WTI (Sep) $76.65 -$1.51, Brent (Oct) $79.68 -$1.36, Diff -$3.03 +15c
USNG (Sep) $2.13 -7c, UKNG (Sep) 94.65p -0.93p, TTF (Sep) €39.46 -€0.44

Oil price

Oil really was flat last week, WTI down 19c but Brent up by 2c reflected the fact that geopolitically the world waited for action from Iran and the demand side of the equation was questioned by the IEA, quelle surprise.

Friday’s fall was caused by the vexed problem of peace talks, started late last week but without Hamas or the US Secretary of State and looked like being sidelined. But today with Anthony Blinken flying to Qatar the talks are on again but still, as I write without Hamas. 

Union Jack Oil

Union Jack Oil, a UK and USA focused onshore hydrocarbon production, development, exploration and investment company today announced a positive update in respect of the Company’s strategic expansion into the USA and its rapidly growing oil and gas production and revenue generating activities.

The Company also confirms that, following completion and testing, the Andrews 2-17 well has been declared a commercial discovery.

This update provides information on:

• Production and development from the Andrews field, comprising the Andrews 1-17 and recently drilled and completed Andrews 2-17 wells
• The acquisition of a 45% interest in the Taylor and Moccasin wells to be drilled in the Q4 2024 drilling campaign
• General progress regarding Union Jack’s other USA activities 

Andrews 1-17 (Union Jack 45%)

• Andrews 1-17 well has been declared a commercial discovery
• Since being placed on restricted and periodic test production during late May 2024, the Andrews 1-17 well has produced 6,460 barrels of high-quality, ultra-light oil with a gravity of approximately 46 degrees API and 382,000 cubic feet of gas
• Andrews 1-17 well is still under test production using a pump jack whilst the optimum flow rate is being determined
• Works to connect a gas pipeline to the Andrews 1-17 well have recently been completed and gas has been sold to the market
• Water produced from the Andrews 1-17 well will be transported via a recently laid pipeline to the Coker injector well to rebuild reservoir pressure in the Rogers and S&M production wells (Rogers Secondary Recovery project - Union Jack 45%), providing considerable savings on OPEX costs at Andrews-1 and allowing eventual production optimisation
• Drilling and completion costs have already been paid for from the Company’s cash resources

The primary target for the Andrews 1-17 well, the Hunton Limestone, one of the main hydrocarbon reservoirs in Oklahoma, was penetrated at approximately 4,200 feet, showing high porosity, elevated gas readings with good reservoir quality being interpreted on the wireline logs. 

The Hunton is unconformably overlain by the main oil-prone source rock, the Woodford Shale and is in an excellent position for the migration of oil.

Andrews 2-17 Well (Union Jack 45%)

• Andrews 2-17 declared a commercial discovery
• Well perforated in the Hunton and completed early August 2024
• Andrews 2-17 is now on test production and free flowing high-quality, ultra-light 46 degrees API gravity oil, significantly with no water
• The well produces naturally due to a gas expansion drive
• Since being placed on restricted and periodic test production from 7 August 2024, the Andrews 2-17 well has produced 544 barrels of oil and 1,895,000 cubic feet of gas
• First oil and gas already being sold to market
• Andrews 2-17 and 1-17 have been connected to a local gas pipeline and product is being sold to Enerfin, a privately held natural gas and oil company with several thousand miles of pipeline infrastructure in Oklahoma, Texas and Louisiana
• Under test conditions production rates of 184 barrels of oil and 320,000 cubic feet of gas per day have been recorded
• Due to high wellhead pressure of 1,250 psi, oil and gas production is currently constrained and the choke reduced to 14/64” (approximately 25% of choke size)
• Work is ongoing to reach optimum production on both Andrews wells to obtain the perfect balance of choke size versus line pressure and oil rate
• Production rates remain variable whilst a stable flow rate is established
• Drilling and completion costs have already been paid for from the Company’s existing cash resources

The main objective for the Andrews 2-17 well, the Hunton Limestone, was penetrated at 4,180 feet, showing elevated gas readings, good oil and gas shows, stain and fluorescence from top to bottom of the Hunton interval.

45% Farm-In and Drilling of the Taylor Well, Seminole County, Oklahoma

Union Jack has agreed to acquire from Reach Oil & Gas Inc (“Reach”) a 45% working interest in theTaylor well, planned to be drilled back-to-back with the Moccasin well (described below) during Q4 2024.

Taylor is an untested 3D seismic supported Hunton Remnant prospect with secondary targets in the Misener and Wilcox sands.

• Analogue case indicates robust economics on success
• Wilcox structures to the north and east of Taylor were prolific in the 1920s, producing in the thousands of barrels of oil per day
• Acreage includes Taylor Hunton Prospect, two Wilcox structures and Misener field with possible infill location
• Operator estimated 40% geological chance of success
• Planning and back costs of US$309,000 paid to Reach
• Costs for drilling and completion of the well are estimated to be approximately US$516,000 net
• Going forward, the costs of further wells will be based on an unpromoted 45% working interest
• Costs will be paid from existing cash resources

Historically, there have been several regional high-profile producing fields such as North East Tibby (1,600,000 bbls oil), Gray (6,000,000 bbls oil) and West Burnett (1,200,000 bbls oil).

45% Farm-In and Drilling of the Moccasin Well, Pottawatomie County, Oklahoma

Union Jack has agreed to acquire from Reach a 45% working interest in the Moccasin well which is planned to be drilled back-to-back with the Taylor well described above.

Moccasin is an untested 3D seismic supported Hunton and Wilcox structure with secondary targets in Pennsylvanian Channel Sands and Base Pennsylvanian Unconformity Sand.

Analogue case indicates robust economics on success

• Operator assesses a high chance of finding movable hydrocarbons in the Base Pennsylvanian and an approximate 50% chance of success in other target zones
• Structure lies close to the Woodford Shale, the main source for light oil across the region
• Planning and back-costs of US$256,000 paid to Reach
• Cost for drilling and completion of the well are estimated to be US$600,000 net
• Going forward, the costs of further wells will be based on an unpromoted 45% working interest
• Costs will be paid from existing cash resources

The Moccasin structure is a compressive feature associated with the regional Wilzetta fault. This strike slip fault was active through the Ordovician to early Carboniferous periods and is responsible for several large oil accumulations. In the area of the planned Moccasin well, a deviation in the fault has caused compressive forces forming numerous dome and fault structures which have led to proven prolific oilfields such as the adjacent North-East Shawnee and North-West Redhill fields that have produced more than 6,000,000 barrels of oil.

Wilzetta Diana-1 Footwall Fold Drilling Project, Seminole County, Oklahoma (Union Jack 75%)

Union Jack has an agreement with Reach to drill the Diana-1 well, to test a Footwall Fold Prospect within the Wilzetta Fault play, following the drilling of the Taylor and Moccasin wells.

• Main Wilzetta Fault zone target is underlain by a deeper structure that will also be tested with a high-impact well with estimated recoverable oil in excess of 200,000 bbls
• High relief compressional fold with a large reverse fault
• Prospect mapping supported by recently reprocessed 3D seismic data

The prolific Wilzetta Fault plays are the site of numerous oilfields across central Oklahoma with nearby analogue production from:

• North East Shawnee field, three miles south of the Diana-1 well location, which has produced more than 5,800,000 barrels of oil to date
• West Belmont field, which has produced more than 580,000 barrels of oil to date
• Arlington field, ten miles north-east of Diana-1, which has produced more than I,800,000 barrels of oil to date

Rogers Secondary Recovery Project, Seminole County, Oklahoma (Union Jack 45%)

The Rogers enhanced oil recovery project is located approximately two kilometres from the Andrews 1-17 discovery well and includes plans to significantly increase delivery from Rogers and S&M, two legacy production wells.

Base case secondary recovery volumes calculated by the Operator suggest that up to a further 124,000 barrels of oil can be recovered. The Company believes the project economics are highly attractive indicating future gross revenues at prevailing oil prices of approximately US$7.5 million, and an IRR approaching 80%.

Water production sourced from nearby wells will be injected into the Coker injector well to rebuild reservoir pressure and increase hydrocarbon production.

The directors believe the Rogers project offers an excellent strategic and locational fit within the Company’s portfolio and will help provide operational synergies and increase production and revenues.

East Shawnee 3D Seismic Acquisition Programme, Seminole County, Oklahoma (Union Jack 37.5%)

The East Shawnee 3D seismic acquisition programme is designed to identify further prospects along the Wilzetta Fault, also known as the Seminole Uplift.

Reach is currently completing permitting with the landowners, clearing lines for a vibration source during September and will commence seismic acquisition in early October 2024.

The objective of this 3D seismic acquisition programme is to generate prospects to be drilled during the 2025 drilling campaign.

USA Corporate Update

Since the commencement of activities in the USA from a standing start in early 2024, Union Jack has made significant progress in building a cash generating hydrocarbon venture and establishing a new corporate “North American brand” complementing the Company’s already successful oil production and development business in the UK.

The directors are delighted with the rapid progress made in the year-to-date and we are already generating and banking oil and gas revenues from the Andrews field where payback is expected on the Company’s initial investment within six months.

The directors believe the balanced portfolio assembled in a short period of time represents excellent progress by any standard.

The Mineral Royalty investments where Union Jack holds proxy interests in 165 wells are delivering a consistent, safe and attractive income stream. Return on investment to date equates to approximately 20%+ and will be reported on comprehensively in the Company’s Half Yearly Report which will be published during September 2024.

During April 2024, Union Jack was admitted to trading on the OTCQB Venture Market in the USA and trades under the ticker UJOGF.

The Company believes that dual trading of its ordinary shares on the OTCQB and the AIM Market of the London Stock Exchange will, in time, provide enhanced investor benefits, including uncomplicated trading access for investors based in the USA and increased liquidity due to a broader geographic pool of investors.

Also in early April 2024, Harbor Access, a proactive North American based Investor Relations Group, was appointed to represent Union Jack and assist with increasing visibility and facilitating a better understanding of the Company in the USA financial markets.

Lighthouse Equity Research, part of Sidoti & Company LLP has been engaged to provide equity research coverage of Union Jack in the USA. Initial analysis of Union Jack is expected to be published in early September 2024.

During the remainder of 2024, the Company intends to appoint a USA based stockbroker to reinforce its recent initiatives in establishing an investor base in the USA. 

David Bramhill, Executive Chairman of Union Jack, commented: 
“Obviously I am delighted at the initial success and significant progress being made in the USA alongside our partners, Reach.

“It is difficult to believe that our entry into North America at the start of the year would yield such material returns in such a short period of time.

“The hydrocarbon opportunities in Oklahoma are considerable and we look forward to drilling the Taylor and Moccasin wells during Q4 2024, followed by the Diana-1 well, all of which hold considerable upside on success.

“I look forward to reporting on further USA progress in the Half Yearly Report and also on our valuable UK assets which include the cash generating Wressle project, West Newton, Biscathorpe, Keddington and North Kelsey.

“We remain committed to all of our current UK projects and are cautiously optimistic that fiscal and regulatory clarification from the new government will allow the owners and entrepreneurs in our industry to move forward and continue to provide reliable domestic production, supporting jobs and delivering tax revenues for many years to come.”

Miles Newman, Chairman of Reach commented: 
“We are very pleased that the Andrews 2-17 well has come in as expected from our 3D seismic. We purchased a Stryde node seismic system to efficiently and inexpensively acquire our own seismic and are delighted to prove up the interpretations.

“The second well in the Andrews field encountered the productive Hunton reservoir 30 feet up-dip from the Andrews 1-17 well. The gas sales line has now been commissioned, on time and under budget. The well is free flowing good quantities of oil and gas and is water free.

“The Andrews field is being developed and we are very excited to turn our attention now to the Q4 2024 drilling campaign, targeting the Taylor and Moccasin Prospects.”

There is no doubt that Union Jack has made huge progress in their US investments as they say ‘from a standing start’ only this year. In this, a detailed report from the company which shows in depth the prospects that they are involved in, and provides the reasons for such justified optimism. 

With the analysis of both the, now commercial, Andrews 1-17 and 2-17 wells which show in the former, production of 6,460 barrels of 46º crude oil and 382/- cubic feet of natural gas and in the latter so far 544 barrels of the same quality crude and 1,895 cubic ft of gas but with, significantly no water. So, a cracking start by any measure but for UJO there is more to come from over the pond. 

The company has announced today in an acquisition from partner Reach, a 45% interest in the Taylor and Moccasin wells which will be drilled in the Q4 drilling campaign, the former with a 40% CoS and the latter of 50%. 

There is more to Union Jack than meets the eye, if the share price could only share in a small part of the current US success and of the exciting near term out there then shareholders are in for a treat, at home and now importantly abroad. 

Jadestone Energy

Jadestone has provided the following update on the Akatara gas development project onshore Indonesia.

As previously reported, gas sales from the Akatara field commenced on 31 July 2024 at an initial rate of c.4 mmscfd. Since then, the gas plant has been progressively made operational and raw gas production into the Akatara Gas Processing Facility (“AGPF”) has been steadily increased to 20 mmscfd, resulting in current gas sales in the range of 11-14 mmscfd.

The AGPF’s export compressors, which pressurise the sales gas for export into the regional gas transportation pipeline system, require further commissioning work, which will allow the plant to achieve the full raw gas volume of c.25mmscfd and deliver the sales gas daily contract quantity (“DCQ”) of c.20 mmscfd, as specified in the Akatara gas sales agreement. This activity is expected to complete this month, with any associated costs remaining the responsibility of the main contractor and equipment vendor.

Paul Blakeley, President and CEO commented:
“We continue to make good progress at the Akatara project towards final completion of the full processing facility, with recent tests demonstrating that well delivery is strong and that the facilities can handle the required raw gas volumes. Final completion, and plant handover to Jadestone, will occur after an extended production test at DCQ volumes, which is a contractual condition. We are confident this will be achieved once the export compressors are fully operational at design pressures.”

Gulfsands Petroleum

OIL AND GAS THEFT FROM BLOCK 26 SURPASSES 50 MILLION BARRELS WITH A LOST VALUE OF OVER US$3,500,000,000 (US$3.5 BILLION)

This week marks another painful milestone for the Syrian people and for Gulfsands, as well as another shameful one for those responsible for prolonging the crisis in Syria.

Unlawful production from GULFSANDS’ Block 26 continues unabated and this week:

• Illicit production volumes have exceeded 50 million barrels of oil equivalent (“boe”).
• The lost value of this production has exceeded US$3,500,000,000 (US$3.5 Billion).

These unlawful activities are widely known as being undertaken by entities affiliated with the Autonomous Administration of North and East Syria (the AANES), Peoples Defence Unit (YPG), Syrian Democratic Forces (SDF).

The illicit production, and ongoing losses, continue at a rate of around 16,000 boe per day and are monitored and measured at www.gulfsands.com

Block 26 represents less than a quarter of the overall illicit production from the North-East of Syria, where average production is estimated to be around 80,000 boe per day. This represents an ongoing lost value of around US$6.4 million every day, at today’s oil price of around US$80 per barrel, and a cumulative value of more than a staggering US$14 billion since the unlawful production began in early 2017.

The Syrian people, however, see the benefits of only a small proportion of this value. The unlawful oil trade takes place on the black market, away from regulation and oversight, meaning prices are depressed and the potential for corruption is high.  The biggest beneficiaries of this illegal production are illicit actors - not the Syrian people.

Equally concerning is the fact that the unlawful and unsophisticated operators of the fields use unsafe, unregulated, and hugely environmentally damaging oil field practices which have a catastrophic effect on the health and safety of local communities, causing widespread cancers and terrible respiratory and skin diseases.

Gulfsands continue to call for this unlawful, unsafe, and environmentally devastating production to stop immediately.

I have reproduced this article, published today by John Bell, CEO of Gulfsands as I consider that he, and his  Gulfsands colleagues and supporters need all the help that they can get to stop this theft against the Syrian people.

KeyFacts Energy Industry Directory: Malcy's Blog