TIDMUJO
RNS Number : 5324L
Union Jack Oil PLC
16 May 2022
--
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it
forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with
the Company's obligations under Article 17 of MAR.
16 May 2022
Union Jack Oil plc
("Union Jack" or the "Company")
Final Results for the Year Ended 31 December 2021
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
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 GBP7,545,575 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."
For further information, please contact:
Union Jack Oil plc info@unionjackoil.com
David Bramhill
SP Angel Corporate Finance LLP +44 (0)20 3470 0470
Nominated Adviser and Broker
Matthew Johnson
Richard Hail
Caroline Rowe
In accordance with the AIM Rules - Note for Mining and Oil and
Gas Companies, the information contained within this 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. This announcement contains certain
forward-looking statements that are subject to the usual risk
factors and uncertainties associated with the oil and gas
exploration and production business. While the directors believe
the expectation reflected within this announcement to be reasonable
in light of the information available up to the time of approval of
this announcement, the actual outcome may be materially different
owing to factors either beyond the Company's control or otherwise
within the Company's control, for example, owing to a change of
plan or strategy. Accordingly, no reliance may be placed on the
forward-looking statements.
Evaluation of hydrocarbon volumes has been assessed in
accordance with 2018 Petroleum Resources Management System (PRMS)
prepared by the Oil and Gas Reserves Committee of the Society of
Petroleum Engineers (SPE) and reviewed and jointly sponsored by the
World Petroleum Council (WPC), the American Association of
Petroleum Geologists (AAPG), the Society of Petroleum Evaluation
Engineers (SPEE), the Society of Exploration Geophysicists (SEG),
the Society of Petrophysicists and Well Log Analysts (SPWLA) and
the European Association of Geoscientists & Engineers
(EAGE).
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 Oil MMstb Gas bcf Oil
MMboe Equiv
MMboe
-------------------- ---------- -------- ---------- ----------- --------- -------
2P Ashover
Grit and Wingfield
Flags 0.62 0.20 0.65 0.25 0.08 0.26
-------------------- ---------- -------- ---------- ----------- --------- -------
2C Penistone
Flags 1.53 2.00 1.86 0.61 0.80 0.75
-------------------- ---------- -------- ---------- ----------- --------- -------
Broughton North
Mean Unrisked
Prospective
Resources 0.51 0.51 0.60 0.20 0.20 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
GBP93,610, 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
GBP170,000 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, GBP3,000,000 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 GBP7,545,575. 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 GBP1,894,875 reported in 2021,
compared to GBP158,004 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 GBP2,877,081 registered to date during 2022
already comfortably exceed the revenues for 2021.
Subsequent to the year end, in March 2022 early settlement of
GBP2,083,333 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 remains bright.
David Bramhill
Executive Chairman
16 May 2022
STRATEGIC REPORT FOR THE YEARED 31 DECEMBER 2021
STRATEGY
Our strategy is the appraisal and exploitation of the assets
currently owned. Simultaneous with this process, the Company's
management expects to continue to use its expertise and cash
resources to acquire further licence interests in the UK 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.
BUSINESS REVIEW
Union Jack Oil plc is a UK registered company, focused on the
exploration for, and future development of hydrocarbon
projects.
A review of the Company's operations during the year ended 31
December 2021 and subsequent to the date of this report is
contained in the Chairman's Statement and this Strategic
Report.
The loss for the year amounted to GBP853,013 (2020:
GBP1,865,515).
The loss for the year includes impairments to Property, Plant
and Equipment of which total costs are GBP156,995 (2020:
GBP106,714). These impairments are in relation to PEDL118,
GBP67,598 (2020: GBP59,627) and PEDL203, GBP83,057 (2020:
GBP47,087).
The loss for the year includes impairments to Intangible Assets
of which total costs are GBP6,340 (2020: nil). These impairments
are in relation to PEDL181, GBP4,204 and PEDL201, GBP2,136.
Administrative expenses amounted to GBP1,740,962 (2020:
GBP1,590,576). The increase in this cost was due to additional
technical work in respect of Wressle, West Newton, Biscathorpe, and
Keddington, undertaken by the Company's external consultants.
Cash and cash equivalents at year end amounted to GBP5,977,541
(2020: GBP7,269,014).
Total assets at year end amounted to GBP24,472,708 (2020:
GBP21,340,804).
Non-current assets at year end amounted to GBP16,392,416 (2020:
GBP13,725,734).
Intangible Assets totalled GBP8,525,373 (2020: GBP6,134,717).
Expenditure included GBP500,000 for a further 15% interest in
Biscathorpe and completion and testing operations at West
Newton.
Tangible assets totalled GBP7,575,525 (2020: GBP6,452,287).
Expenditure included the proppant squeeze and site enhancement at
Wressle.
The Company's Income Statement reports revenues of GBP1,894,875
(2020: GBP158,004) in respect of production income from Wressle,
Keddington oilfield and the Fiskerton Airfield oilfield.
The directors do not recommend the payment of a dividend (2020:
GBPnil).
In September 2021, 13,636,364 new ordinary shares were issued
for cash at a price of 22 pence per ordinary share, raising
GBP3,000,000 before expenses of GBP312,484 by way of a placing and
subscription.
The enlarged issued share capital following the issue of the new
ordinary shares described above is 112,715,896 ordinary shares of 5
pence each and 831,680,400 deferred shares of 0.225 pence each.
FUTURE DEVELOPMENTS
The directors intend to continue with the Company's stated
strategy, reviewing the licence interests held in respect of future
viability, any potential impairment indicators that may arise
during the year and adjusting immediately to any changes that may
be required in the operation of the licence interests held.
The Company holds a number of key, quality project interests,
namely, Wressle, West Newton and Biscathorpe, Keddington and North
Kelsey, where development, appraisal and exploration plans are in
place for the future benefit of stakeholders and the Company.
The directors will continue to investigate further acquisition
opportunities as and when they arise.
KEY PERFORMANCE INDICATORS
The Company has made good progress during the year ended 31
December 2021. In respect of 2021 traditional KPIs are not deemed
appropriate to the Company. Performance is measured by monitoring
exploration costs and ensuring sufficient funds are available to
meet project commitments. The 2022 Financial Statements will show a
full year's production from Wressle and focus will be changed to
traditional KPIs and not E&E expenditure.
The directors were successful in raising funds to ensure the
Company is adequately funded to meet all of its current
commitments.
In January 2021, the Company acquired a further 15% economic
interest in PEDL253 containing the Biscathorpe Prospect from Humber
Oil & Gas Limited for a cash consideration of GBP500,000. In
addition, a contingent cash payment of GBP500,000 will be made to
Humber Oil & Gas Limited following receipt of planning for
drilling the Biscathorpe-2Z side-track, testing and subsequent
production in the event of drilling success. The Company, following
this transaction, now holds a 45% interest in PEDL253.
In February 2021, the Company concluded a transaction to acquire
a further 30% interest in PEDL241 containing the North Kelsey
Prospect with Egdon Resources U.K. Limited. The cash consideration
was GBP100,000 and all previous arrangements in respect of the
previous farm-in for a 10% interest from Egdon Resources U.K.
Limited during March 2013, were nullified. Following this
transaction the Company and Egdon hold a 50% interest each in the
licence.
In February 2021, the Company announced that following
re-perforation of the Wressle-1 conventional oil well,
communication was made with the Ashover Grit reservoir interval and
free-flow of good quality oil had commenced.
The well has been placed on continuous test production and,
subsequent to the proppant squeeze, Wressle is now producing
between 760 - 800 bopd.
During March 2021, the Company acquired a 2.5% cash generating
royalty in the Central North Sea Claymore, Piper and Scapa
oilfields from Cambridge Petroleum Royalties Limited for a cash
consideration of GBP93,610 (US$130,000).
To date, the exploration, development and production activities
of the Company's assets have continued in line with plans and with
minimal impact from COVID-19.
Further events which took place after the Balance Sheet date are
described in the Annual Report and note 7 of this RNS.
INCOME STATEMENT
FOR THE YEARED 31 DECEMBER 2021
Notes 31.12.21 31.12.20
GBP GBP
==================================== ===== ============ ============
Revenue 1,894,875 158,004
Cost of sales - operating costs (377,153) (286,892)
Cost of sales - depreciation (735,160) (57,715)
Gross profit / (loss) 782,562 (186,603)
------------------------------------ ----- ------------ --------------
Administrative expenses (excluding
impairment charge) (1,740,962) (1,590,576)
Impairment (156,995) (106,714)
Total administrative expenses (1,897,957) (1,697,290)
Operating loss (1,115,395) (1,883,893)
Finance income 112,611 18,378
Royalty income 149,771 -
------------------------------------ ----- ------------ --------------
Loss before taxation (853,013) (1,865,515)
Taxation - -
------------------------------------ ----- ------------ --------------
Loss for the financial year (853,013) (1,865,515)
------------------------------------ ----- ------------ --------------
Attributable to:
Equity shareholders of the Company (853,013) (1,865,515)
------------------------------------ ----- ------------ --------------
Loss per share
Basic and diluted loss per share
(pence) 2 (0.83) (2.23)
------------------------------------ ----- ------------ --------------
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2021
31.12.21 31.12.20
GBP GBP
=========================================== ========= ===========
Loss for the financial year (853,013) (1,865,515)
Items which will not be reclassified
subsequently to profit and loss
Other comprehensive loss 54,420 (83,190)
------------------------------------------- --------- -----------
Total comprehensive loss for the financial
year (798,593) (1,948,705)
------------------------------------------- --------- -----------
BALANCE SHEET
AS AT 31 DECEMBER 2021
Notes 31.12.21 31.12.20
GBP GBP
================================== ===== =========== ===========
Assets
Non-current assets
Exploration and evaluation
assets 4 8,525,373 6,134,717
Property, plant and equipment 5 7,575,525 6,452,287
Investments 291,518 137,098
Loan receivables - 1,001,632
---------------------------------- ----- ----------- -------------
16,392,416 13,725,734
Current assets
Inventories 8,829 -
Loan receivables 1,028,110 8,993
Trade and other receivables 1,065,812 337,063
Cash and cash equivalents 5,977,541 7,269,014
---------------------------------- ----- ----------- -------------
8,080,292 7,615,070
Total assets 24,472,708 21,340,804
---------------------------------- ----- ----------- -------------
Liabilities
Current liabilities
Trade and other payables 2,390,603 2,447,727
---------------------------------- ----- ----------- -------------
Non-current Liabilities
Provisions 1,876,758 803,772
---------------------------------- ----- ----------- -------------
Total liabilities 4,267,361 3,251,499
---------------------------------- ----- ----------- -------------
Net assets 20,205,347 18,089,305
---------------------------------- ----- ----------- -------------
Capital and reserves attributable
to the CompanyÕs equity
shareholders
Share capital 6 7,507,076 6,825,258
Share premium 21,528,077 19,522,379
Share-based payments reserve 638,586 411,467
Accumulated deficit (9,468,392) (8,669,799)
---------------------------------- ----- ----------- -------------
20,205,347
Total equity 18,089,305
---------------------------------- ----- ----------- -------------
Statement of Changes in Equity
for the year ended 31 December 2021
Share-based
Share Share payment Accumulated
capital premium reserve deficit Total
GBP GBP GBP GBP GBP
========================= ========== =========== =========== ============ ============
Balance at 1 January
2021 6,825,258 19,522,379 411,467 (8,669,799) 18,089,305
Loss for the financial
year - - - (853,013) (853,013)
Other comprehensive loss - - - 54,420 54,420
------------------------- ---------- ----------- ----------- ------------ ------------
Total comprehensive
loss for the year - - - (798,593) (798,593)
Contributions by and
distributions to owners
Issue of share capital 681,818 2,318,182 - - 3,000,000
Share issue costs - (312,484) - - (312,484)
Share-based payments - - 227,119 - 227,119
Total contributions
by and
distributions to owners 681,818 2,005,698 227,119 (798,593) 2,116,042
------------------------- ---------- ----------- ----------- ------------ ------------
Balance at 31 December
2021 7,507,076 21,528,077 638,586 (9,468,392) 20,205,347
------------------------- ---------- ----------- ----------- ------------ ------------
Balance at 1 January
2020 5,731,508 14,205,000 167,466 (6,721,094) 13,382,880
Loss for the financial
year - - - (1,865,515) (1,865,515)
Other comprehensive loss - - - (83,190) (83,190)
------------------------- ---------- ----------- ----------- ------------ ------------
Total comprehensive
loss for the year - - - (1,948,705) (1,948,705)
Contributions by and
distributions to owners
Issue of share capital 1,093,750 5,906,250 - - 7,000,000
Share issue costs - (588,871) - - (588,871)
Share-based payments - - 244,001 - 244,001
Total contributions
by and distributions
to owners 1,093,750 5,317,379 244,001 (1,948,705) 4,706,425
------------------------- ---------- ----------- ----------- ------------ ------------
Balance at 31 December
2020 6,825,258 19,522,379 411,467 (8,669,799) 18,089,305
------------------------- ---------- ----------- ----------- ------------ ------------
STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2021
31.12.21 31.12.20
GBP GBP
====================================== =========== ===========
Cash flow from operating activities (646,726) (1,412,801)
--------------------------------------- ----------- -----------
Cash flow from investing activities
Purchase of intangible assets (2,277,224) (2,874,060)
Purchase of property, plant and
equipment (1,022,055) (389,330)
Loan advanced - (1,000,000)
Purchase of Investments (100,000) (100,000)
Interest received 67,016 7,754
--------------------------------------- ----------- -----------
Net cash used in investing activities (3,332,263) (4,355,636)
--------------------------------------- ----------- -----------
Cash flow from financing activities
Proceeds on issue of new shares 3,000,000 7,000,000
Cost of issuing new shares (312,484) (588,871)
Net cash generated from financing
activities 2,687,516 6,411,129
--------------------------------------- ----------- -----------
Net increase / (decrease) in
cash and cash equivalents (1,291,473) 642,692
--------------------------------------- ----------- -----------
Cash and cash equivalents at
beginning of financial year 7,269,014 6,626,322
--------------------------------------- ----------- -----------
Cash and cash equivalents at
end of financial year 5,977,541 7,269,014
--------------------------------------- ----------- -----------
Notes to the Financial Statements
for the year ended 31 December 2021
1 ACCOUNTING POLICIES
Basis of Preparation
This financial information does not constitute full statutory
financial statements but is derived from accounts for the year
ended 31 December 2021 which are audited. This announcement is
prepared on the same basis as set out in the statutory financial
statements for the year ended 31 December 2021. While the financial
information included in this announcement has been prepared in
accordance with the recognition and measurement criteria of UK
adopted international accounting standards (IFRS), this
announcement does not in itself contain sufficient information to
comply with IFRS.
The Auditor's Report for the year ended 31 December 2021 was
unqualified.
The full Annual Report along with a Notice of Annual General
Meeting ("AGM") will be distributed to shareholders on 16 May 2022
and will be available on the Company's website from that date.
Going Concern
The Company's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Chairman's Statement and the Strategic Report.
The directors' forecasts demonstrate that the Company will meet its
day-to-day working capital and share of estimated drilling costs
over the forecast period being at least 12 months from the sign-off
of these financial statements.
There are a number of risks to the Company's working capital
position, which have been identified by the directors and its
independent advisor, OGA, namely: (i) timing of incurred costs;
(iii) scope of work programmes undertaken; and (iii) realised oil
price.
The impact of those risks on the Company's working capital
position has been assessed under a range of differing scenarios,
with the most adverse, given the current operating environment and
stage of development that the Company's assets are at, being
identified as being the basis for evaluating the impact for the
Going Concern assessment using the worst case 'stress test.'
The Company has sufficient funding to meet planned expenditures
and a level of contingency. Taking account of the risks, the stress
test shows that the Company is able to operate within the level of
funds currently held at the date of approval of these financial
statements.
The directors have a reasonable expectation that the Company has
adequate resources to continue in operational existence for the
foreseeable future. Thus, they continue to adopt the going concern
basis of accounting in preparing the financial statements.
2 LOSS PER SHARE
The Company has issued warrants and options over ordinary shares
which could potentially dilute the basic loss per share in the
future.
Basic loss per share is calculated by dividing the loss
attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the year.
During the current and prior year, the Company had warrants and
options in issue.
At 31 December 2021 the Company had 30,373 (2020: 30,373)
warrants in issue and 3,200,000 (2020: 3,200,000) options in
issue.
These warrants and options have not been taken into account when
calculating the diluted loss per share as their impact was
anti-dilutive. Therefore, the basic and diluted loss per share are
the same.
For the purposes of the loss per share calculation the
post-consolidation factor of 200 shares for one has been
applied.
Loss per share 2021 2020
Pence Pence
-------------------------------------------- ------ ------
Loss per share from continuing operations (0.83) (2.23)
---------------------------------------------- ------ ------
The loss and weighted average number of ordinary shares used in
the calculation of loss per share are as follows:
2021 2020
GBP GBP
---------------------------------------------- --------- -----------
Loss used in the calculation of total basic
and diluted loss per share (853,013) (1,865,515)
------------------------------------------------ --------- -----------
Number of shares 2021 2020
------------------------------------------------ ----------- ----------
Weighted average number of ordinary shares
for the purposes of basic and diluted loss
per share 102,628,722 83,539,914
------------------------------------------------ ----------- ----------
The Company has 831,680,400 (2020: 831,680,400) deferred shares.
These have not been included within the calculations of basic
shares above on the basis that IAS 33 defines an ordinary share as
an equity instrument that is subordinate to all other classes of
equity instruments. Any residual interest in the assets of the
Company would not currently, on liquidation, go to the deferred
shareholders, hence they are not currently considered subordinate.
These deferred shares have not been taken into account when
calculating the diluted loss per share as their impact was
anti-dilutive.
The Company issued 13,636,364 new ordinary shares during the
year (2020: 21,875,000).
3 RECONCILIATION OF LOSS TO CASH GENERATED FROM OPERATIONS
31.12.21 31.12.20
GBP GBP
---------------------------------------------- ------- ---------- ------------
(853,013)
Loss before taxation (1,865,515)
Depletion of producing assets 735,160 57,715
Impairment of intangibles 156,995 106,714
Share-based payments 227,119 244,001
Finance income (112,611) (18,378)
Royalty income (149,771) -
---------------------------------------------- -------- ---------- ------------
3,879 (1,475,463)
---------------------------------------------- -------- ---------- ------------
(Increase) in inventories (8,829) -
(Increase) in trade and other receivables (550,868) (156,886)
Increase / (decrease) in trade and
other payables (90,908) (219,528)
---------------------------------------------- -------- ---------- ------------
Cash used in operations (646,726) (1,412,801)
---------------------------------------------- -------- ---------- ------------
4 Exploration and evaluation assets
31.12.21
Exploration 31.12.21 31.12.21 31.12.20
and evaluation Royalty Total Total
GBP GBP GBP GBP
---------------------------- --------------- -------- --------- -----------
Cost
At 1 January 6,134,717 - 6,134,717 6,726,743
Transfer to development
and
production assets (18,092) - (18,092) (5,646,086)
Costs incurred in the
year 2,333,835 93,610 2,427,445 5,054,060
---------------------------- --------------- -------- --------- -----------
At 31 December 8,450,460 93,610 8,544,070 6,134,717
---------------------------- --------------- -------- --------- -----------
Depreciation and impairment
At 1 January - - - -
Amortisation charge for
the year - 12,357 12,357 -
Costs impaired 6,340 - 6,340 -
---------------------------- --------------- -------- --------- -----------
At 31 December 6,340 12,357 18,697 -
---------------------------- --------------- -------- --------- -----------
Net book value
At 31 December 8,444,120 81,253 8,525,373 6,134,717
At 1 January 6,134,717 - 6,134,717 6,726,743
---------------------------- --------------- -------- --------- -----------
Additions to exploration and evaluation costs represent
exploration and appraisal costs incurred in the year in respect of
unproven properties and provisions recognised for decommissioning
and restoration liabilities.
Furthermore in the year, the Company acquired a 2.5% cash
generating royalty interest that is part of the royalty unit over
20% of the revenues from oil and gas production from the Claymore,
Piper and Scapa oilfields located in the Central North Sea, known
collectively as the Claymore and Piper Complex, for a total
consideration of GBP93,610. The royalty purchase included the right
to accrued income of GBP124,316 for the years 2017 to 2020,
inclusive. This income is included in the royalty income figure for
2021 being the year that the Company became entitled to the income,
and is also included as a current asset within other
receivables.
The royalty is being amortised over its useful economic
life.
The directors have reviewed whether there were any potential
indicators for impairment evidence for each of the assets. If an
indicator was identified, the directors considered the potential
value of the projects and licences. The directors have also
considered the likely opportunities for realising the value of
licences and have concluded that the likely value of each
exploration area is individually in excess of its carrying amount.
The total impairment charge for 2021 was GBP6,340 (2020: nil) with
regard to PEDL181, GBP4,204 and PEDL201, GBP2,136.
Included in the above intangible asset additions during the year
are amounts arising in relation to changes in decommissioning and
restoration provisions.
Intangible assets (less any impairment) comprise amounts
capitalised as follows:
31.12.21 31.12.20
GBP GBP
------------------ ---------- --------- -----------
West Newton PEDL183 5,184,442 3,755,301
Biscathorpe PEDL253 2,992,694 2,136,834
North Kelsey PEDL241 266,984 225,306
Louth Extension PEDL339 Ð 17,276
Royalty 81,253 Ð
------------------------------ --------- ---------
5 PROPERTY, PLANT AND EQUIPMENT
31.12.21 31.12.20
GBP GBP
------------------------------- --------- ----------------------
Cost
At 1 January 6,698,650 663,234
Transfer from exploration
and evaluation assets 18,092 5,646,086
Additions 1,990,961 389,330
------------------------------- --------- --------------------
At 31 December 8,707,703 6,698,650
------------------------------- --------- --------------------
Depreciation and impairment
At 1 January 246,363 81,934
Depreciation charge for the
year 735,160 57,715
Costs impaired 150,655 106,714
At 31 December 1,132,178 246,363
------------------------------- --------- --------------------
Net book value
At 31 December 7,575,525 6,452,287
At 1 January 6,452,287 581,300
------------------------------- --------- --------------------
Development and Production assets comprise amounts capitalised
as follows:
31.12.21 31.12.20
GBP GBP
Wressle PEDL180/182 6,176,515 5,646,086
Fiskerton Airfield EXL294 373,582 208,218
Keddington PEDL005(R) 1,025,428 597,983
7,575,525 6,452,287
-------------- --------- ---------
The Board has assessed the Development and Production assets as
at 31 December 2021 and has identified indicators of impairment as
set out in IAS36 Impairment of assets in respect of PEDL118 Dukes
Wood
and PEDL203 Kirklington, respectively. This impairment amounts
to a total of GBP150,655 (2020: GBP106,714).
The total impairment charge for these assets was PEDL118,
GBP67,598 (2020: GBP59,627) and PEDL203, GBP83,057 (2020:
GBP47,087).
Licence interest in PEDL339, Louth Extension, has been
relinquished. Any drilling target can be reached from
PEDL005(R).
Monies spent on PEDL339 have been reallocated to PEDL005(R).
There were no indicators for impairment on any other assets.
6 SHARE CAPITAL
Allotted and issued: Class Nominal 31.12.21 31.12.20
Number value GBP GBP
112,715,896 Ordinary 5p 5,635,795 4,953,977
(31 December 2020: 99,079,532)
831,680,400 Deferred 0.225p 1,871,281 1,871,281
(31 December 2019: 831,680,400)
----------------------------------- -------- ----------- ----------- ---------------------
Total 7,507,076 6,825,258
----------------------------------- -------- ----------- ----------- ---------------------
Ordinary shares hold voting rights and are entitled to any
distributions made on winding up. Deferred shares do not hold
voting rights and are not entitled to distributions made on winding
up.
Allotments during the year
In September 2021, 13,636,364 new ordinary shares were issued
for cash at 22 pence per share, raising approximately GBP3,000,000
before expenses of GBP312,484 by way of a placing and
subscription.
7 EVENTS AFTER THE BALANCE SHEET DATE
The following events have taken place after the year end:
In January 2022, the Company received a positive independent
review from RPS Group, a leading global company offering services
within the energy sector in respect of West Newton flow rate
potential. The RPS review indicated that initial average production
rates of up to 35.6 million cubic feet of gas per day from a
horizontally drilled well situated in the gas zone could be
achieved, based on the data from the West Newton A-2 well. The
study also indicated initial average production rates of up to
1,000 bopd from a horizontally drilled well situated in the oil
zone, based on data from the West Newton A-2 well.
In January 2022, the Company announced a summary of the results
of an analysis of the bottom hole pressure data acquired from the
Wressle-1 well during December 2021. The interpretation was
completed by ERCE, an independent energy consultancy, on behalf of
the Wressle Joint Venture partners. Results demonstrated the
significant potential of the Wressle-1 well and the production
rates that could be achieved once the surface facilities are
optimised and a gas monetisation scheme is in place.
During January 2022, the Company announced the intention of the
operator of PEDL253 to appeal against the refusal of planning
permission by Lincolnshire County Council, for a side track
drilling operation, associated testing and long-term oil
production.
During March 2022, planning for the extension for PEDL241 was
refused by the Lincolnshire County Council. The Joint Venture
Partners are considering an appeal.
During March 2022, planning for the drilling of additional wells
and production at West Newton A site was approved by the East
Riding of Yorkshire Council. Separately, permission was granted for
a time extension to allow further exploratory drilling at West
Newton B site.
During March 2022, settlement of GBP2,083,333 for the
consideration payment of a 25% interest in PEDL180 and PEDL182 was
made to Calmar LLP.
During April 2022, the Company announced a US$5 million net
landmark reached in revenues generated from the Ashover Grit
reservoir at the Wressle-1 well.
8 COPIES OF THE ANNUAL REPORT AND FINANCIAL STATEMENTS
The 2021 Annual Report and Financial Statements will be posted
to shareholders on, or around, 23 May 2022 and are now available on
the Company's website www.unionjackoil.com .
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