29 January 2024
This
announcement contains inside information for the purposes of
Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms
part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 ("MAR"), and is Disclosed in accordance with
the Company's obligations under Article 17 of MAR.
Union Jack Oil
plc
("Union Jack" or the
"Company")
Strategic Expansion into the
United States
Purchase of Producing Mineral
Royalties
Proposed Future USA Drilling
Collaboration with Reach Oil & Gas Inc
Union Jack Oil plc, (AIM: UJO) a
predominantly UK onshore focused production, development and
exploration company is pleased to announce details of its initial
expansion into the United States of America ("United States" or
"USA"), with the purchase of three Mineral Royalty packages
("Royalties"), brokered by the Company's agent and adviser, Reach
Oil & Gas Inc ("Reach").
Union Jack is also poised to
complete Joint Venture agreements with Reach, in respect of a
number of value accretive, exploration, drilling, development and
potential production ventures in Oklahoma, one of the highest
ranked hydrocarbon production locations in the United
States.
Royalties Purchased to Date
·
Cronus Unit, containing a 25 well package in the Permian
Basin, Midland County, Texas, (Effective date December 2023); the
property is comprised of 9 Chevron and 16 XTO
(a subsidiary of Exxon) operated wells
· COG
Operating LLC (a subsidiary of ConocoPhillips) operated, Powell
Ranch Unit, consisting of 15 wells in the Permian Basin, Upton
County, Texas (Effective date November 2023); the property is
comprised of 7 horizontal and 8 vertical wells
·
Occidental operated Palm Springs Unit, containing 10
horizontal wells in the Permian Basin, Howard County, Texas
(Effective date January 2024)
· The
total cash consideration for the Royalties was US$854,070
(£677,235)
· 10%
of consideration earned since December 2023
· The
Royalties are estimated to have an economic life of more than 26
years and a current Internal Rate of Return in excess of
20%
The Royalties also provide
additional upside as new wells are completed and drilled on the
properties at no cost to Union Jack. Chevron, one of the associated
operators, has publicly stated their commitment to expanding
activities in the Permian Basin.
Reach has been appointed as agent to
act on behalf of Union Jack in the management of the
Royalties.
The Royalties acquisition has been
completed using existing cash balances.
Gneiss Energy acted as Financial
Adviser to this transaction.
Attraction of United States Royalties and Initial Focus
Areas
·
Exposure to most active basins and largest operators in the
United States
·
Monthly income with no development or operating
costs
·
Owned in perpetuity, with no forward liabilities or
obligations
·
Focus on the Permian Basin, Texas, which produces
approximately 6% of the world's daily oil requirements
· Oil
and gas production and drilling anticipated for decades
·
Each well can target multiple productive zones, such as the
Lower Sprayberry, Wolfcamp A, Wolfcamp B Lower, Wolfcamp B Upper,
Wolfcamp C and D, Jo Mill, and Dean and Barnett, amongst
others
Future Collaboration with Reach on Drilling
Opportunities
In addition to Reach's role in the
management of the Royalties, Union Jack is also poised to complete
Joint Venture agreements with Reach, in respect of a number of
value accretive, exploration, drilling, development and potential
production ventures in Oklahoma, one of the highest ranked
hydrocarbon production locations in the United States.
The Company's rationale in pursuing
these investment opportunities is that Union Jack will acquire
material interests in projects with near-term planned drilling, a
high chance of success and capable of adding significant cash flow,
complementing Union Jack's existing profitable, production and
development interests onshore UK.
Due diligence, including a site
visit, has been undertaken by Union Jack in respect of certain oil
and gas investment opportunities that have received the approval of
the Company's technical team. Terms are being finalised with
Reach and when complete will allow the execution of Joint Venture
agreements in respect of at least two material drilling programmes
in Oklahoma, where the first well is planned for early Q2
2024.
Further details on the proposed
future collaboration with Reach on drilling opportunities will
follow upon execution of definitive documentation expected to be
completed in the coming weeks.
Reach Oil and Gas Inc (https://www.reachoilgas.com)
Reach, and its sister company Reach
Energy Limited, established in 2013, are successful private,
production, development and exploration entities, based in
Oklahoma, with offices in Aberdeen (UK) and Oklahoma City
(USA).
The Principals of Reach
are:
Miles Newman
·
Imperial College London (Geology)
·
Britoil plc and Kerr-McGee Corporation - geologist UK, Janice
and Gryphon, North Sea
·
Geoscientist and Exploration Manager in London, Houston and
Aberdeen
·
Founder of two successful UK Continental Shelf exploration
companies, Reach Exploration (North Sea) Limited and Reach Oil
& Gas
Jim
McKenny
·
Oklahoma University (Geology)
·
Represented UK based, Fisherman's Petroleum Company Ltd for
over 30 years
·
Represented Caithness Petroleum
·
Wide experience of United States onshore oil
basins
In addition, the Board of Reach is
well supported by numerous, experienced oilfield personnel, which
include land rights management, administration, production drilling
operations and engineering completions managers.
Union Jack is committed to working
with operators such as Reach, who demonstrate a strong commitment
to safety, environmental and social responsibility, in all aspects
of their operations.
David Bramhill, Executive Chairman of Union Jack,
commented: "In my Chairman's
Statement, contained within the Half Yearly Report, dated 11
September 2023, I indicated that the Company was actively seeking
growth opportunities in regimes with sympathetic views towards the
hydrocarbon industry, without compromising the world's
environmental objectives and the aim of a Net Zero target by
2050.
"To this end, today, we are
announcing a strategic expansion into the United States by
investments in Permian Basin focused royalties and an intended
future collaboration, with Reach, on oil and gas investment
opportunities and drilling projects in Oklahoma.
"Union Jack's existing onshore UK
conventional production, development and exploration activities
will remain our core focus for the foreseeable future. This
distinct strategy has transformed the Company in to a
self-sustainable, dividend paying, profit making entity.
"We have distributed approximately
£3,000,000 via dividend payments and share buy-backs in just 15
months, and the intent is to continue share buy-backs and dividend
payment programme as and when appropriate.
"The evolution of Union Jack,
particularly in recent years, in my opinion, has been
transformational. Almost every year growth in assets or
revenues has been delivered to shareholders. Management has
consistently focused on value creation, such as at our flagship,
Wressle development, where our interest has increased from just
8.33% to a predominant 40%, due to our acquisitive approach when
value can be seen.
"The investment climate for
international investment outside of the UK, especially within the
United States, has improved significantly, driven primarily by
streamlined asset ownership and the evolution of enabling
technologies. These factors have been instrumental in Union Jack's
decision to expand its activities in the United States.
"The acquisition of the Royalties
provides immediate cash-flow, is without CAPEX exposure and has the
scope to grow exponentially, as new wells are drilled and completed
within the prolific Permian Basin. The longevity of the Royalties
is assured as the economic life of the wells is in excess of 26
years.
"The operators associated with the
Royalties are all major producers, ranking highly in the S&P
Global (formerly Standard & Poor's), Fitch and Moody's credit
ratings.
"Reach has presented to Union Jack
numerous investment opportunities for direct participation in the
drilling of a number of wells during the course of 2024, with the
first well planned for early Q2 2024.
"These projects, once finalised,
will be funded from current cash balances without recourse to the
Capital Markets.
"I look forward to updating
shareholders on progress in respect of Union Jack's development in
the United States, that we believe, in time, will replicate our
ongoing success seen in the UK."
Miles Newman, Chairman of Reach, commented:
"We are very pleased to be working with the Union
Jack team in the USA onshore, initially advising on the purchase of
Mineral Royalties in Texas, where there remains the opportunity to
purchase quality oil rights in the Permian Basin, the fastest
growing oil basin in the world and an area in just the mid-stages
of development.
"Our team in Oklahoma City is also
working on a number of near-term drilling projects which will lead
to the expansion of our collaboration with Union Jack in the coming
weeks."
For
further information, please contact:
Union Jack Oil
plc
info@unionjackoil.com
David Bramhill
Reach Oil & Gas Company Inc
Miles
Newman
miles@reachoil-gas.com
Jim
McKenny
jmckenny@reachoil-gas.com
SP Angel Corporate Finance
LLP
+44 (0)20 3470 0470
Nominated Adviser and Joint Broker
Matthew Johnson
Richard Hail
Caroline Rowe
Kasia Brzozowska
Shore
Capital
+44 (0)20 7408 4090
Joint Broker
Toby Gibbs
Iain Sexton
Gneiss Energy
Limited
+44 (0)20 3983 9263
Financial Adviser
Joe Fitzpatrick
Paul Weidman
BlytheRay
+44 (0)20 7138 3204
Financial PR
Tim Blythe
Megan Ray