Industry

Union Jack plans to pull out of licences where falling value pushes up annual loss

2019 Union Jack licences

The exploration and production company, Union Jack Oil, is planning to withdraw from three licences in 2020 because of falls in their value.

In annual accounts published today, the company declared a loss for 2019 of £1.692m, up from just over £1m in the year before.

The accounts show the loss included increased impairments, or falling recoverable value, of three licences in the East Midlands and North Lincolnshire

Union Jack recorded an impairment of £375,892 for PEDL201, formerly known as Burton-on-the Wolds, now Widmerpool Gulf. Union Jack has a 26.25% stake in the licence on the Leicestershire-Nottinghamshire border. The licence operator, Egdon Resources, drilled the Burton-on-the-Wolds well here in 2014 only to announce less than a fortnight later that the formation was water-bearing and the well was being plugged.

The accounts also recorded impairments of £15,041 for PEDL181, the Humber Basin licence, in North Lincolnshire. Europa drilled the Kiln Lane-1 well in 2015 but found it was water-wet and plugged and abandoned without further drilling.

A further impairment of £2,763 was listed against PEDL209, also in North Lincolnshire. Egdon Resources abandoned the Laughton-1 well in 2016 because hydrocarbon shows were “not sufficiently encouraging to warrant testing”.

Union Jack described PEDLs 201 and 181 as nonconventional assets. It said it had decided to withdraw from these licences because of the government moratorium on fracking, announced in November 2019.

It also said it was withdrawing from PEDL209, where no activity was planned for the foreseeable future.

The relinquishment of Union Jack’s interests would result in “modest cost savings”, the accounts said, and allow the company to focus on core assets.

Last year, Union Jack sold its 7.5% interest in PEDL143, the Holmwood prospect, to UKOG.

As well as the three impaired PEDLs, the company has interests in 10 other licences:

  • West Newton PEDL183 16.665%
  • Wressle PEDL180 27.5%
  • Broughton North PEDL182 27.5%
  • Biscathorpe PEDL253 27.5%
  • Keddington PEDL005R 55%
  • Louth Extension PEDL339 35%
  • Fiskerton EXL294 20%
  • North Kelsey PEDL241 20%
  • Dukes Wood PEDL118 16.67%
  • Kirklington PEDL203 16.67%

‘Debt free and £5.5m in cash’

Union Jack said it was debt free and had cash balances of more than £5.5m at 1 May 2020.

The company said there was sufficient money to fund its share of planned drilling and testing of the planned West Newton B-1 well in East Yorkshire and the development of oil production at Wressle in North Lincolnshire.

The Wressle project was granted planning permission in January 2020 following a public inquiry. Union Jack said it would receive a proportion of costs of £403,000 awarded against North Lincolnshire Council by the inquiry inspector.

The company also revealed that contingent liabilities included a payment of £1,040,000 to the Cayman Islands-based Calmar LP when the first oil was produced from Wressle

On its current production interests, Union Jack said Keddington and Fiskerton Airfield produced a gross combined average of 50 barrels of oil a day in 2019.

Decommissioning provision was up at £620,686, compared with £453,165 in 2018.

The executive chairman, David Bramhill, said:

“even in these difficult times, given our attractive projects, we will achieve our goal of increasing production materially and becoming a significant midtier UK onshore producer in the medium term.”

Key figures

Revenue: £136,959 (2018: £165,270)

Operating expenses: £185,169 (2018: £159,046)

Loss for the year: £1,692,383 (2018: £1,098,708)

Total comprehensive loss: £1,724,595) (2018: £1,098,708)

Total impairments: £393,697 (2018: £205,308). PEDL201, £375,892 (2018: £nil); PEDL181, £15,042 (2018: £nil); PEDL209, £2,763 (2018: £nil).

Admin expenses: £1,343,362 (2018: £871,489)

Cash and cash equivalents: £6,626,322 (2018: £3,123,287)

Total assets: £14,234,850 (2018: £7,458,441)

Non-current assets: £7,428,331 (2018: £4,137,100)

Contingent liabilities: £1,040,000 to be paid to the Cayman Islands based Calmar LP on first oil production from Wressle

Total liabilities: £851,970 (2018: £849,853)

Decommissioning provision at 31 December 2019: £620,686 (2018: £453,165)

Share issues: £1.75m in April 2019, £2.25m in July 2019 and £5m in November 2019.

New ordinary shares: 6,990,196,071

Employees: 5 (2018: 5)

Salaries/fees of highest paid director, David Bramhill: £160,000 (2018: £110,000)

  • Annual General Meeting to be held at 11am on 18 June 2020 at 6 Charlotte Street, Bath BA1 2NE

1 reply »

  1. £403k costs awarded against the Council!! (Wressle.)

    OMG, that should cause a cut in the Bourbon biscuit budget.

    Never mind, I suspect they will just keep on blaming central Government for “austerity”.

    (My mother was unimpressed with austerity. She correctly stated that she had been unable to afford austerity but had utility instead.)

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