Union Jack Oil plc (LON:UJO) is making significant strides in both the UK and US, reinforcing its position as a key player in onshore oil and gas production. SP Angel’s latest report reiterates their BUY recommendation for the stock, with a target price of 66p. The company continues to deliver strong results, driven by its strategic diversification and operational achievements.
In the first half of 2024, Union Jack reported revenues of £2.3 million, largely from its flagship Wressle field in the UK, where it holds a 40% working interest. The field alone generated £0.5 million in operating cash flow, contributing to a £789k net profit. This profitability has allowed Union Jack to maintain a healthy balance sheet, remaining debt-free and holding approximately £4 million in cash. Additionally, the company has invested in a US mineral royalties portfolio, which has already delivered a 20% return on capital. With further expansion planned in 2025, the company’s dual focus on UK and US assets is paying off.
Expansion in the UK
Union Jack’s UK portfolio continues to thrive, with exciting developments at the Wressle and Keddington fields. The Wressle field produced an average of 188 barrels per day net during the first half of 2024. Looking ahead, two new wells are scheduled to be drilled, alongside plans for a facilities expansion and the monetisation of gas from the Ashover Grit formation.
The Keddington field (55% interest) is also progressing, with a site upgrade and production restart expected by late Q4 2024. In addition, an infill drilling location has been approved, targeting an additional 180,000 barrels. As part of their future plans, Union Jack expects activity at the West Newton project in 2025, with a low-cost early production concept.
Successful Entry into the US Market
Union Jack’s recent expansion into the US is proving to be a game-changer. The company has built a portfolio of cash-generative royalty packages and low-risk drilling prospects, already yielding results. Early drilling success in the Andrews field, Oklahoma (45% interest) promises to deliver payback on investment within six months. The company is also gearing up for an ambitious three-well exploration programme later in 2024, focusing on the Taylor and Moccasin prospects, followed by the Diana-1 well in 2025. This diversification into the US has not only strengthened Union Jack’s revenue base but also positioned it for continued growth.
Bright Prospects for Investors
SP Angel analyst David Mirzai highlights the positive impact of Union Jack’s operational momentum on investor sentiment. Despite the stock’s sideways trading over the last year, driven in part by concerns around the UK’s fiscal environment, Union Jack’s expanded US operations provide a fresh source of optimism. The success at Andrews field and the upcoming back-to-back drilling campaigns are expected to boost production rates and enhance the company’s ability to continue shareholder distributions.
Mirzai remains confident in Union Jack’s future, stating that the company’s ability to generate rapid returns from its US investments should further strengthen its financial position. With an active drilling programme underway and a well-diversified portfolio, Union Jack is poised for substantial growth over the next 12 months.
On a Final Note
Union Jack Oil is in an excellent position to build on its recent successes. With robust cash flows, exciting new projects, and a balanced portfolio across the UK and US, the company is delivering value for its shareholders. As the upcoming drilling activities unfold and production ramps up, investors have much to look forward to. SP Angel’s reaffirmed BUY rating and 66p price target reflect the growing confidence in Union Jack’s potential to unlock significant value in the near term.
