READ THE FULL UJOGF RESEARCH REPORT
Zacks is initiating coverage on Union Jack Oil (OTCQB:UJOGF). Union Jack is an oil and gas company that has traditionally been rooted in the UK onshore market but has now made a substantial investment in the United States to add to its portfolio. For years, its flagship project has been the Wressle oil field in Lincolnshire, UK, which has provided steady production and good cash flow. A further production interest is at Keddington, which has recently been brought back online following extensive site upgrades.
The company has development interests in West Newton, Biscathorpe, and North Kelsey, all of which offer longer-term growth opportunities. The operating environment for oil and gas companies has grown difficult in the UK, with a regulatory environment that makes approvals for projects drag on for years, and a “windfall tax” on hydrocarbon projects makes developing profitable projects difficult. It must be noted that Union Jack has enough capital loss carryforwards to offset UK income that the company is going to make in the next several years, so that it will not have to worry about the tax. To further expand the reach of Union Jack and to diversify operations in areas other than the UK, company management made the decision several years ago to add the United States to their portfolio.
The US expansion began in earnest over the past couple of years, with partnerships in Oklahoma and the acquisition of Mineral Royalty packages in prolific shale plays such as the Eagle Ford, the Bakken, and the Permian Basin. The strategy is two-pronged. First, by joining forces with an experienced partner, Reach Oil & Gas, Union Jack gains access to producing and near-term drilling projects in Oklahoma. Recent wells such as Moccasin and Andrews have already demonstrated commercial success, which is encouraging for future drilling campaigns. Second, the company has taken positions in Mineral Royalties across several US basins. These royalty interests provide exposure to production and cash flow without the need to take on full operating costs or risks. Together, these steps mark a significant shift for Union Jack, turning it from a purely UK-focused producer into one with a genuine transatlantic presence.
The team leading Union Jack through these developments brings decades of experience across the industry. Executive Chairman David Bramhill has spent more than 40 years in oil and gas, working with both major companies like Shell and smaller independents. His colleague Joseph O’Farrell adds another 30 years of experience in hydrocarbons and mining, while other directors and advisors bring technical expertise in geology and financial markets. This depth of knowledge has allowed Union Jack to navigate the UK’s often difficult planning environment and to secure attractive US partnerships at a relatively low cost of entry ahead of other UK companies who are now following Union Jack’s lead.
The company’s financial position is also a positive point with over $3,000,000 cash balances, revenues in excess of $300,000 per month, and debt free, all attractive characteristics for a small cap energy company.
Union Jack Oil, in our view, is at an inflection point, making the leap from being a UK-focused player to a more diversified operator with international reach. The next year or two will be crucial in showing whether that decision pays off, and early indications are very promising. For investors willing to accept the risks of a smaller oil company, the combination of proven UK cash-generating assets, early success in the US, and an experienced management team offers a compelling story with real upside potential.
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