Union Jack Oil (LON:UJO), a key player in the oil and gas production sector, has announced a significant step in its exploration endeavours. The company is gearing up to spud the West Bowlegs exploration well, Andrews-1, in Oklahoma by late March, marking its first drilling activity following its recent entry into the USA onshore oil sector.
The Andrews-1 well aims to target the Hunton limestone reservoir, a regionally proven source, holding a promising 75% success rate as estimated by the operator. Union Jack has set its sights on this well as a major drilling catalyst, hopeful of emulating the initial production rates of similar regional wells, which stand at 150 barrels per day of oil and 0.2 million cubic feet per day of gas. The company also anticipates a potential six-month payback period post-successful drilling, which could substantially bolster its financial standing.
Union Jack Oil has also laid out plans for additional drilling at the West Bowlegs site, contingent on the success of the Andrews-1 well. These subsequent operations could further enhance the company’s resource base and production levels, leveraging the cost-effective and straightforward operating environment Oklahoma offers.
The company remains steadfast in its valuation forecasts, holding a gross resource estimate for Andrews-1 at 0.2 million barrels of oil equivalent, attributing a 45% share to Union Jack. Its net asset value is assessed at 0.5 pence risked and 1 pence unrisked, pending the outcome of this initial exploration and potential future drills in the area.
Union Jack Oil’s venture into the USA follows a series of asset acquisitions and farm-ins, including royalty interests in Texas’ Permian Basin and stakes in Oklahoma’s West Bowlegs and Wilzetta assets. This move is part of a broader strategy to diversify its portfolio and ensure sustained revenue streams.
In the UK, the company has seen success with its Wressle field, which, after the recent implementation of a jet pump, is expected to enhance production rates. This project, along with the West Newton and Biscathorpe-2 sites, forms the backbone of Union Jack’s domestic operations, contributing significantly to its revenue and strategic growth.
Daniel Slater, Analyst at Zeus Capital said, “Based on the likelihood of news flow from Wressle, the USA, West Newton and elsewhere in the portfolio over the next 12-18 months, we have a positive outlook for the shares.”
With a solid financial base, marked by a cash holding of £6.3 million and zero debt, Union Jack is well-positioned for future exploration and development activities.
