REG - Union Jack Oil PLC - Strategic Expansion into the United States

Union Jack OilAnnouncement

29/01/2024 07:00

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RNS Number : 1333B  Union Jack Oil PLC  29 January 2024

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
(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 (mailto:info@unionjackoil.com)

David Bramhill

 

Reach Oil & Gas Company Inc

Miles
Newman
miles@reachoil-gas.com (mailto:miles@reachoil-gas.com)

Jim
McKenny
jmckenny@reachoil-gas.com (mailto: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

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