Union Jack Oil plc (AIM: UJO), a UK focused onshore hydrocarbon production, development and exploration company is pleased to announce the acquisition of an additional 35% economic interest in PEDL005(R) containing the producing Keddington Oilfield ("Keddington") from Terrain Energy Limited (the "Acquisition").
Following completion of the Acquisition, Union Jack will hold a 55% economic interest in Keddington, with Egdon Resources plc ("Egdon" or the "Operator") holding the remaining 45%.
· Union Jack's interest in the Keddington Oilfield increases to 55% following completion
· Net Contingent Resource increases to 311,000 barrels ("bbls") of oil
· Net Prospective Resource increases to 349,250 bbls of oil
· Potential to increase production volumes multi-fold via a relatively inexpensive side-track well
The consideration for the Acquisition is £200,000. In addition, Union Jack has assumed costs of £35,000 in relation to site activities from the effective economic date of the Acquisition, being 1 January 2020 (the "Economic Date"). The cost of the acquisition will be financed by existing cash resources. The Company will receive its increased share of Keddington production proceeds from the Economic Date. The Acquisition is subject to approval by the Oil & Gas Authority.
Keddington, currently producing approximately 28 bbls of high-quality oil per day from Carboniferous age sandstone reservoirs, is located along the highly prospective East Barkwith Ridge, an east-west structural high on the southern margin of the Humber Basin.
A detailed, in-depth subsurface review of the Keddington field and the surrounding licence area was conducted by Egdon and Union Jack during 2019, resulting in a fully audited and consistent data set that supports updated resource estimates generated by the Operator.
These geological and geophysical studies indicate that potentially significant resources remain unswept at Keddington, highlighting an excellent opportunity to increase production volumes multi-fold by the drilling of a relatively inexpensive development well from the existing production site. The gross remaining Mean Contingent Resource at Keddington is 567,000 bbls of oil (311,000 bbls net to Union Jack).
The Operator is finalising the assessment of potential in-fill drilling locations at Keddington with a view to targeting a side-track drilling location.
The Keddington site lease has been extended until 2029. Current planning consent expires in 2058, with approval in place for the drilling of a further two wells.
In addition to the unswept resources in Keddington, a near field exploration opportunity exists at Keddington South, which has a gross Mean Prospective Resource Volume of 635,000 bbls of oil (349,250 bbls net to Union Jack).
As part of this Acquisition, the Company is also acquiring a 15% interest in PEDL339 into which the Louth Prospect, with a gross Mean Prospective Resource of 600,000 bbls of oil, extends from PEDL005(R). Significant additional Prospective Resources, both for oil and gas also exist over the licence areas and includes the North Somercotes Prospect.
David Bramhill, Executive Chairman of Union Jack, commented:
"This Acquisition is an inexpensive transaction and provides an immediate uplift in oil production, which will have a beneficial effect when consolidated into the production revenues generated from Fiskerton Airfield and the expected "first oil" from the Wressle development later in the year.
"Keddington also contains major scope for expansion which could be achieved by drilling a relatively inexpensive development well from the existing Keddington site.
"Union Jack's other key projects remain on track, with news expected during the remainder of Q1 and Q2 in respect of:
· The Extended Well Test at the West Newton A-2 discovery
· Commencement of site works in preparation for the drilling of the West Newton B-1 well
· Update in respect of achieving "first oil" from the Wressle discovery during H2 2020
· Update in respect of Biscathorpe, where significant technical work has been undertaken to fully assess what Union Jack considers may become a significant project for the Joint Venture going forward
"The Company continues to exercise strict financial discipline and is fully funded to cover all planned drilling and development commitments at West Newton, Wressle and Biscathorpe.
"I look forward to reporting to shareholders in respect of progress of our principal projects in the near term."