Union Jack Oil plc (AIM: UJO), a UK focused onshore hydrocarbon production, development and exploration company is pleased to announce that it has agreed to acquire a further 12.5% economic interest in PEDL180 and PEDL182 containing the Wressle hydrocarbon development project ("Wressle") from Humber Oil & Gas Limited ("Humber") for a cash consideration of £500,000 (the "Acquisition").
· Union Jack will acquire a further 12.5% in the Wressle development, increasing its interest to 40%, reaffirming Union Jack's ongoing commitment to one of the Company`s three flagship projects
· The Acquisition is value accretive and increases Union Jack`s 2P Reserves and 2C Contingent Resource base at Wressle by 45.5%
· The Internal Rate of Return to the Company of the Acquisition is 46%, underlining the economic attractiveness of the Acquisition and the Wressle project
· The Wressle project economics remain strong in today`s oil price environment, with a cash break-even oil price estimated at US$17.62 per barrel
· Planning approval for the Wressle project is in place and development is underway
· The economic impact on the Company of establishing first oil at Wressle during H2 2020 will be financially transformative and will be enhanced by the Acquisition
· A Deferred Consideration of £1,040,000 to be paid to Calmar LP on "first commercial oil"
· Union Jack remains in a strong financial position with current cash reserves in excess of £5.5 million and fully funded for its existing drilling, testing and development commitments on all of its projects during 2020
Commenting, David Bramhill, Executive Chairman of Union Jack, said:
"This Acquisition is important to Union Jack and increases our interest in Wressle, with production anticipated to commence during H2 2020, from 27.5% to a material 40%. The terms of the Acquisition are compelling and this transaction is significantly asset value accretive from the outset, reaffirming Union Jack's commitment to the development of Wressle and will assist in delivering the Company`s goal to become a mid-tier producer in the medium term.
"The Acquisition has an immediate positive impact on Union Jack by increasing its reserves and resources at Wressle by 45.5% to in-excess of 1,240,000 barrels of oil equivalent. The development of Wressle continues apace and first oil is anticipated during H2 2020. When Wressle is commissioned and in production, it will result in an initial constrained production anticipated to be 500 barrels of oil per day gross, adding production of 200 barrels of oil per day net to Union Jack and transforming the Company's financial position.
"The justification for Union Jack acquiring an additional interest in Wressle is our expectation of the transformative economic impact on the Company. We believe that when commercial oil production at Wressle is established, it will provide Union Jack with meaningful cash revenues. After taking operating costs into consideration, estimated net revenues are expected propel Union Jack to a profitable revenue generating oil and gas production company.
"Wressle also possesses several additional upside value drivers, which include the economic impact of the possible production of gas and electricity sales over and above that used on site and the additional significant Contingent Resource volumes within the Penistone Flags reservoir".