Union Jack Oil (LON:UJO) has recently made significant progress at its Wressle field, with the installation of a jet pump in the Wressle-1 production well leading to an impressive increase in oil production rates. This development marks a pivotal moment for the company, significantly boosting its production capabilities and positively impacting its financial health. The increase in production is not only a technical achievement but also a strategic advantage, enhancing Union Jack Oil’s cash flow and solidifying its position in the market. The company’s future outlook appears promising, with potential for further production increases and strategic initiatives aimed at growth and expansion.
Zeus Capital said that Union Jack holds a portfolio of onshore UK assets, with work programmes steadily being progressed across these. The company brought its Wressle field (Union Jack 40%) onstream in 2021, and this is currently looking to ramp up post installation of a jet pump, having delivered EBITDA of £2.0m for Union Jack in H1 2023. There is then the possibility of higher rates as further development of the field is progressed. Wressle is providing significant revenues for the company, which can be redeployed elsewhere. Union Jack also holds 16.7% in the West Newton asset, where large volumes have been reported as discovered, but flow testing in 2021 did not establish commercial rates. Further analysis has now led to plans for a new horizontal test well in 2024, with potential for development beyond this. More widely, Union Jack also continues to pursue the drilling of a side-track from its Biscathorpe-2 well and drilling of an exploration well on North Kelsey (which requires planning permission). New acquisitions, potentially outside the UK, are also being considered. The company is currently funded from its end June 2023 cash holding of £6.3m (plus additional cash/investments totalling £2.9m; debt is zero) and ongoing cash flows. Based on the likelihood of news flow from Wressle, West Newton and elsewhere in the portfolio over the next 12-18 months, and the potential for new acquisitions, we have a positive outlook for the shares.
