The Directors of Union Jack Oil plc (AIM: UJO) are pleased to announce that, further to entering into a Heads of Agreement as announced on 3 October 2018, the Company has now signed a farm-in agreement with Rathlin Energy (UK) Limited (“Rathlin”), a wholly owned subsidiary of Canadian registered Connaught Oil & Gas Ltd (“Connaught”), for a 16.665% licence interest in PEDL183 (the “Farm-in”). PEDL183 is located onshore UK in East Yorkshire and within the Western sector of the Southern Zechstein Basin and contains the significant West Newton A-1 gas discovery (Best Estimate Contingent Resource 189 Bcfe or 31.5 MMboe gross), where the drill-ready West Newton conventional appraisal well is planned to be drilled in Q1 2019.
· Acquiring a 16.665% interest in the large 176,000 acre PEDL183 licence containing the significant West Newton A-1 UK onshore gas discovery
· Best Estimate Contingent Resources of 189 Bcf of gas equivalent or 31.5 million barrels of oil equivalent (gross) assigned to West Newton in a Competent Persons Report
· West Newton A-1 gas discovery is on-trend with the prolific offshore Hewett gas complex
· Proximity to existing gas pipelines and infrastructure
· Drill-ready conventional appraisal well planned to be drilled in Q1 2019 to appraise the gas discovery
· Appraisal well to be fully funded from existing cash resources
· Compelling immediate and future economic value from a development of the gas discovery alone
· Operator’s NPV10% of US$247 million and 52.5% ROR for the gas discovery alone
· Attractive acquisition metrics of less than US$0.30 per barrel of oil equivalent for the gas discovery alone
· Considerable upside potential from the lower Cadeby Reef oil exploration target underlying the gas reservoir that will also be drilled, with Best Estimate Prospective Resources of 79.1 million boe (gross)
· Further significant upside potential from numerous other prospects and leads
· A successful appraisal well in Q1 2019 is expected to deliver a major onshore gas development
David Bramhill, Executive Chairman of Union Jack, commented:
“We are pleased to be able to confirm the Farm-in to PEDL183 containing the material West Newton gas discovery that represents a significant project technically and is compelling financially for Union Jack has now been signed.
“The drilling of the material West Newton conventional appraisal well, where success is expected to deliver a significant onshore gas development project, will be transformational for Union Jack.
“We look forward to working with Rathlin, as Operator, and Humber Oil & Gas Limited (“Humber”), as our Commercial Partner, and drilling the West Newton conventional appraisal well in order to firm up the project’s significant potential and, upon a successful appraisal well, progress to a Field Development Plan. On completion of this Farm-in, Union Jack can book immediately 5.3 million barrels of oil equivalent Contingent Resources to its existing reserve and resource portfolio and once a Field Development Plan is in place, West Newton’s Contingent Resources can be converted to Reserves.
“In addition to our ongoing commitment to develop the Wressle oil discovery, and plans to commence drilling of the material conventional Biscathorpe-2 oil appraisal well later this quarter, the Farm-in and drilling of West Newton in Q1 2019 puts Union Jack in an even stronger position to deliver growth in reserves, production and asset value while adhering to our principles of strict financial and technical discipline.”
Frazer Lang, Director of Humber, and Union Jack’s Commercial Partner, commented:
“PEDL183 is one of the largest onshore licences within the UK and we are delighted to be investing in parallel in this project alongside our Commercial Partner, Union Jack.
“The conventional West Newton appraisal well is planned to be drilled in Q1 2019 and, if successful, the effect will be transformational for both Union Jack and Humber.
“Humber is also pleased to be partner in the Wressle oil discovery and also a participant in the Biscathorpe-2 appraisal well planned to be drilled soon
“Success in any one of these stand-alone projects would change materially the dynamics of both Union Jack and Humber.”