Union Jack Oil Plc (LON:UJO), has recently declared the Andrews 1-17 well in Oklahoma officially onstream, marking a significant milestone in its operational capabilities. This new development not only underscores Union Jack’s strategic expansion in the U.S. market but also highlights its adept management of resources which facilitated the transition from discovery to production without external financing.
Operational Highlights and Future Outlook
The Andrews 1-17 well, in which Union Jack holds a 45% stake, showcased encouraging initial results and has now commenced production. This well’s early success is pivotal as it represents the company’s first production foray in the West Bowlegs area in Oklahoma, an initiative that has smoothly transitioned thanks to existing resources and strategic planning.
Union Jack anticipates stable production rates soon, expecting typical wells in the area to yield about 150 barrels of oil per day and 0.2 million cubic feet of gas per day. This addition to their portfolio not only enhances Union Jack’s production capacity but also boosts its revenue streams, contributing significantly to its financial robustness.
Moreover, buoyed by these positive results, Union Jack and its joint venture partners are preparing to spud a second well in the same region, targeting the same productive Hunton Limestone reservoir. This expansion strategy could potentially replicate the success of Andrews 1-17, further solidifying Union Jack’s presence in the U.S. oil and gas market.
Financial Health and Market Response
Union Jack’s financial strategy appears robust, with the company maintaining a strong balance sheet. As of the end of June 2023, the company reported cash holdings of £6.3 million, supplemented by additional investments totalling £2.9 million, and importantly, zero debt. This financial stability is critical as the company pursues further growth and potentially more lucrative projects in the near future.
The company’s market capitalisation stands at £25 million with a share price of 23.50p, reflecting a stable investor confidence level. This stability is crucial as it navigates the operational phases of its newly onstream well and plans for future drilling operations.
Daniel Slater, Analyst at Zeus Capital on forecasts and valuation said, “We await further news on flow rates before adding Andrews 1-17 production and revenues into our forecasts. We have derisked the well in our valuation, which sees our total risked NAV unchanged at 75p overall.“
Strategic Moves and Portfolio Diversification
Apart from its operations in the U.S., Union Jack continues to manage a diversified portfolio across the UK. The Wressle field, for instance, is another testament to Union Jack’s successful operational management, contributing significant revenues that are being strategically redeployed to fund further explorations and developments.
The recent acquisition of royalty interests in the Permian Basin in Texas and the Williston Basin in North Dakota, along with the farm-ins to the West Bowlegs and Wilzetta assets, underscore Union Jack’s ambition to broaden its operational footprint and leverage the diverse geological profiles these regions offer.
Union Jack Oil’s strategic operational expansions, coupled with a prudent financial management approach, position it well for future growth. With the Andrews 1-17 well now contributing to its production profile and more drilling operations on the horizon, the company is poised to enhance its market standing and deliver value to its shareholders. Investors are advised to watch for updates on production rates and additional exploratory success, which could provide further uplift to its prospects and stock valuation.
