By HotStockRockets | Wednesday 8 March 2017
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Now we know the reason for the £1.4 million placing at 0.135p by Union Jack Oil (UJO) a week ago. As we predicted at the time the acquisition it was targeting was at Wressle in Lincolnshire. Today we are told that Union has spent £600,000 to buy from Celtique Energie Petroleum Limited a further 3.33% interest in PEDL180 and PEDL182. Union Jack currently holds an 11.67% interest in both licences so its stake now goes to 15%.
The other £800,000 will, we expect, be used to other purchases as Union Jack was already fully funded for corporate costs and for its existing commitments, which include the drilling of the Biscathorpe-2 and Holmwood-1 conventional exploration wells with gross Mean Prospective Resources of 14MMbbl and 5.6MMbbl of oil respectively.
The 2 licenses contain the Wressle-1 oil discovery well from which first commercial oil is expected to flow at an initial constrained rate of 500 barrels of oil a day gross - that is once certain planning issues have been overcome. In addition, PEDL182 also contains the promising Broughton North Prospect.
The shares have rallied to 0.15p on the news but we are not done yet. House broker SP Angel notes this morning:
Wressle Interest Increased: The acquisition of a further interest in Wressle is opportune as it takes advantage of the dislocation created by the planning refusal. Whilst confirmation of the commissioning of Wressle will be required, the higher NPV attributable to UJO's interest, we are adjusting our valuation, which is now $6.4mm (0.16p – Core) to $39.1mm (0.98p – Full); the SPA recommendation remains BUY.
So the shares trade below the bottom of the range valuation. That limits downside. We think 0.9p a bit (lot) generous but continue to value the shares at a lot closer to 0.3p than 0.2p. Buy.
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