Union Jack Oil says RPS review underlines West Newton’s potential
In an operational update, (UJO ) told investors today that the results of a recent independent review assessing the well productivity potential from the West Newton project has continued to underline the project’s potential as a material hydrocarbon producer.
The UK-focused onshore hydrocarbon production, development and exploration company said the independent review was commissioned by the project’s operator, Rathlin, following the completion of the Extended Well Test programme carried out at West Newton in 4Q21.
The purpose of the review, which was undertaken by the consultancy, RPS, was to assess well productivity and investigate optimised drilling and well completion methodologies.
Overall, the RPS review concluded that the Kirkham Abbey reservoir could deliver ‘substantially higher production rates’ from horizontal wells compared to vertical wells.
The study indicated initial average potential production rates of up to 35.6 million cubic feet of gas per day (“mmcfd”) (5,900 barrels of oil equivalent per day “boepd”) from a horizontally drilled well situated in the gas zone, based on the data from West Newton A-2 well.
The study also indicates initial average potential production rates of 1,000 “bopd” from a horizontally drilled well situated in the oil zone based on data from West Newton A-2 well.
Union Jack Oil said the analysis has confirmed that hydrocarbon liquids recovered to surface are low specific gravity, low viscosity, light oil or condensate with an API ranging from 45.9 to 49 degrees, and that gas recovered to surface is good quality with high heat content.
The report also concluded that, based on RPS modelling, most of the acid stimulation carried out during the EWT only interacted with a small section of the perforated intervals due to the permeability contrast across the Kirkham Abbey formation in both wells, Union Jack noted.
It said this suggests that potential flow rates from wells in Kirkham Abbey would benefit from a conventional optimised acid stimulation programme that includes active diversion techniques.
Union Jack said the analysis was based on a comprehensive suite of data provided from operations to date at West Newton, including logs, core data, petrophysical analysis, drilling and completion information, stock tank oil analysis, and other existing third-party reports.
Whilst the modelling does not take into account any potential contribution to productivity resulting from the natural fracturing that has been identified within Kirkham Abbey, Rathlin’s management believes natural fracturing is likely to be present within future completion zones.
The operator said more detailed evaluation is required to support this flow rate potential as well as the economic feasibility of horizontal wells, including an assessment of longer-term production rates. It added that additional work streams are currently underway and that the results of which will enable the compilation of the next work programme at West Newton.
In addition, Union Jack said fluid analysis has confirmed that hydrocarbon liquids recovered to surface are low specific gravity, low viscosity, light oil or condensate with an API ranging from 45.9 to 49 degrees, and that gas recovered to surface is good quality with high heat content
Commenting on the results, Executive Chairman of Union Jack, David Bramhill, told investors: “We are encouraged by the RPS review which continues to underline West Newton’s potential as a material hydrocarbon producer.”
“This initial analysis confirms the significance of the in-place resource and crucially, has de-risked the project by indicating the potential recovery of what we can now confirm to be high quality light oil, in addition to good quality gas.”
He added: “The mass of data obtained from the operation has allowed the modelling of potential flow rates, independently assessed for the first time. Ultimately, all of the analysis currently being undertaken is aimed at reducing risk and providing the Joint Venture with sufficient data to develop our forward plan for the next phase of activity at West Newton.”
Last week, Union Jack Oil said it had achieved landmark net revenues of US$2 million from the Wressle hydrocarbon development in which the company holds a 40% economic interest.
The firm said it has generated $2m in revenues since re-commenceming production at Wressle, which is located within licences PEDL180 and PEDL182, back in August 2021.
In October 2021, Wressle had generated US$1,000,000 of net revenues to the Company. Commenting at the time, Executive Chairman of Union Jack, David Bramhill, told investors: “Wressle is still in the infancy of its development and despite restricted flow and continuing site upgrades, net revenues to Union Jack have been material since mid-August 2021.”
Last week, Union Jack told investors that the well at Wressle, which is situated on the western margin of the Humber Basin, is producing under natural flow and that production remains constrained on a restricted choke with zero water cut and staged site upgrades ongoing.
For the first time, Union Jack Oil said it is now cash flow positive covering all corporate, administrative and project operating costs. As at 11 January 2022, the Company reported that it was debt free and held cash balances of £6.27m and receivables of £1.56m.
Bramhill said the revenues of in-excess of US$2m, whilst under test production, are “highly positive” for Union Jack which remains “in prime financial health, as the figures illustrate.”
“We believe that Wressle holds considerable further upside which will be demonstrated over the foreseeable future and we look forward to reporting on progress in due course,” he said.
In addition to Wressle, Bramhill noted that the Company has “three other cash generating projects” and that under current oil prices, for the first time “is now cash flow positive and covering all of its outgoings, including corporate, administrative and project operating costs.”
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