Union Jack Oil plc has made its “initial” expansion into America with three purchased mineral royalty packages in Texas and planned joint ventures in Oklahoma.
PERMIAN BASIN
The unit acquisitions in the Permian basin, to be owned in perpetuity with no forward liabilities or obligations, were brokered by the company’s agent and adviser Reach Oil & Gas Inc.
The JVs, also with Reach, are for “a number of value accretive, exploration, drilling, development and potential production ventures”.
Cronus unit, effective from December 2023, contains 25 wells in Midland County. The property consists of nine Chevron and 16 XTO (a subsidiary of Exxon) operated wells.
Powell Ranch, from November 2023, operated by COG Operating LLC, a subsidiary of ConocoPhillips, has seven horizontal and eight vertical wells in Upton County.
Palm Springs, operated by Occidental, contains 10 horizontal wells in Howard County, with an effective date of January 2024.
Union Jack said that each well could target multiple productive zones, such as the Lower Sprayberry, Wolfcamp A, Wolfcamp B Lower, Wolfcamp B Upper, Wolfcamp C and D, Jo Mill and Dean and Barnett among others.
The company paid a total $854,070 (£677,235) using existing cash, for the royalties estimated to have an economic life of more than 26 years. Union Jack added it had earned 10% of the amount since December 2023.
The Permian basin in Texas produces approximately 6% of the world’s daily oil requirements.
The planned JVs will undergo near-term planned drilling with “a high chance of success” and are capable of adding “significant cash flow” for Union Jack.
The company has conducted due diligence, including a site visit, and is finalising terms with Reach for at least two material drilling programmes in Oklahoma, with the first well planned for early Q2 2024.
The project will also be funded by the company’s current cash balance.
DISTINCT STRATEGY
Executive chairman David Bramhill said that the company’s onshore UK projects would remain the core focus for the “forseeable future.”
“This distinct strategy has transformed the company in to a self-sustainable, dividend paying, profit making entity.
“The evolution of Union Jack, particularly in recent years, in my opinion, has been transformational.
“Management has consistently focused on value creation, such as at our flagship Wressle development, where our interest has increased from just 8.33% to a predominant 40%, due to our acquisitive approach when value can be seen.”
He added that the investment climate for international investment outside of the UK, especially within the USA, had significantly improved primarily driven by “streamlined asset ownership and the evolution of enabling technologies”.
In 15 months, Union Jack has distributed approximately £3 million via dividend payments and share buy-backs and intends to continue as and when appropriate.