The onshore oil and gas company, Union Jack Oil has announced a loss of £1.1m in its accounts for 2018, published today. This compares with a deficit of £0.75m in 2017.
The increased loss is mainly down to “an impairment of an intangible asset”. It follows the refusal of the environment secretary to renew the lease on the exploration site at Bury Hill Wood (also known as Holmwood) in the Surrey Hills near Dorking.
At the time of the refusal, Union Jack had a 7.5% interest in the site. The annual accounts put the cost to the company of losing the site at £205,308. In January, Europa, the operator at Bury Hill Wood, put its cost of losing the lease at £1.1m
In April, Union Jack Oil announced it was selling its 7.5% interest in PEDL 143, the licence containing the Bury Hill Wood site, to the new operator, UKOG, in exchange for £112,500 of UKOG shares.
Union Jack suffered further setbacks during 2018 as two planning applications for the Wressle oil site were turned down by North Lincolnshire Council’s planning committee.
Union Jack has a 27.5% interest in the site, having acquired a further 12.5% interest from Celtique Energy in June 2018. The £1.04m cost of the acquisition will be paid to Celtique only when Wressle is in commercial production.
In August 2018, North Lincolnshire turned down a request by Egdon, the site operator, to extend planning consent by a year. Egdon appealed against the decision, and its appeal was upheld in January 2019.
In November 2018, the planning committee refused permission for long-term oil production at Wressle. The operator has again appealed, and the decision will be made by a planning inspector, following a public inquiry in November, 2019.
Union Jack’s chairman, David Bramhill, said a successful operation at Wressle would have a”transformative economic impact” on the company, bringing it a net cash flow of $3.5 million per annum, assuming oil prices remained at current levels.
In October 2018, Union Jack acquired a 16.7% interest in PEDL 183 in East Yorkshire. This includes the West Newton-A exploration site, operated by Rathlin Energy. A second well at the site was spudded in April 2019.
In an interview today with Proactive Investors, Union Jack chairman David Bramhill described West Newton as “a big potato” for the company. He said gas reserves in the Kirkham Abbey Shoal formation were valued at a possible $300 million. There may also be recoverable oil in the deeper Cadeby Reef formation, he said.
Mr Bramhill put the probability of success for the project at 60%. He said:
“There’s always risks, there always will be. This is exploration”
In February 2019, Egdon Resources, announced it failed to encounter the oil formation it was targeting at the Biscathorpe well site in Lincolnshire.
Union Jack has a 22% interest in the licence, PEDL253. In the annual accounts, Mr Bramhill expressed continuing confidence in the site, quoting Henry Ward Beecher, a 19th century American social reformer:
“One’s best success comes after their greatest disappointments”
Mr Bramhill told Proactive Investors that seismic data would be re-processed to see if there was a possible drill target within 2km of the site.
“There’s work to be done, but it’s certainly not on the back burner. It’s on our front burner.”
Key financial details
Producing fields: Keddington (20% stake), Fiskerton Airfield (20% stake)
Gross average production from fields (OGA)
Fiskerton Airfield: 2018 19.3 barrels of oil per day (bopd); 2017 12.0 bopd
Keddington: 2018 21.9 bopd; 2017 22.3 bopd
Revenue: 2018 £165,270; 2017 £46,203
Loss for period: 2018 £1.1m (including Holmwood impairment of £205,000); 2017 £0.75m
Cash at bank: 2018 £3.1m; 2017 £1.6m
Net current assets: 2018 £6.6m; 2017 £4.4m