energie Petroleum Limited
("Celtique").
Highlights:
-- Union Jack acquires a further 12.5% in the licences
containing Wressle, increasing its interest to 27.5%, reaffirming
Union Jack's and its joint venture partners' commitment to the
development of Wressle
-- The Acquisition structure is attractive and involves no
initial cash consideration. The Deferred Consideration of GBP1.04
million is conditional on establishing first commercial oil
production at Wressle
-- The Acquisition has an immediate positive impact on Union
Jack by instantly increasing its reserves and resources base at
Wressle by 83%
-- The economic effect of establishing commercial oil production
at Wressle will be transformative to the Company
-- Union Jack welcomes the participation of Humber Oil &
Gas, its Commercial Partner, as an additional stakeholder in
Wressle
-- Union Jack remains in a robust financial position, with
current cash reserves of GBP2 million and is fully funded for its
existing drilling commitments during 2018
Commenting, David Bramhill, Executive Chairman of Union Jack,
said:
"This Acquisition, with no upfront cash payment, increases our
interest in Wressle from 15% to 27.5%. The Acquisition is highly
attractive and significant to Union Jack's future and reaffirms
Union Jack's and its joint venture partners' commitment to the
development of Wressle.
"The Acquisition has an immediate positive impact on Union Jack
by instantly increasing its reserves and resources base by 83% to
in excess of 855,000 barrels of oil equivalent. Revised site design
and hydrological work in respect of the development of Wressle
continues which is subject to the new planning application being
successful. Once Wressle is in production, it will result in an
initial constrained production anticipated to be 500 barrels of oil
per day gross, adding production in excess of 137 barrels of oil
per day net to Union Jack and transforming the Company's financial
position.
"The justification for Union Jack acquiring an additional
interest in Wressle is the transformative economic impact to the
Company, as we believe that when commercial oil production at
Wressle is established, it would provide Union Jack with cash flows
of approximately US$4 million per annum in the current oil price
environment. After taking operating costs into consideration, that
are estimated to be below US$15 per barrel, such net revenues would
propel Union Jack into a material revenue generating oil and gas
production company. In further support of the Acquisition, the
economics are robust and net asset value accretive down to an oil
price of US$35 per barrel.
"The Written Ministerial Statement released on 17 May 2018
demonstrates an encouraging positive shift in Governmental attitude
towards the importance of UK energy production and provides the
Board with further comfort on obtaining a favourable development
decision.
"I welcome our Commercial Partner, Humber Oil & Gas, as a
direct stakeholder in Wressle, a project that we believe offers
significant commercial potential. Wressle also possesses several
additional possible upside value drivers, which include, the impact
of production on gas and electricity sales over and above that used
on site and, the potential volumetric bonus that exists in the
Penistone Flags reservoir. Using the deepest recorded oil, the
Contingent Resource estimates for the Penistone Flags have been
conservatively calculated. The confirmation of a deeper oil water
contact at Wressle would have a positive impact on increasing the
resource volumes attributable to this formation.
Acquisition Details
The Company has entered into a Sale and Purchase Agreement
("SPA") with Celtique, whereby Union Jack, its Commercial Partner,
Humber Oil & Gas Limited ("Humber") and Egdon Resources U.K.
Limited ("Egdon"), will acquire Celtique's entire 30% interest in
licences PEDL180 and 182 (the "Licences") containing Wressle and
the Broughton North Prospect (the "Acquisition"), for nil initial
consideration with a Deferred Consideration element payable in cash
only on commercial oil production being established. The effective
date for the transaction is 1 January 2018.
The Deferred Consideration of GBP2,500,000 for Celtique's entire
30% interest is only payable on first commercial production from
the Licences being established and will result in Union Jack,
Humber and Egdon acquiring 12.5%, 12.5% and 5% legal and economic
interests respectively in the Licences.
Prior to first commercial oil production at Wressle being
established, the Union Jack Board will give appropriate
consideration to the range of funding options suitable for the
Acquisition. Wressle is an attractive, low-cost and low-risk
hydrocarbon development project with Reserves and Contingent
Resources, which lends itself to offtake financing from production
and the opportunity to choose from a range of favourable debt and
structured finance options.
New Wressle Field Development Application
An application to extend the existing planning consent for a
further year was submitted to the North Lincolnshire Council on 13
April 2018.
In respect of a revised Wressle Field Development application,
since January 2018, the operator has drilled two deeper cored
groundwater boreholes in addition to the investigation boreholes
previously drilled. The data from these operations is being used to
support the new application which will contain a revised site
design and hydrological risk assessment. The operator has received
and integrated results of the positive hydraulic conductivity tests
executed on the core samples. The new Wressle Field Development
application will be submitted in June 2018.
Other
On completion of the Acquisition, the interests in PEDL180 and
PEDL182 will be as follows:
Egdon Resources U.K. Limited (operator) 30.0%
Europa Oil & Gas Limited 30.0%
------
Union Jack Oil plc 27.5%
------
Humber Oil & Gas Limited 12.5%
------
On completion of the Acquisition, the tables below show the net
volumes of hydrocarbons attributable to Union Jack pre and
post-acquisition.
Net Volumes of hydrocarbons attributable to Union Jack
pre-acquisition
GROSS VOLUMES NET VOLUMES ATTRIBUTABLE
TO UNION JACK PRE-ACQUISITION
OIL MMSTB GAS BCF OIL EQUIV OIL MMSTB GAS BCF OIL EQUIV
MMBOE MMBOE
---------------------------- ---------- ---------- ------------ -----------
2P Ashover Grit
and Wingfield Flags 0.62 0.20 0.65 0.09 0.03 0.10
---------- ---------- ------------ -----------
2C Penistone Flags 1.53 2.00 1.86 0.23 0.30 0.28
---------- -------- ---------- ------------ -------- -----------
Broughton North
Mean Unrisked Prospective
Resources 0.51 0.51 0.60 0.08 0.08 0.09
---------- -------- ---------- ------------ -------- -----------
Net Volumes of hydrocarbons attributable to Union Jack
post-acquisition
GROSS VOLUMES NET VOLUMES ATTRIBUTABLE
TO UNION JACK POST-ACQUISITION
OIL MMSTB GAS BCF OIL EQUIV OIL MMSTB GAS BCF OIL EQUIV
MMBOE MMBOE
---------------------------- ---------- -------- ---------- ------------ --------- -----------
2P Ashover Grit
and Wingfield Flags 0.62 0.20 0.65 0.16 0.05 0.18
---------- -------- ---------- ------------ --------- -----------
2C Penistone Flags 1.53 2.00 1.86 0.42 0.55 0.51
---------- -------- ---------- ------------ --------- -----------
Broughton North
Mean Unrisked Prospective
Resources 0.51 0.51 0.60 0.15 0.15 0.16
---------- -------- ---------- ------------ --------- -----------
Completion of the Acquisition is subject to Oil and Gas
Authority approval.
Any Deferred Consideration in relation to the Acquisition will
not become payable until commercial oil production from the Licence
is established, and is defined in the SPA as: "...the commencement
of production of Petroleum for commercial sale, which shall not
include any Petroleum produced as a result of the testing,
completion or commissioning of the discovery well".
Under the terms of the Acquisition, 25% of Celtique's 30%
interest in PEDL180 is the subject of a 2.5% Net Profits Interest
("NPI") to a third party. The NPI will only become payable
following commercial production and recovery of all costs
including, drilling, testing, planning and development. In
acquiring interests in the Licences, Union Jack and its joint
venture partners will take on the NPI obligation in proportion to
their respective legal and economic interests under the
Acquisition.
In accordance with the "AIM Rules - Note for Mining and Oil and
Gas Companies", the information contained within the announcement
has been reviewed and signed off by Graham Bull, Non-Executive
Director, who has over 46 years of international oil and gas
industry exploration experience.
For further information, please contact:
Union Jack Oil plc +44 (0) 7787 160 682
David Bramhill
SP Angel Corporate Finance LLP +44 (0) 20 3470 0470
Nominated Adviser
Lindsay Mair
Richard Hail
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END
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