The political parties are laying out their manifesto promises with the two major contenders continuing to show a total lack of support for the UK oil and gas companies who are fast retreating from their operations on and offshore. The North Sea, one of the UK’s biggest oil bearing locations is being slowly forced into early retirement as some of the major operators signify their reluctance to invest further in a country that is using their profits to pay off THEIR mistakes.
For all this money they are taking with their 75% Energy Profits Levy, UK residents are seeing nothing of this huge sum of cash being invested in the National Health Service, being spent on the increasing the abysmal road pot hole situation on our roads or any other public service or rights.
The future of this country looks bleak and for small companies like Union Jack Oil, this is reflected in the situation that has led to what is looking more and more like the best decision the management could have ever made by diversifying their portfolio to include the United States of America.
In what is certainly a massive step from their UK onshore operations that are being restricted by planning issues, challenges to successful appeals and the ludicrously long time it takes to get any project mobilised, the company is already seeing success in just a few months. From conception to realisation has taken only 4 months. Yes, just 4 months to secure a location, drill a well and be in receipt of production revenues whilst the well is being cleaned up and prepared for permanent production.
Whilst shareholders are still unaware of the figures, one could fairly assume they are not in the 20-30 bopd range as the company and their joint venture partner Reach Oil have already started the process of planning their second well, drilling into the same Hunton discovery as the Andrews-1-17 well. The site of this first prospect is being fitted with all the equipment required for a long term production facility and there’s absolutely no doubt in my mind that the next 12 months will see a significant drilling campaign with 4-6 wells to be drilled. This will far exceed the production revenues from the UK assets and along with the mineral royalties, this little company should buck the trend that is presently being seen by their peer companies.
The oil produced in the US has no crippling taxes imposed on it. Every barrel produced has a substantially higher dollar value and with Union Jack’s 45%, the cash balance is going to enable further deals and drilling without any fear of fund raising. What other small UK oiler can boast of future in this industry as things stand?
When one looks at the share price, it does not reflect the fact that the company is cash rich, debt free and making a profit. It doesn’t reflect their success in the United States. In fact, for some reason, for a company that has all this potential, has reduced the shares in issue and paid dividends, it is substantially undervalued. With just UK assets, no institution would risk a penny investing in Union Jack or any other company relying on the outlook for any support for this industry. What I do see is the potential for US institutional interest and with the engagement of Harbor Access and Sidoti, it won;t be long before the name UNION JACK OIL will emerge from under the radar and attract some interest from larger investors. It should be remembered that there are no extra shares in issue or will be issued to facilitate US buyers. They have to buy the shares from the company wallet the same as the rest of us. Availability WILL tighten and the market WILL have to attract sellers, sending the share price in just one direction. UP!
I see little future for any further developments of Union Jack’s UK interests at this time. With a successful appeal on Biscathorpe being contested, the inability of Rathlin to raise the funding required to progress West Newton, the lethargy shown by Egdon/Heyco to sort out Keddington and the time it is taking to stop talking about the Penistone Flags and start the work on it, but by the time any of this comes to fruition, we will very likely have a second and third well successfully producing in Oklahoma.
Moving to the Unites States and teaming up with an experienced JV partner like Reach will reverse the fortunes here for shareholders and create an attractive investment opportunity for the wider community.
For many years, investor’s in Union Jack have exercised tremendous patience, many tied in for years due to a lifeless, depreciating share price. But a corner has now certainly been turned and 2024, in my opinion, will see a marked increase in value here.
Give the management the time to prove up their goals, ignore the bulletin board noise.Appreciate the knowledge that if you are invested here, you won’t wake up to placings, you have an experienced, shrewd management team that haven’t splashed the cash on wild plans to enter countries where risk is high and success is unlikely. The US lives for oil and it will love UJO!
