Union Jack Oil plc (LON:UJO), a UK focused, onshore hydrocarbon production, development and exploration company noted today’s announcement from Reabold Resources plc (LON:RBD) which includes an analysis Reabold independently commissioned in respect of an exploration well drilled on PEDL183 in 2013.
KEY POINTS
· PEDL 183 licence update:
· JV partnership agreed specific well path for West Newton B-2 well
· Potentially highly significant discovery in Crawberry Hill, part of the PEDL 183 licence and previously drilled by Rathlin Energy Limited (“Rathlin”) in 2013
· Rathlin to potentially bring in an industry partner to support licence activity, with West Newton B-2 drilling targeted for H2 2023, subject to final regulatory approvals and rig availability
· Reabold could provide additional funding solution for Rathlin upon receipt of the second tranche of net proceeds from the sale of Victory
· CPR published on four of the Reabold North Sea licences; follows the announcement and publication of a CPR in February 2023 on licence P2478, which includes the Dunrobin West prospect and confirmed significant resource potential
· Initiation of share buyback programme of up to £750,000 to commence on 28 April 2023
WEST NEWTON PEDL 183 LICENCE UPDATE
WN B-2 well
The joint venture partnership at PEDL 183 has continued to analyse the geophysical, petrophysical and test data from the West Newton A and B wells in preparation for drilling. The data analysis has already confirmed the likelihood of intersecting good reservoir quality that, when taken in conjunction with the optimised drilling and completion methods, is expected to deliver good well productivity from a horizontal well from the B site (“WN B-2”) and, as such, the JV partnership has committed to the specific, optimised well path for WN B-2. It is envisaged that WN B-2 will be followed by a multi-well development programme based on a 50 Mscf/d gas facility.
Potentially highly significant existing discovery in Crawberry Hill, part of the PEDL 183 licence, in the Zechstein play region
Alongside the development plans for the West Newton A and B wells, Reabold has continued to appraise other opportunities within the PEDL 183 licence. Reabold has undertaken a technical review of its Zechstein play prospectivity in the UK, including the licences acquired through the Simwell transaction and PEDL 183, combining the significant quantity of seismic data, historical wells, core analysis and other proprietary data and analysis assembled by the Company.
Through this analysis, Reabold has identified on PEDL 183 a significant potential discovery, Crawberry Hill, which was drilled by Rathlin in 2013. The Company’s priority now is to develop plans with the aim of making this a drill-ready appraisal opportunity. This could add materially to the already significant resource within PEDL 183 offered from the West Newton trend. The Crawberry Hill-1 well, drilled in 2013, intersected 141m of Kirkham Abbey Formation with good indications of gas shows and porosity. The well was originally drilled to test a deeper target and does not have a full suite of logs over the Kirkham Abbey interval.
ERC Equipoise Ltd (ERCE) has undertaken a petrophysical analysis of the conventional reservoir of the Kirkham Abbey formation in the Crawberry Hill and Risby-1 wells and interprets average porosities greater than 15% in the top 20m of the Kirkham Abbey formation in Crawberry Hill-1. ERCE also interprets probable gas saturations in the top 6m of the Kirkham Abbey formation in the Crawberry Hill-1 well.
The Risby-1 well was drilled in the water leg but good porosity was calculated from the well logs and the potentially very good permeability indicated from well cuttings, which is supported by a drill-stem test in the Kirkham Abbey Formation. Detailed seismic mapping is underway to define the extent of the Crawberry Hill accumulation, which could add materially to the already significant resource within PEDL 183 offered from the West Newton trend.
In conclusion, Reabold believes the apparent discovery at Crawberry Hill to be an exciting appraisal opportunity potentially significantly enhancing the already strategic asset that is PEDL 183.
Given the significant technical analysis that has been completed to date, culminating in the JV partnership agreeing the well path for WN B-2 and the emergence of the Crawberry Hill opportunity, and in line with prudent risk management, Rathlin has decided to reduce its significant working interest position in PEDL 183 with the aim of potentially bringing in an industry partner to participate in drilling on PEDL 183.
Rathlin holds a 66.67% licence interest in and is operator of PEDL 183. Reabold has a ca. 56% economic interest in PEDL 183 via its 16.665% direct licence interest and through its ca. 59% equity ownership of Rathlin. Reabold is sufficiently funded for its 16.665% direct share of the costs for this well with its existing cash resources.
Should Rathlin’s efforts to reduce their working interest position not fully meet their objective, Reabold could provide additional funding for Rathlin upon receipt of the second tranche payment from Shell relating to the sale of the Victory asset, which would allow WN B-2 to be drilled at the earliest opportunity, subject to Environment Agency permit approvals and rig availability. The exact timing and amount of the second tranche payment from Shell is currently uncertain, however the second tranche payment will be ca. £9.5 million, assuming the development and production consent for the Victory gas field is secured from the North Sea Transition Authority by 1 December 2023. If consent has not been received by this date, then Reabold expects to receive £5.2 million within 3 business days of this date, with the balancing payment to come at a later consent date. The net proceeds to be received by Reabold would be sufficient to meet Rathlin’s share of the drilling costs of WN B-2, leaving Reabold financial flexibility for its capital allocation strategy of balancing portfolio investment with shareholder returns.
