UJO defers Wressle operations to January 2021 and grants Egdon £1m loan
(AIM:UJO ) announced that workover operations and final commissioning of the Wressle oil field near Scunthorpe in Lincolnshire has been deferred until January 2021.
The UK focused onshore hydrocarbon exploration company said this move will eliminate any possible operating and supply chain issues associated with the December festive shutdown.
UJO said Wressle, in which the Company holds a 40% economic interest, is at ‘an advanced stage’ with site reconfiguration works completed and surface facilities now being installed.
To date, the storage tanks and inspection gantry have been installed and work is advanced in respect of the electrical and control system installation. All remaining equipment is expected next month despite the challenges posed by COVID-19 restrictions around certain suppliers.
UJO said the mobilisation of the workover rig will take place immediately in the New Year, with the workover being completed and initial oil flows anticipated later in January 2021.
UJO has also agreed to provide a £1m loan facility to Wressle’s operator, Egdon Resources, over an 18 month term at an interest rate of 11% per annum, payable quarterly and starting on the earlier of the first quarter end-date following initial production or 1 April 2021.
The company said the loan is secured against an unencumbered 25% interest in PEDL180, and PEDL182, including the Wressle development project and associated infrastructure.
‘The facility, as well as providing a commercial return on funds will also assist in the development of the Wressle oil field, a key asset for UJO, with anticipated production of 200 barrels of oil per day net to the Company,’ Union Jack detailed to investors this morning.
Shares in Union Jack Oil have traded within a tight range of 0.14p and 0.16p over the past month to open 1.92% lower at 0.128p this morning following the announcement.
Reasons to Follow Union Jack Oil
UJO is an onshore oil and gas exploration firm with a focus on drilling, development and investment opportunities in the UK hydrocarbon sector, and currently holds interests in 13 licences in areas including, inter alia, the East Midlands, Humber Basin and East Yorkshire.
West Newton
The UK focused onshore hydrocarbon explorer holds a 16.665% interest in PEDL183, containing the conventional West Newton A-1 discovery well and WNA-2 appraisal well.
West Newton is located at the heart of the Zero Carbon Humber project area, which aims to promote decarbonising technologies across industrial activities in the wider Humber region.
Last month, it reported that the onshore West Newton B-1 ("WNB-1") well - the next well following the successful West Newton A-2 ("WNA-2") appraisal well - had been spud.
Results from the drilling of WNB-1 are expected to inform a subsequent programme of testing to establish the well's productive capability as well as future drill operations.
North Kelsey
In recent weeks, UJO has also increased its stake in the North Kelsey project by acquiring an additional 30% from Egdon Resources, taking its stake in the exploration project up to 50%.
Further financial obligations will be equal between Union Jack and Egdon Resources, in line with both parties’ 50% stake in the North Kelsey Prospect which is located in Lincolnshire.
The North Kelsey Prospect is a conventional oil prospect along trend from and analogous to the Wressle oil development, which lies around 15 kilometres to the northwest.
The UK- focused group said the prospect has been mapped from 3-D seismic data and has the potential for oil in up to four stacked conventional Carboniferous reservoir targets.
David Bramhill, Executive Chairman of UJO, described North Kelsey as “a low cost, drill-ready onshore acquisition for Union Jack in our focus area, consistent with our strategy.”
He said a further stake in the project increases the group’s exposure to a “potentially value adding project” as well as expanding UJO’s balanced drilling and development portfolio.
Subject to a successful farm-out, North Kelsey-1 is expected to be drilled during 2021.
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