Union Jack Oil plc (AIM: UJO and OTCQB: UJOGF), a UK and US-focused onshore hydrocarbon exploration and production company, has announced a positive update regarding its growing US activities. This news follows the successful drilling and completion of the Andrews 2-17 well, declared a commercial discovery.
Andrews Field Expansion: A Dual Success Story
The Andrews 1-17 well, placed on restricted production in May 2024, has produced over 6,460 barrels of high-quality, ultra-light oil and over 382,000 cubic feet of gas. The well is currently under test production to determine optimal flow rates. A recently completed gas pipeline has allowed for the sale of gas to the market, while a newly laid pipeline transports produced water to the Coker injector well. This ensures reservoir pressure is maintained in the Rogers and S&M wells, part of the Rogers Secondary Recovery project (Union Jack 45%), leading to cost savings and production optimisation.
The Andrews 2-17 well, completed in early August 2024, has also been declared a commercial discovery. The well, perforated in the Hunton formation, is free-flowing high-quality, ultra-light oil with no water present, generating over 544 barrels of oil and 1,895,000 cubic feet of gas since its restricted production commencement on 7 August. The first oil and gas are already being sold to the market.
Both Andrews wells have been connected to a local gas pipeline, with sales being made to Enerfin, a private natural gas and oil company with extensive pipeline infrastructure in Oklahoma, Texas, and Louisiana. While current production rates are variable due to high wellhead pressure, work is underway to optimize production for both wells.
Drilling and completion costs for both Andrews wells have been funded from Union Jack's existing cash resources.
Expanding Horizons: Farm-In and Drilling of the Taylor and Moccasin Wells
Union Jack has secured a 45% working interest in both the Taylor and Moccasin wells, slated for drilling during the fourth quarter of 2024. These projects represent strategic opportunities to expand Union Jack's presence and further capitalize on the potential of the Hunton formation.
The Taylor Well
The Taylor well is an untested Hunton Remnant prospect with secondary targets in the Misener and Wilcox sands. Analogous successful wells in the area indicate robust economic potential. Notably, Wilcox structures to the north and east of the Taylor well were prolific producers in the 1920s, generating thousands of barrels of oil per day. The acreage includes the Taylor Hunton Prospect, two Wilcox structures, and the Misener field with potential infill opportunities. The operator estimates a 40% geological chance of success.
Planning and back costs of US$309,000 have been paid to Reach, while drilling and completion costs are estimated to be approximately US$516,000 net. Future well costs will be based on an unpromoted 45% working interest and will be paid from existing cash resources.
The Moccasin Well
The Moccasin well is an untested 3D seismic-supported Hunton and Wilcox structure with secondary targets in Pennsylvanian Channel Sands and Base Pennsylvanian Unconformity Sand. Analogous wells indicate robust economics on success. The operator estimates a high chance of finding movable hydrocarbons in the Base Pennsylvanian and an approximate 50% chance of success in other target zones. The structure's proximity to the Woodford Shale, a major source of light oil in the region, is further encouraging.
Planning and back costs of US$256,000 have been paid to Reach, while drilling and completion costs are estimated to be US$600,000 net. Similar to the Taylor project, future well costs will be based on an unpromoted 45% working interest and will be funded from existing cash resources.
The Moccasin structure is associated with the Wilzetta fault, a strike-slip fault responsible for several large oil accumulations. This fault, active during the Ordovician to early Carboniferous periods, has created numerous dome and fault structures, leading to prolific oilfields in the region, such as the adjacent North-East Shawnee and North-West Redhill fields, which have produced over 6,000,000 barrels of oil.
Other US Projects: Wilzetta Diana-1, Rogers Secondary Recovery, and East Shawnee 3D Seismic
Union Jack is also involved in the following US projects:
Wilzetta Diana-1 Footwall Fold Drilling Project: This project, a 75% working interest for Union Jack, is slated for drilling following the completion of the Taylor and Moccasin wells. The primary target is a Footwall Fold Prospect within the Wilzetta Fault play, with a potential for over 200,000 barrels of recoverable oil.
Rogers Secondary Recovery Project: A 45% working interest project, this initiative aims to significantly increase production from legacy production wells, Rogers and S&M. The operator estimates an additional 124,000 barrels of recoverable oil.
East Shawnee 3D Seismic Acquisition Programme: This 37.5% working interest programme is designed to identify further prospects along the Wilzetta Fault. Permitting is ongoing, with seismic acquisition slated to begin in early October 2024. Prospects identified will be considered for drilling during the 2025 drilling campaign.
USA Corporate Update
Union Jack has made significant progress in building its US operations since the beginning of 2024. The company has successfully established a cash-generating hydrocarbon venture and developed a distinct North American brand, complementing its existing UK oil production and development business.
The Andrews field is already generating revenue, with payback on the initial investment expected within six months. Union Jack's mineral royalty investments, which include proxy interests in 165 wells, are generating consistent income, with a return on investment of approximately 20%.
In April 2024, Union Jack was admitted to trading on the OTCQB Venture Market in the US, under the ticker UJOGF. The dual listing on the AIM Market of the London Stock Exchange and the OTCQB is anticipated to benefit investors by providing easier access to US-based investors and increasing liquidity.
Harbor Access, a North American Investor Relations Group, was also appointed in April 2024 to increase Union Jack's visibility in the US financial markets. Lighthouse Equity Research, part of Sidoti & Company LLP, has been engaged to provide equity research coverage of Union Jack in the US.
Union Jack plans to appoint a US-based stockbroker in the remainder of 2024 to further solidify its investor base in the US.
Executive Comments
David Bramhill, Executive Chairman of Union Jack, expressed his delight at the company's initial success in the US and the progress made in partnership with Reach. He highlighted the significant hydrocarbon potential in Oklahoma and expressed excitement for the upcoming drilling of the Taylor and Moccasin wells.
Miles Newman, Chairman of Reach, echoed this sentiment, emphasizing the success of the Andrews 2-17 well and the anticipated move to the Taylor and Moccasin prospects.
Conclusion
Union Jack Oil has demonstrated a strong commitment to its US operations, establishing a robust portfolio of assets and generating initial positive results. The recent discoveries in the Andrews field and the planned drilling of the Taylor and Moccasin wells are expected to continue driving growth and expansion in the coming months. Union Jack's strategic focus on both its US and UK operations positions the company well for continued success in the onshore hydrocarbon sector.