Union Jack buys another 30pc of North Kelsey from Egdon

The AIM-traded firm described North Kelsey as a conventional oil prospect, along trend from and analogous to the Wressle oil development, which lay about 15 kilometres to the north west.

It said the prospect had been mapped from 3D seismic data, and had the potential for oil in up to four stacked conventional carboniferous reservoir targets.

The operator estimated that the prospective resources ranged from 4.66 million barrels to 8.47 million barrels of oil, with a mean resource volume of 6.47 million barrels.

In September, the existing planning consent for drilling North Kelsey-1 was extended to 31 December 2021 by the Lincoln County Council.

Requisite permits for drilling were also received from the Environment Agency.

Under the terms of the agreement, Union Jack said it would acquire an additional 30% interest in the licence for £0.1m in cash.

Previous financial farm-in obligations over the 20% interest in PEDL241 already held by Union Jack would lapse.

Further financial obligations would be equally carried on a 50-50 basis by Union Jack and the operator, with the transaction subject to Oil and Gas Authority consent.

Upon completion, the interests held in PEDL241 would be Union Jack Oil, with its share rising to 50% from 20%, while operator Egdon Resources UK would see its share reduced to 50% from 80%.

“North Kelsey is a low cost, drill-ready onshore acquisition for Union Jack in our focus area, consistent with our strategy,” said executive chairman David Bramhill.

“The increase in our interest to 50% increases our exposure to this potentially value adding project and expands our balanced drilling and development portfolio.

“North Kelsey sits within our focus areas of the East Midlands, Humber Basin and East Yorkshire and is on trend with our Wressle oil development project which is on track to produce first oil later this quarter.”

Bramhill said the acquisition of the additional interest had been executed on “attractive” terms without any promote, and would also deliver additional savings by removing the company’s previous farm-in carry obligations.

“Subject to a successful farm-out process, North Kelsey-1 is expected to be drilled during 2021.”

At 1226 BST, shares in Union Jack Oil were down 0.92% at 0.16p.