REG - Union Jack Oil PLC - Final Results for the Year Ended 31 December 2022
15/05/2023 07:00
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RNS Number : 3248Z Union Jack Oil PLC 15 May 2023
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.
15 May 2023
Union Jack Oil plc
("Union Jack" or the "Company")
Final Results for the Year Ended 31 December 2022
Union Jack Oil plc (AIM: UJO), a UK focused onshore hydrocarbon production,
development and exploration company, is pleased to announce its audited
results for the year ended
31 December 2022.
Operational Highlights
• Approvals for the Wressle Field Development Plan and licences
for the production phase through to 2039 received from the North Sea
Transition Authority ("NSTA")
• Wressle is currently the second most productive conventional
producing onshore oilfield in the UK
• ERCE commissioned to review the reserve and resource potential
of the Wressle field through a new Competent Person's Report ("CPR")
• Planning for the drilling of additional wells at West Newton
approved by the East Riding of Yorkshire Council ("ERYC")
• RPS delivered a positive revised CPR on West Newton, where a
horizontal well is planned to be drilled during H2 2023
• Biscathorpe appeal heard - awaiting decision from the Planning
Inspectorate
• North Kelsey appeal hearing set for June 2023
Financial Highlights
• Maiden net profit of £3,606,624 post tax
• Oil revenues increased by 340%
• Basic earnings per share increased by over 485%
• Cash balances and near-term receivables stand in excess of
£9,750,000 as at
12 May 2023
• Debt free
• Funded for all operational, contracted and planned CAPEX costs,
including budgeted drilling activities for at least the next 12 months
• Capital Reduction granted for share buy-back programme and the
payment of a 0.8 pence Maiden Special Dividend during December 2022
• Post period end an Interim Dividend of 0.3 pence declared to be
paid July 2023
David Bramhill, Executive Chairman, commented:
"The Company will remain focused on the development of its flagship projects,
Wressle and West Newton, where the respective Operators and joint venture
partners have ambitious appraisal and development programmes planned.
"I am confident that the news-flow emanating from our balanced portfolio which
contains elements of production, development, appraisal and exploration, will
continue to attract the attention of shareholders and investors and generate
support for the Company in its pursuit of shareholder value.
"Union Jack is in sound financial health with a robust balance sheet,
continues to be free of debt and has significant cash reserves with no
requirement to raise capital for its planned operations for at least the next
12 months.
"The future of Union Jack remains bright."
For further information, please contact
Union Jack Oil plc info@unionjackoil.com
David Bramhill
SP Angel Corporate Finance LLP +44 (0)20 3470 0470
Nominated Adviser and Joint Broker
Matthew Johnson
Richard Hail
Kasia Brzozowska
Shore Capital +44 (0)20 7408 4090
Joint Broker
Toby Gibbs
Iain Sexton
In accordance with the AIM Rules - Note for Mining and Oil and Gas Companies,
the information contained within this announcement has been reviewed and
signed off by Graham Bull, Non-Executive Director, who has over 46 years of
international oil and gas industry exploration experience. This announcement
contains certain forward-looking statements that are subject to the usual risk
factors and uncertainties associated with the oil and gas exploration and
production business. While the directors believe the expectation reflected
within this announcement to be reasonable in light of the information
available up to the time of approval of this announcement, the actual outcome
may be materially different owing to factors either beyond the Company's
control or otherwise within the Company's control, for example, owing to a
change of plan or strategy. Accordingly, no reliance may be placed on the
forward-looking statements.
Evaluation of hydrocarbon volumes has been assessed in accordance with 2018
Petroleum Resources Management System (PRMS) prepared by the Oil and Gas
Reserves Committee of the Society of Petroleum Engineers (SPE) and reviewed
and jointly sponsored by the World Petroleum Council (WPC), the American
Association of Petroleum Geologists (AAPG), the Society of Petroleum
Evaluation Engineers (SPEE), the Society of Exploration Geophysicists (SEG),
the Society of Petrophysicists and Well Log Analysts (SPWLA) and the European
Association of Geoscientists & Engineers (EAGE).
CHAIRMAN'S STATEMENT
I am delighted to present to the shareholders of Union Jack Oil plc ("Union
Jack" or the "Company"), the Annual Report and Financial Statements for the
year ended 31 December 2022.
Growth and progress continued throughout 2022, mainly due to the elevated cash
flow from our flagship development Wressle, where revenues increased
significantly from £1,894,875 in 2021, to £8,507,050 in 2022, enabling Union
Jack to announce a maiden net profit of £3,606,624 post tax compared to a
loss of £853,013 in 2021.
Post Balance Sheet cash balances and near-term receivables, stand in excess of
£9,750,000 as at 12 May 2023.
The Company is funded for all G&A, OPEX and contracted or planned CAPEX
costs, including any budgeted drilling activities for at least the next 12
months, without recourse to the Capital Markets.
The material increase in cash flow during 2022, coupled with a robust oil
price and increased hydrocarbon production, allowed the Company to seek a
Capital Reduction exercise which was granted by the High Court, during August
2022, enabling the Company to distribute a Maiden Special Dividend of 0.8
pence per share during December 2022, totalling £900,527, and also introduce
a share buy-back programme, enhancing earnings per share.
In respect of a Dividend Policy, it is our intention to make payments to
shareholders as and when cash balances allow. During March 2023, the Board
declared an Interim Dividend of 0.3 pence per share, payable during July 2023
and it is the intention to continue dividend payments based on a proportion of
the free cash available subject to our project obligations being fulfilled.
I am delighted to be able to report that since the Capital Reduction was
granted in August 2022, return of capital by way of total dividends paid or
announced and share buybacks has totalled £1,117,154.
Union Jack's maiden profit, the return of capital, current record-high cash
balances and near-term receivables, all highlight the achievements of the
Company during 2022.
Oil from our flagship project, Wressle, remains free flowing with zero water
cut. Wressle continues to perform in an extremely positive way and our
expectations remain high as we believe there remains scope for material
expansion.
The GaffneyCline report, published during September 2022, suggested the
possibility of a significantly higher reserve than originally predicted for
the Ashover Grit reservoir. On current performance we find it difficult to
dismiss this theory and look forward to the technical and commercial
assessment by ERCE, who have recently been commissioned to review the reserve
and resource potential of the Wressle field through a new CPR. The results of
this report are expected during June 2023.
Positive results from independent laboratories and consultants during 2022 and
from the data driven information received from the West Newton discoveries
expand our confidence in the success of the horizontal well currently planned
to be drilled during H2 2023.
Additional information on our leading projects at Wressle and West Newton, and
overviews on Biscathorpe, Keddington and North Kelsey can be found later
within this statement.
The results for 2022 are highly positive with the Company being in a strong
financial position and a balanced work programme of potentially further
transformational development and drilling to look forward to.
Further information can be found on our website www.unionjackoil.com,
presenting detailed technical information on our projects, designed to inform
shareholders and attract new investors to the Company. In addition, Union Jack
hosts an active twitter account @unionjackoilplc.
WRESSLE DEVELOPMENT PEDL180 AND PEDL182 (40%)
Wressle is located in Lincolnshire, on the western margin of the Humber Basin.
The Wressle-1 ("Wressle") discovery was defined on proprietary 3D seismic
data. The structure is on trend with the producing Crosby Warren oilfield and
the Broughton oil discovery, both to the immediate northwest and the Brigg-1
discovery to the southeast. These wells all contain hydrocarbons in several
different sandstone reservoirs within the Upper Carboniferous succession.
Since the proppant squeeze and coiled tubing operations conducted during
August 2021, Wressle has established itself as Union Jack's flagship project
with production rates far exceeding original expectations.
Wressle continues to produce oil under natural flow and associated gas at high
rates with zero water cut from the Ashover Grit reservoir. To date, over
400,000 barrels of high-quality oil have been produced and sold from Wressle.
During the past 12 months, a programme of improvements and upgrades to Wressle
site facilities has been successfully carried out. The implementation of a
two-stage gas utilisation scheme is being progressed which will enable the oil
production to be increased.
The Ashover Grit gas is being utilised for electricity generation on-site and
will be exported at a later date. The diesel generator has been replaced by
three gas microturbines which were installed and commissioned during early
2023. The second phase of the programme will see the installation of a
separate gas engine to generate and export approximately 1.4 MW of electricity
into a local private power network. A later stage of the gas monetisation will
focus on gas export from the undeveloped reservoirs that hold significant
contingent hydrocarbon resources and are awaiting production in due course.
The performance of the Ashover Grit reservoir during 2022 has been nothing
short of exceptional. During September 2022, the Company published the results
of a report, commissioned by Union Jack and compiled by GaffneyCline, in
respect of the potential upside at Wressle which provided commentary on the
reserve and resource volumes.
The highlights of this report are as follows:
• Ashover Grit Speculative Deeper Oil-Water Contact assessment
indicates a potentially significant increased estimate of STOIIP ("Stock Tank
Oil Initially in Place") of 10.12 million barrels of oil ("mmbbl") and a
recoverable resource of 2.43 mmbbl
• The Wressle-1 well also indicated additional hydrocarbon potential
within the Santon Sandstone, where GaffneyCline has estimated a Contingent
Resource being present
During the second half of 2022, the Operator re-processed the 3D seismic data
over the field. This data has been interpreted and mapped with the objective
of identifying reservoir targets for drilling an additional well/wells at the
earliest opportunity, subject to receipt of regulatory approvals.
A new CPR, considering all oil and gas bearing horizons has been commissioned,
incorporating the new field interpretation and production performance data.
The results of this report are expected during June 2023.
The management of Union Jack believes that the Company holds a material
interest in a project that will continue to deliver significant revenues for
at least the next decade and more.
WEST NEWTON APPRAISAL PEDL183 (16.665%)
PEDL183 is located in the East Riding of Yorkshire, north of the River Humber,
encompassing the town of Beverley, East Yorkshire. The licence area is within
the western sector of the Southern Zechstein Basin.
Union Jack entered into a farm-in during 2018 with Rathlin Energy (UK) Limited
("Rathlin") the Operator, and since that time the West Newton A-2 ("WNA-2")
and West Newton B -1Z ("WNB-1Z") drilling programmes have yielded substantial
hydrocarbon discoveries within the Kirkham Abbey formation.
Throughout 2022, data collected during drilling operations and well testing,
which included core, oil and gas samples, wireline log and well test records
were analysed by independent laboratories CoreLab, Applied Petroleum
Technology ("APT") and RPS Group Limited ("RPS"). The results of these
analyses, in conjunction with internal evaluations, have been invaluable in
informing the upcoming programme of work and future drilling plans.
The laboratory reports confirm that the hydrocarbon-bearing Kirkham Abbey
reservoir is extremely sensitive to aqueous fluids and that previous drilling
of the West Newton wells with water-based mud had created near well-bore
damage through the creation of very fine rock fragments, affecting the natural
porosity and permeability of the formation which had a detrimental effect on
its ability to flow. Further analyses have determined that the use of dilute
water-based acids during well testing would have also affected the flow
characteristics of the Kirkham Abbey reservoir.
These tests indicate that by drilling the Kirkham Abbey reservoir with an
oil-based drilling fluid, damage to the oil and gas reservoir should be
minimised.
The Operator, Rathlin Energy, has made applications to the Environment Agency
("EA") for use of oil-based drilling fluids within the hydrocarbon bearing
Permian section for both the West Newton A and B sites.
Analyses by APT of numerous oil and gas samples recovered from the West Newton
wells during testing, along with evaluation of mud gases measured during
drilling utilising a proprietary software package, indicates that the Kirkham
Abbey reservoir is predominantly gas (primarily methane 90% plus ethane 5%)
with associated light condensate.
RPS has modelled wells extending up to 1,500 metres horizontally through the
Kirkham Abbey reservoir. These wells have a much greater likelihood of
encountering significant sections of the naturally fractured reservoir,
enhancing its productive capability.
In preparation for a decision on the potential development of the West Newton
discoveries, the Operator submitted revised planning applications for the
development of West Newton to the ERYC. This was approved by the ERYC Planning
Committee by a vote of ten to one during March 2022.
A revised CPR was compiled by RPS during 2022, evaluating the resources of
PEDL183 as of 30 June 2022, ("Effective Date").
The results of the CPR were very encouraging, highlighting:
• Kirkham Abbey Best Case Gross Unrisked Contingent Technically
Recoverable Sales Gas is estimated to be 197.6 billion cubic feet ("bcf")
• Geological Chance of Success of Kirkham Abbey horizontal well
estimated to be 85.5%
• Gross NPV10 risked value of Kirkham Abbey Contingent Gas Resource as
at Effective Date of US$396.1 million post tax
• Substantial additional Prospective Resource figures for Ellerby,
Spring Hill and Withernsea prospects
In the preparation of the CPR, RPS adopted the Petroleum Resource Management
System ("PRMS") standard.
WEST NEWTON GROSS UNRISKED TECHNICALLY RECOVERABLE SALES
Category Gross Technically Recoverable
Gas Liquids
(bcf)
(mbbl)
1C 99.7 299.4
2C 197.6 593.0
3C 393.0 1,178.9
Note: Net data for Union Jack can be calculated by applying its 16.665%
economic interest to the above gross data.
WEST NEWTON GEOLOGICAL CHANCE OF SUCCESS
Asset Source Rock Charge Migration Reservoir Trap Seal Geological COS
West Newton 1.00 1.00 1.00 0.90 0.95 1.00 0.855
A future West Newton development will benefit from being located in an area
that provides access to substantial regional infrastructure and could deliver
significant volumes of onshore low-carbon sales gas into the UK's energy
market.
Domestically produced natural gas is, and will remain, a much-needed part of
the energy mix as the UK seeks to reduce its reliance on imported products.
Union Jack looks forward to the drilling of a 1,500 metre horizontal well at
the earliest opportunity and unlocking the significant potential of the
Greater West Newton project.
KEDDINGTON PEDL005(R) (55%)
The producing Keddington oilfield is located along the highly prospective East
Barkwith Ridge, an east-west structural high on the southern margin of the
Humber Basin.
A technical review by the Operator has confirmed that there remains an
undrained oil resource located on the eastern side of the Keddington field.
Planning consent for further drilling is already in place, presenting an
opportunity to increase production via a development side-track from one of
the existing wells.
To facilitate confirmation of the target definition and well design planning,
re-processing of legacy 3D seismic data has been completed.
Modelling indicates that infill drilling is forecast to improve recovery from
the Keddington field by between 113,000 to 183,000 barrels of oil, depending
on the reservoir permeability model selected and the combination of infill
targets.
Subject to finalising the sub-surface location, it is planned to drill the
well, where planning is already granted, in late 2023.
BISCATHORPE PEDL253 (45%)
PEDL 253 is situated within the proven hydrocarbon fairway of the South Humber
Basin and is on-trend with the Keddington oilfield and the Saltfleetby
gasfield.
While drilling the Biscathorpe-2 well, there were hydrocarbon shows, elevated
gas readings and sample fluorescence observed over the entire interval from
the top of the Dinantian to the Total Depth of the well, with 68 metres being
interpreted as being oil-bearing.
Independent consultants APT also conducted analyses, confirming a hydrocarbon
column of 33-34 API gravity oil, comparable with the oil produced at the
nearby Keddington oilfield.
Further evaluation of the results of the Biscathorpe-2 well, together with the
reprocessing of 264 square kilometres of 3D seismic, indicate a material and
potentially commercial viable hydrocarbon resource remaining to be appraised.
Subject to a favourable planning appeal decision a side-track well is planned,
targeting the Dinantian Carbonate where the Operator has assessed, in
accordance with the PRMS Standard, a gross Mean Prospective Resource of 2.55
mmbbl. The overlying Basal Westphalian Sandstone has the potential to add
gross Mean Prospective Resources of 3.95 mmbbl. Economic modelling
demonstrates that the Westphalian target is economically robust, especially in
the current oil price environment. Commercial screening indicates break-even
full cycle economics to be US$18.07 per barrel.
During November 2021, a planning application for a side-track drilling
operation, associated testing and long-term production was refused by the
Lincolnshire County Council Planning Committee, despite being recommended for
approval by the planning officers.
The Joint Venture partners are awaiting a decision from the Planning
Inspectorate, where an appeal was heard in October 2022.
Union Jack's technical team believe that Biscathorpe remains one of the
largest unappraised conventional onshore discoveries within the UK.
PEDL241 NORTH KELSEY (50%)
North Kelsey is a conventional oil exploration prospect on trend with, and
analogous to, the Wressle oilfield which lies approximately 15 kilometres to
the northwest. The prospect has been mapped from 3-D seismic data and has the
potential for oil in four stacked Upper Carboniferous reservoir targets.
The Operator estimates that gross Prospective Resources range from 4.66 to
8.47 mmbbl.
During August 2022, the Operator submitted an appeal on behalf of the Joint
Venture, against the refusal of an extension of time to the existing planning
permission by Lincolnshire County Council to enable the drilling and testing
of a conventional exploration well at the North Kelsey site.
An Inspector has been appointed and the Joint Venture has been informed the
appeal will be conducted as a two day hearing in mid-June 2023, the result of
which, is expected within a few months.
OTHER LICENCE INTERESTS
Union Jack has interests in a number of other non-core projects, namely
PEDL118 (Dukes Wood), PEDL203 (Kirklington), PEDL201 (Widmerpool Gulf),
PEDL181 (Humber Basin) and PEDL209 (Laughton).
These licence interests have all been fully impaired and are at various stages
of relinquishment with the exception of Dukes Wood and Kirklington where the
geothermal upside potential is being investigated.
Fiskerton Airfield (EXL294) is currently shut-in whilst awaiting a workover
programme to reinstate production. Longer term potential for the site is to
manage produced water through the existing water injection well on site and
also for potential geothermal repurposing.
The Company has decided to fully impair the value of Fiskerton Airfield at a
cost of £416,606. This decision was made as production was not covering costs
and substantial work and capital expenditure was required on the existing
production equipment.
PIPER CLAYMORE COMPLEX ROYALTY UNITS (2.5%)
During May 2023, the Management negotiated price and terms of condition for
the sale of the Company's 2.5% interest in the Claymore Area Royalty
Agreement. The Company has subsequently disposed of this asset with full
payment received.
This transaction is a post period end event.
CORPORATE AND FINANCIAL
The 12 month period under review has seen the Company become a cash generating
and profitable entity, with a strong balance sheet and a clear focus on the
development of its flagship assets.
Union Jack remains debt free and has cash balances and near-term receivables
in excess of £9,750,000 as at 12 May 2023. We are funded for all operational,
CAPEX and drilling costs for at least the next 12 months.
Revenues from oil sales of £8,507,050 (2021: £1,894,875) reported for the
period have had a material effect on the Income Statement, resulting in the
Company being able to report a maiden net profit of £3,606,624 (2021: loss
£853,013).
Basic Earnings per share of 3.20 pence were reported versus a loss per share
of (0.83 pence) in 2021.
Given the strong and improved cash position of the Company during 2022, a
decision was made by the Board to undertake a Capital Reduction exercise to
enable the payment of a cash dividend and activate a share buy-back programme.
During August 2022, the High Court granted the Capital Reduction. A maiden
Special Dividend of 0.8 pence per share was made to shareholders during
December 2022. Post period end, during March 2023, the Company announced an
Interim Dividend of 0.3 pence per share to be paid during July 2023.
The Company also commenced a share buy-back programme in October 2022, which
has continued during 2023. Post period end, as at 12 May 2023, a total of
3,050,000 shares have been bought and are held in Treasury. Shares held in
Treasury, increase the Earnings Per Share, hold no voting rights and are not
entitled to a dividend payment.
I would be remiss not to mention the Energy Profits Levy of 25% introduced in
May 2022 by the Chancellor and subsequent increase to 35% in 2023. Union Jack
has a development and drilling programme planned for the remainder of 2023 and
beyond. The tax breaks available for future investment in our projects
provides an effective cushion to help mitigate this unfair and punitive tax on
smaller energy companies.
I take this opportunity to thank our shareholders for their continued support,
as well as my co-directors and advisers, all who continue to support the
development and growth of the Company.
OUTLOOK
My confidence at the close of 2022 has been vindicated by the Company's
excellent 2022 financial results, confirming its transformation, both
financially and operationally.
The Board is of the opinion that within the Wressle development there remains
significant material upside which will support the Company with revenues for
at least another decade.
I also look forward to the drilling of a horizontal well at West Newton.
Independent technical analyses have concluded that using extended horizontal
development wells and oil-based muds should maximise hydrocarbon productivity.
Encouragingly, the results from West Newton to date, signal a potentially
highly valuable onshore project with resources comparable to those usually
reported offshore. A significant onshore domestic gas resource as indicated at
West Newton has the potential to become an important transition fuel in
helping the UK achieve its 2050 Net Zero targets.
The Company will remain focused on the development of its flagship projects,
Wressle and West Newton, where the respective Operators and joint venture
partners have ambitious appraisal and development programmes planned.
I am confident that the news-flow emanating from our balanced portfolio which
contains elements of production, development, appraisal and exploration, will
continue to attract the attention of shareholders and investors and generate
support for the Company in its pursuit of shareholder value.
In closing, Union Jack is in sound financial health with a robust balance
sheet, continues to be free of debt, has significant cash reserves with no
requirement to raise capital for its planned operations for the foreseeable
future.
The future of Union Jack remains bright.
David Bramhill
Executive Chairman
12 May 2023
STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2022
BUSINESS REVIEW
Union Jack Oil plc is a UK registered company, focused on the exploration and
future development of the hydrocarbon project interests held by the Company.
A review of the Company's operations during the year ended 31 December 2022
and subsequent to the date of this report is contained in the Chairman's
Statement and this Strategic Report.
The profits for the year amounted to £3,606,624 (2021: loss £853,013).
The profit for the year includes impairments to Property, Plant and Equipment
of which total costs are £478,584 (2021: £156,995). These impairments are in
relation to PEDL118, £33,718 (2021: £67,598), PEDL203, £28,260 (2021:
£83,057) and EXL294, £416.606 (2021: £nil).
The profit for the year includes impairments to Intangible Assets of which
total costs are
-£3,028 (2021: £6,340). These impairments are in relation to a reverse
impairment to PEDL181, -£5,306 and an impairment to PEDL201, £2,278.
Administrative expenses, excluding impairment costs, amounted to £1,665,174
(2021: £1,740,962). This decrease is largely due to lower share based costs
for share options.
Cash and cash equivalents at year end amounted to £7,155,100 (2021:
£5,977,541).
Total oil revenue contributing assets at year end amounted to £26,361,337
(2021: £24,472,708).
Non-current assets at year end amounted to £17,157,286 (2021: £16,392,416).
Intangible Assets totalled £9,134,006 (2021: £8,525,373).
Tangible Assets totalled £5,666,212 (2021: £7,575,525).
Of the assets figures above, the net effect is an increase overall consisting
of an increase to Intangible Assets of £608,633 from investment in projects;
Investments of £260,525, from a revaluation of shares held; Other
Receivables, being the deferred tax asset of £1,805,005; and Current Assets
of £1,123,759 being due to increased oil revenues. There has also been a
decrease in Tangible Assets of £1,909,313 largely through the calculated
depreciation of the producing assets.
The Company's Income Statement reports revenue of £8,507,050 (2021:
£1,894,875) in respect of production income from Wressle, Keddington oilfield
and the Fiskerton Airfield oilfield.
The directors have recommended a payment of an interim dividend of 0.3 pence,
payable during July 2023.
In January 2022, the Company announced a summary of the results of an analysis
of the bottom hole pressure data acquired from the Wressle-1 well during
December 2021. The interpretation was completed by ERCE, an independent energy
consultancy, on behalf of
the Wressle Joint Venture partners. Results demonstrated the significant
potential of the Wressle-1 well and the production rates that could be
achieved once the surface facilities are optimised and a gas monetisation
scheme is in place.
During January 2022, the Company announced the intention of the Operator of
PEDL253, Biscathorpe, to appeal against the refusal of planning permission by
Lincolnshire County Council, for a side track drilling operation, associated
testing and long-term oil production. This appeal was heard during October
2022 by the Planning Inspectorate, the result of which is expected during
2023.
During March 2022, planning for the extension for PEDL241, North Kelsey, was
refused by the Lincolnshire County Council. The Joint Venture Partners have
lodged an appeal to be heard by the Planning Inspectorate.
During March 2022, planning for the drilling of additional wells and
production at West Newton A site was approved by the East Riding of Yorkshire
Council. Separately, permission was granted for a time extension to allow
further exploratory drilling at West Newton B site.
During March 2022, settlement of £2,083,333 for the consideration payment of
a 25% interest in PEDL180 and PEDL182 was made to Calmar LLP.
In July 2022, 150,000 new ordinary shares were issued for cash at a price of
22 pence per ordinary share, raising £33,000 before expenses of nil, by way
of exercising options.
The enlarged issued share capital following the issue of the new ordinary
shares described above is 112,865,896 ordinary shares of 5 pence each and
831,680,400 deferred shares of 0.225 pence each.
The approval of a Capital Reduction exercise in August 2022, was granted by
the High Court of Justice. The Capital Reduction created additional reserves
to the value of £21,553,557 providing flexibility to deliver shareholder
returns in the form of dividends and/or share buy-backs.
During December 2022, a maiden dividend of 0.8 pence per ordinary share was
paid to qualifying shareholders (2021: £nil).
FUTURE DEVELOPMENTS
The directors intend to continue with the Company's stated strategy, reviewing
the licence interests held in respect of future viability, any potential
impairment indicators that may arise during the year and adjusting immediately
to any changes that may be required in the operation of the licence interests
held.
The Company holds a number of key, quality project interests, namely, Wressle,
West Newton, Biscathorpe, Keddington and North Kelsey, where development,
appraisal and exploration plans are in place for the future benefit of
stakeholders and the Company.
KEY PERFORMANCE INDICATORS
In the past, reporting traditional Key Performance Indicators (KPIs) were
deemed inappropriate for the Company. Performance was measured by monitoring
exploration costs and ensuring sufficient funds were available to meet project
commitments.
These Financial Statements for the year end 31 December 2022, show a full
year's production from Wressle and focus has now changed showing traditional
KPIs and not E&E expenditure.
The Board are extremely pleased with the business performance of the Company
and note the significant positive financial figures reported within the KPI
table.
These figures have been enhanced by a material increase in production at
Wressle and firm oil prices.
During the year, the Company has also achieved profitability, paid a maiden
dividend and commenced a share buy-back programme with a view to increasing
earnings per share.
Further events which took place after the Balance Sheet date are described in
note 7.
Key Performance Indicators For the Year Ending For the Year Ending
31 December 2022
31 December 2021
£
£
Revenues 8,507,050 1,894,875
Total Comprehensive Income/(Loss) 3,777,124 (798,593)
Cash and cash equivalents 7,155,100 5,977,541
Net Current Assets 8,425,761 5,689,689
Total Equity 23,005,231 20,205,347
INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2022
Notes 31.12.22 31.12.21
£
£
Revenue 8,507,050 1,894,875
Cost of sales - operating costs (1,143,967) (377,153)
Cost of sales - depreciation (2,125,425) (735,160)
Cost of sales - Net Profit Interest payment (137,179) -
Gross profit 5,100,479 782,562
Administrative expenses (excluding impairment charge) (1,665,174) (1,740,962)
Impairment (475,556) (156,995)
Total administrative expenses (2,140,730) (1,897,957)
Operating profit / (loss) 2,959,749 (1,115,395)
Finance income 86,586 112,611
Royalty income 42,444 149,771
Profit / (loss) before taxation 3,088,779 (853,013)
Taxation 517,845 -
Profit / (loss) for the financial year 3,606,624 (853,013)
Attributable to: 3,606,624 (853,013)
Equity shareholders of the Company
Earnings / (loss) per share 2 - -
3.20 (0.83)
Basic (pence)
Diluted (pence) 2 3.16 (0.83)
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
31.12.22 31.12.21
£
£
Profit / (loss) for the financial year 3,606,624 (853,013)
Items which will not be reclassified subsequently
to profit or loss
Other comprehensive profit 170,500 54,420
Profit on investment revaluation
Total comprehensive profit / (loss) for the financial year 3,777,124 (798,593)
BALANCE SHEET
AS AT 31 DECEMBER 2022
Notes 31.12.22 31.12.21
£
£
Assets 9,134,006 8,525,373
Non-current assets
4
Exploration and evaluation assets
Property, plant and equipment 5 5,666,212 7,575,525
Investments 552,043 291,518
Deferred tax asset 1,805,025 -
17,157,286 16,392,416
Current assets
Inventories 28,038 8,829
Loan receivables - 1,028,110
Trade and other receivables 2,020,913 1,065,812
Cash and cash equivalents 7,155,100 5,977,541
9,204,051 8,080,292
Total assets 26,361,337 24,472,708
Liabilities
Current liabilities
Trade and other payables 778,290 2,390,603
Non-current Liabilities 1,700,069 1,876,758
Provisions
Deferred tax liability 877,747 -
2,577,816 1,876,758
Total liabilities 3,356,106 4,267,361
Net assets 23,005,231 20,205,347
Capital and reserves attributable to the Company's equity shareholders
Share capital 6 7,514,576 7,507,076
Share premium - 21,528,077
Share-based payments reserve 712,634 638,586
Treasury reserve (214,227) -
Accumulated profit / (deficit) 14,992,248 (9,468,392)
Total equity 23,005,231 20,205,347
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
Share Share Share-based payment Treasury Accumulated Total
capital
premium
reserve
reserve
(deficit) /
£
£
£
£
£
retained earnings
£
Balance at 1 January 2022 7,507,076 21,528,077 638,586 - (9,468,392) 20,205,347
Profit for the financial year - - - - 3,606,624 3,606,624
Other comprehensive profit - - - - 170,500 170,500
Total comprehensive profit - - - - 3,777,124 3,777,124
for the year
Contributions by and
distributions to owners
Exercise of share options
7,500 25,500 (19,368) - 19,368 33,000
Capital reduction - (21,553,577) - - 21,553,577 -
Dividends - - - - (900,527) (900,527)
Expiry of warrants - - (11,098) - 11,098 -
Treasury Share - - - (214,227) - (214,227)
Share-based payments - - 104,514 - - 104,514
Total contributions by and 7,500 (21,528,077) 74,048 (214,227) 20,683,516 (977,240)
distributions to owners
Balance at 31 December 2022 7,514,576 - 712,634 (214,227) 14,992,248 23,005,231
Balance at 1 January 2021 6,825,258 19,522,379 411,467 - (8,669,799) 18,089,305
Loss for the financial year - - - - (853,013) (853,013)
Other comprehensive profit - - - - 54,420 54,420
Total comprehensive loss - - - - (798,593) (798,593)
for the year
Contributions by and
distributions to owners
Issue of share capital 681,818 2,318,182 - - - 3,000,000
Share issue costs - (312,484) - - - (312,484)
Share-based payments - - 227,119 - - 227,119
Total contributions by and distributions to owners 681,818 2,005,698 227,119 - (798,593) 2,116,042
Balance at 31 December 2021 7,507,076 21,528,077 638,586 - (9,468,392) 20,205,347
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
31.12.22 31.12.21
£
£
Cash flow from operating activities 5,811,734 (646,726)
Cash flow from investing activities (712,935) (2,277,224)
Purchase of intangible assets
Purchase of property, plant and equipment (2,852,254) (1,022,055)
Fixed term deposit (1,000,000) -
Loan advanced (1,000,000) -
Loan repaid 2,000,000 -
Purchase of Investments (100,000) (100,000)
Sale of investments 6,772 -
Interest received 105,996 67,016
Net cash used in investing activities (3,552,421) (3,332,263)
Cash flow from financing activities 33,000 3,000,000
Proceeds on issue of new shares
Cost of issuing new shares - (312,484)
Dividends paid (900,527) -
Treasury shares (214,227) -
Net cash (used in) / generated from financing activities (1,081,754) 2,687,516
Net increase / (decrease) in cash and cash equivalents 1,177,559 (1,291,473)
Cash and cash equivalents at beginning of financial year 5,977,541 7,269,014
Cash and cash equivalents at end of financial year 7,155,100 5,977,541
Notes to the Financial Statements
for the year ended 31 December 2022
1 ACCOUNTING POLICIES
Basis of Preparation
This financial information does not constitute full statutory financial
statements but is derived from accounts for the year ended 31 December 2022
which are audited. This announcement is prepared on the same basis as set out
in the statutory financial statements for the year ended 31 December 2022.
While the financial information included in this announcement has been
prepared in accordance with the recognition and measurement criteria of UK
adopted international accounting standards (IFRS), this announcement does not
in itself contain sufficient information to comply with IFRS.
The Auditor's Report for the year ended 31 December 2022 was unqualified.
The full Annual Report along with a Notice of Annual General Meeting ("AGM")
will be distributed to shareholders on, or around, 23 May 2023 and now be
available on the Company's website www.unionjackoil.com
(http://www.unionjackoil.com) .
Going Concern
The Company's business activities, together with the factors likely to affect
its future development, performance and position are set out in the Chairman's
Statement and the Strategic Report. The directors' forecasts demonstrate that
the Company will meet its day-to-day working capital and share of estimated
drilling costs over the forecast period being at least 12 months from the
sign-off of these financial statements.
There are a number of risks to the Company's working capital position, which
have been identified by the directors and its independent advisor, OGA,
namely: (i) timing of incurred costs; (iii) scope of work programmes
undertaken; and (iii) realised oil price.
The impact of those risks on the Company's working capital position has been
assessed under a range of differing scenarios, with the most adverse, given
the current operating environment and stage of development that the Company's
assets are at, being identified as being the basis for evaluating the impact
for the Going Concern assessment using the worst case "stress test."
The Company has sufficient funding to meet planned expenditures and a level of
contingency. Taking account of the risks, the stress test shows that the
Company is able to operate within the level of funds currently held at the
date of approval of these financial statements.
The directors have a reasonable expectation that the Company has adequate
resources to continue in operational existence for the foreseeable future.
Thus, they continue to adopt the going concern basis of accounting in
preparing the financial statements.
2 EARNINGS Per Share
The Company has issued warrants and options over ordinary shares which could
potentially dilute the basic earnings per share in the future.
Basic earnings per share is calculated by dividing the profit attributable to
ordinary shareholders by the weighted average number of ordinary shares
outstanding during the year.
At 31 December 2022, the Company had no warrants in issue (2021: 30,373) and
3,050,000 (2021: 3,200,000)
options in issue.
These warrants and options have been taken into account when calculating the
diluted earnings per share.
Earnings per share 2022 2021
Pence
Pence
Profit / (loss) per share from continuing operations 3.20 (0.83)
- Basic
- Diluted 3.16 (0.83)
The profit / (loss) and weighted average number of ordinary shares used in the
calculation of profit/(loss) per share are as follows:
2022 2021
£
£
Profit/ (loss) used in the calculation of total basic and diluted profit / 3,606,624 (853,013)
(loss
per share
Number of shares 2022 2021
Weighted average number of ordinary shares for the purposes of basic 112,706,307 102,628,722
and diluted profit / (loss) per share
- Basic
- Diluted 114,132,334 102,628,722
The Company has 831,680,400 (2021: 831,680,400) deferred shares. These have
not been included within the calculations of basic shares above on the basis
that IAS 33 defines an ordinary share as an equity instrument that is
subordinate to all other classes of equity instruments. Any residual interest
in the assets of the Company would not currently, on liquidation, go to the
deferred shareholders, hence they are not currently considered subordinate.
These deferred shares have not been taken into account when calculating the
diluted loss per share as their impact was anti-dilutive.
The Company issued 150,000 new ordinary shares during the year (2021:
13,636,364).
3 RECONCILIATION OF Profit / LOSS TO CASH GENERATED FROM OPERATIONS
31.12.22 31.12.21
£
£
Profit for the year 3,606,624 (853,013)
Depletion of producing assets 2,125,425 735,160
Impairment of intangibles 475,556 156,995
Share-based payments 104,514 227,119
Amortisation / depreciation 20,248 -
Loss on disposal of shares 3,203 -
Finance income (86,586) (112,611)
Royalty income (42,444) (149,771)
6,206,540 3,879
(Increase) in inventories (19,209) (8,829)
(Increase) in trade and other receivables (1,708,982) (550,868)
Increase / (decrease) in trade and other payables 1,333,385 (90,908)
Cash generated from / (used in) operations 5,811,734 (646,726)
Income taxes paid - -
Net cash flows from operating activities 5,811,734 (646,726)
4 INTANGIBLE assets
31.12.22 31.12.22 31.12.22 31.12.21
Exploration and evaluation
Royalty
Total
Total
£
£
£
£
Cost
At 1 January 8,450,460 93,610 8,544,070 6,134,717
Transfer to development and production assets - - - (18,092)
Costs incurred in the year 616,106 - 616,106 2,427,445
At 31 December 9,066,566 93,610 9,160,176 8,544,070
Depreciation and impairment
At 1 January 6,340 12,357 18,697 -
Amortisation charge for the year - 10,501 10,501 12,357
Costs impaired (3,028) - (3,028) 6,340
At 31 December 3,312 22,858 26,170 18,697
Net book value
At 31 December 9,063,254 70,752 9,134,006 8,525,373
At 1 January 8,444,120 81,253 8,525,373 6,134,717
Additions to exploration and evaluation costs represent exploration and
appraisal costs incurred in the year in respect of unproven properties and
provisions recognised for decommissioning and restoration liabilities.
The directors have reviewed whether there were any potential indicators for
impairment evidence for each of the assets. If an indicator was identified,
the directors considered the potential value of the projects and licences. The
directors have also considered the likely opportunities for realising the
value of licences and have concluded that the likely value of each exploration
area is individually in excess of its carrying amount. There was a reverse
impairment for 2022 of £5,306 with regard to PEDL181 (2021: £6,340), and an
impairment of £2,278 with regard to PEDL201 (2021: £2,136).
Included in the above intangible asset additions during the year are amounts
arising in relation to changes in decommissioning and restoration provisions.
Intangible assets (less any impairment) comprise amounts capitalised as
follows:
31.12.22 31.12.21
£
£
West Newton PEDL183 5,689,647 5,184,442
Biscathorpe PEDL253 3,045,506 2,992,694
North Kelsey PEDL241 328,101 266,984
Royalty 70,752 81,253
9,134,006 8,525,373
5 PROPERTY, PLANT AND EQUIPMENT
31.12.22 31.12.22 31.12.22 31.12.21
Development and production
Equipment
Total
Total
£
£
£
£
Cost
At 1 January 8,707,703 - 8,707,703 6,698,650
Transfer from exploration and evaluation assets - - - 18,092
Additions 587,904 116,539 704,443 1,990,961
At 31 December 9,295,607 116,539 9,412,146 8,707,703
Depreciation and impairment
At 1 January 1,132,178 - 1,132,178 246,363
Depreciation charge for the year 2,125,425 9,747 2,135,172 735,160
Costs impaired 478,584 - 478,584 150,655
At 31 December 3,736,187 9,747 3,745,934 1,132,178
Net book value
At 31 December 5,559,420 106,792 5,666,212 7,575,525
At 1 January 7,575,525 - 7,575,525 6,452,287
Development and Production assets comprise amounts capitalised as follows:
31.12.22 31.12.21
£
£
Wressle PEDL180/182 4,695,402 6,176,515
Fiskerton Airfield EXL294 - 373,582
Keddington PEDL005(R) 864,018 1,025,428
5,559,420 7,575,525
The Board has assessed the Development and Production assets as at 31 December
2022 and has identified indicators of impairment as set out in IAS36
Impairment of assets in respect of PEDL118 Dukes Wood, PEDL203 Kirklington and
EXL294 Fiskerton Airfield, respectively. This impairment amounts to a total of
£478,584 (2021: £150,655). The total impairment charge for these assets was
PEDL118, £33,718 (2021: £67,598), PEDL203, £28,260 (2021: £83,057) and
EXL294 £416,606 (2021: £nil).
There were no indicators for impairment on any other assets.
6 SHARE CAPITAL
Allotted and issued: Class Nominal 31.12.22 31.12.21
Number
value
£
£
112,865,896 Ordinary 5p 5,643,295 5,635,795
(31 December 2021: 112,715,896)
831,680,400 Deferred 0.225p 1,871,281 1,871,281
(31 December 2021: 831,680,400)
Total 7,514,576 7,507,076
Ordinary shares hold voting rights and are entitled to any distributions made
on winding up. Deferred shares do not hold voting rights and are not entitled
to distributions made on winding up.
Allotments during the year
In July 2022, 150,000 new ordinary shares were issued for cash at 22 pence per
share, raising approximately £33,000 by way of exercised options by Raymond
Godson, non-executive director.
7 EVENTS AFTER THE BALANCE SHEET DATE
The following events have taken place after the year end:
During March 2023, the Board declared an interim dividend of 0.3 pence per
ordinary share, with a London Stock Exchange ex-dividend date of Thursday 6
July 2023, a record date of Friday 7 July 2023 and payment date of Friday 28
July 2023.
The share buy-back programme has continued and since 1 January 2023 to 12 May
2023 a total of 2,350,000 ordinary shares were purchased and placed in
Treasury. The number of ordinary shares held in Treasury as at
12 May 2023, is 3,050,000.
During May 2023, the Management negotiated price and terms of condition for
the sale of the Company's 2.5% interest in the Claymore Area Royalty
Agreement. The Company has subsequently disposed of this asset with full
payment received.
8 COPIES OF THE ANNUAL REPORT AND FINANCIAL STATEMENTS
The 2022 Annual Report and Financial Statements will be posted to shareholders
on, or around, 23 May 2023 and are now available on the Company's website
www.unionjackoil.com (https://www.unionjackoil.com/) .
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