Union Jack Oil plc has announced it has reached agreement with Europa Oil & Gas Limited ("Europa" or the Operator) to acquire a 7.5% economic interest in PEDL143 located within the Weald Basin, located in southern England and containing the drill-ready Holmwood Prospect (the Acquisition).
The Acquisition is in line with the Company's stated strategy of identifying attractive drill-ready opportunities. The Company is to participate in the drilling of the planned Holmwood-1 exploration well, which obtained planning consent during 2015 that will test the Holmwood Prospect's identified Portlandian and Corallian sandstone reservoirs and the same Jurassic section that tested oil from Kimmeridge limestones at Horse Hill.
The Acquisition brings the first Weald Basin licence interest to Union Jack's expanding UK onshore portfolio.
Holmwood-1 is a high impact exploration well with planning consent and is expected to be drilled late 2016/H1 2017.
Europa estimates the unrisked gross mean prospective resources to be 5.6 million bbls with a geological chance of success (COS) of 33% from the shallower sandstone reservoirs only.
Net well cost expected to be £480 000 and will be financed from Union Jack's existing cash resources.
The drill site is 12 km immediately west and of similar stratigraphy to the Horse Hill-1 discovery.
Further upside resource potential exists from the Jurassic Kimmeridge limestones.
Presence of multiple payzones.
Terms of acquisition
Union Jack is not paying any up-front cash consideration to earn a 7.5% economic interest in PEDL143.
Under the terms of the Acquisition Union Jack, has agreed to pay to Europa:
15% of the costs of the Holmwood-1 exploration well up to a gross well cost of £3.2 million (£480 000 net cost for Union Jack).
Union Jack to contribute 7.5% of the costs in respect of any well costs incurred in excess of £3.2 million.
Should there be a commercial discovery and subsequent development on the licence, Union Jack will pay to Europa back costs of £159 375.
Any payment of back costs are to be made from the net proceeds of the sale of production from any future development of a discovery on PEDL143.
Union Jack's contribution towards the cost of the drilling of the Holmwood -1 exploration well will be financed from the Company's existing cash resources.