Union Jack Oil: Wressle-1, So far so good

Union Jack Oil (LON:UJO) is a stock I added last year and conducted a Q&A article with the Executive Chair Mr David Bramhill, since then it's been mixed fortunes with a disappointing Burton on Would Well and testing delay for the Wressle-1 discovery, however as we all know you need luck in this game and early indications show that the Wressle-1 onshore UK could be goer for Union Jack Oil (LON:UJO). As I write this piece two of the three zones of the Wressle-1 oil discovery in licence PEDL180 in Lincolnshire have been reported to date where Union Jack holds an 8.33 per cent interest in PEDL180.

As we know in this game there are no certainties and it's still early days for this well, but so far it's so good for Union Jack Oil alongside its AIM listed JV partners Europa Oil And Gas Holdings (LON:EOG) (33%) and the operator Egdon Resources (LON:EDR) (25%) as they move on to test the final zone of the tree intervals, and that being the Penistone Flags. On analysis of the preliminary petrophysical evaluation of the log data, the Penistone Flags was the largest potential zone and indicated the presence of potential hydrocarbon pay in up to 19.8 metres measured thickness (15.9 metres vertical thickness).

Testing from the bottom up the lowest zone, Ashover Grit reservoir, where an interval of 9.5 metres was perforated and following an initial "clean-up" flow, free flowing oil production rates equivalent to 80 barrels of oil per day were achieved during a 16 hour main flow period along with 47 thousand cubic feet of gas per day.

Moving on testing form the Ashover Grit reservoir, test operations have now been reported for the Wingfield Flags reservoir, where oil production rates equivalent of up to 182 barrels of oil per day of and as per the Ashover Grit reservoir good quality 39-40 API oil were achieved on free flow, along with up to 456 thousand cubic feet of gas per day within the Wingfield Flags.

Commenting on the Wingfield Flags flow test results, Mark Abbott Managing Director of Egdon Resources said;

"These are very encouraging results, with free-flowing rates of up to 182 bopd from the Wingfield Flags and 80 bopd from the Ashover Grit zone tested last week. We now look forward to flow testing the final interval the Penistone Flags which could add further substantial production potential to that achieved from the Wingfield Flags and the Ashover Grit.

We are progressing with plans for an extended well test to provide an assessment of longer term production performance under pumped conditions, to confirm commerciality and provide the data required in planning for the development of the Wressle oil and gas discovery. As previously stated the low capital and operating cost of UK onshore developments make developments such as Wressle commercially attractive even in today's lower oil price environment. We look forward to updating shareholders further following the Penistone Flags test." [ref] Update on Wressle-1 Well Testing - Results of Wingfield Flags Flow Test http://www.investegate.co.uk/union-jack-oil-plc--u... [/ref]

All in all as a shareholder holder I am very pleased with the flow rates of Wressle-1 to date and to have theses numbers of oil at surface without aid of a pump. Egdon have noted “it is already intended to undertake a longer term pumped production test to determine how best the field can be develope", which may well result in increased numbers.

I now await the results of the third zone, the Penistone Flags with interest, which will hopefully be followed by the long term pump-assisted test to prove commerciality or not. Also an important factor for me will be the cash flow for Union Jack during this extended testing period as the oil produced can be sold to market.  

Ticker code: UJO, Shares in issue: 2418.12m, Current SP: 0.225p, Market Cap: £5.44m, 52 Wk Low: 0.15p, 52 Wk High: 0.48p.

Disclosure: the author holds shares in Union Jack Oil

O&G Risk
As always, when looking at oil and gas exploration activity the risk element is high, and a dry or non-commercial well almost certainly results in a severe share price drop. Oil and gas exploration activity is also very costly business, hence the future economic outlook and the ability of companies to raise future funds also needs serious consideration, alongside factors such as oil/gas price risk, political risk etc.