Union Jack Oil expects Wressle to have material impact on cash flow

Hydrocarbon developer Union Jack Oil said it remained debt free and was trading satisfactorily following the acquisition of three licenses in the first half of the year.

During the six months ended 30 June the company bought three licences, a 7.5% interest in the PEDL143, which incorporated the drill-ready Holmwood prospect from Europe Oil & Gas, a 10% interest in PEDL209 from Egdon Resources, which contains the Laughton prospect and an 8.33% interest in PEDL182 also from Egdon and containing the Broughton North prospect.

The AIM-listed oil company said the licences will provide additional exposure and potential production, development and appraisal.

The company was currently debt free, holding in excess of £2m in cash as of 5 September. The company highlighted that it remained fully funded for the current drill programme at its licenses, including the low-cost UK onshore Wressle development.

Egdon, the operator at Wressle, said the project was in the midst of a field development programme and production should start in the last quarter of 2016.

That would have a "material impact" on Union Jack´s cash flow generation, chairman David Bramahill.

Union Jack´s supplementary tax rate fell from 20% to 10% as a result of the March 2016 Budget, which would have a constructive and positive impact on the economics of onshore hydrocarbon projects. Going forward, this would reduce the effective tax rate from 50% to 40%, the company said in a statement.

Full cycle costs associated with UK onshore production, development and exploration remain highly attractive even at current oil prices as "the nadir has been tested", Union Jack said.

Executive chairman David Bramhill said: "Union Jack is well placed with a number of development, appraisal and drilling projects underway that are fully funded from our available cash resources. We are not deviating from our strategy and we are continuing to see an escalation of the rewards of that focus.”

Shares in Union Jack Oil were down 2.35% to 0.166p at 0955 BST.