PRODUCTION, DRILLING,
DEVELOPMENT AND
INVESTMENT IN THE
UNITED KINGDOM
ONSHORE
HYDROCARBON
SECTOR
UNION JACK OIL plc
Annual Report and
Financial Statements
DIRECTORS, OFFICERS AND ADVISERS
DIRECTORS
David Bramhill
Executive Chairman
Joseph O’Farrell
Executive
Graham Bull
Non-Executive
Raymond Godson
Non-Executive
Frazer Lang
Non-Executive
COMPANY OFFICE
6 Charlotte Street,
Bath BA1 2NE,
England
Telephone: +44 (0) 1225 428139
Fax:
+44 (0) 1225 428140
Email: info@unionjackoil.com
Web: www.unionjackoil.com
REGISTERED NUMBER
07497220
SECRETARY AND
REGISTERED OFFICE
Matthew Small
6 Charlotte Street,
Bath BA1 2NE,
England
BANKERS
Royal Bank of Scotland plc
8-9 Quiet Street,
Bath BA1 2JN,
England
REGISTRARS
NOMINATED ADVISER
AND BROKER
Computershare Investor Services PLC
The Pavilions,
Bridgwater Road,
Bristol BS13 8AE,
England
SP Angel Corporate Finance LLP
Prince Frederick House,
35-39 Maddox Street,
London W1S 2PP,
England
PUBLIC RELATIONS
CONSULTANTS
Cassiopeia Services Ltd
Second Floor,
4-5 Gough Square,
London EC4A 3DE,
England
AUDITOR
BDO LLP
55 Baker Street,
London W1U 7EU,
England
SOLICITORS
Osborne Clarke
2 Temple Back East,
Temple Quay,
Bristol BS1 6EG,
England
Union Jack Oil plc is an onshore oil and gas
exploration and production company with a
focus on production, drilling, development,
and investment in the United Kingdom
hydrocarbon sector. The issued share capital
is traded on the AIM Market of the London
Stock Exchange (Ticker: UJO).
Our strategy is the appraisal and exploitation
of the assets currently owned. Simultaneous
with this process, the Company’s management
expects to continue to use its expertise to
acquire further licence interests over areas
where there is a short lead time between
the acquisition of the interest and either
exploration drilling or initial production from
any oil or gas fields that may be discovered.
During 2018 a 16.665%
interest was acquired
in a major onshore gas
discovery. READ MORE ON PAGE 11
CONTENTS
BUSINESS AND STRATEGY
Chairman’s Statement
Strategic Report
Review of Operations
GOVERNANCE
Directors’ Report
Corporate Governance Report
Directors’ Responsibilities
Statement
Independent Auditor’s Report
on the Financial Statements
FINANCIAL STATEMENTS
Income Statement
Statement of
Comprehensive Income
Balance Sheet
Statement of Changes in Equity
Statement of Cash Flows
Principal Accounting Policies
2
6
8
22
24
33
34
39
40
41
42
43
44
Notes to the Financial Statements
50
ANNUAL GENERAL MEETING
Notice of Annual General Meeting 67
www.unionjackoil.com
1
CHAIRMAN’S STATEMENT
I am pleased to present to the
shareholders of Union Jack Oil plc
(“Union Jack” or the “Company”),
the Annual Report and Financial
Statements for the year ended
31 December 2018.
Union Jack’s strategy remains consistent with the
objective of the Board to build a successful and
sustainable, UK-focused, onshore hydrocarbon
production and development business. In this respect,
we have delivered demonstrable growth and have
expanded our portfolio with what we consider to be
quality, high-value project interests with substantial
upside potential in our focus areas of the East Midlands,
Humber Basin and East Yorkshire. In addition, success
in any one of our key assets would result in a significant
market valuation of the Company.
Marked progress was made in the year under review and
in the post balance sheet events period up to the signing
of these financial statements, with the highlights being:
• enhanced our portfolio with selective, value-
accretive transactions by increased interests
in both Wressle and Biscathorpe
• acquired a 16.665% working interest in PEDL183
containing the material West Newton A-1
gas discovery with a Contingent Resource of
189 bcfe (billion cubic feet equivalent)
•
•
•
increased our proven (1P), and proven plus
probable (2P) reserves and materially increased
our level of contingent and prospective resources
increased production revenue by over 250%
fully funded for all current drilling
and testing requirements
• currently drilling the West Newton
A-2 conventional appraisal well
• current cash balance in excess of
£2.5 million as at 1 May 2019
• debt free
PEDL183 WEST NEWTON A-1 GAS DISCOVERY
(16.665%)
During October 2018, Union Jack completed a farm-in
to licence PEDL183, containing the West Newton A-1 gas
discovery with Rathlin Energy (UK) Limited, a subsidiary
of Canadian registered Connaught Oil & Gas Ltd where,
according to a Competent Person’s Report prepared by
Deloitte LLP in June 2017, there is in excess of 189 bcfe
of 2C Contingent Resources within the Kirkham Abbey
Shoal formation and further considerable potential
prospective resource upside for oil within the deeper
Cadeby Reef formation.
PEDL183 is located onshore UK, North of the Humber
River, and also contains the town of Beverley, East
Yorkshire. The licence area is within the western sector of
the Southern Zechstein Basin and the West Newton A-1
gas discovery is on-trend with the prolific offshore Hewett
gas complex.
The West Newton A-2 fully funded conventional appraisal
well is currently being drilled using the BDF28 rig and the
first target, the Kirkham Abbey Shoal formation, may have
been penetrated and possibly reported upon by the time of
publication of this Annual Report and Financial Statements.
There are a number of positives for the Company as
a result of the West Newton acquisition including:
•
•
farm-in terms were very attractive with no associated
up-front or back cost payments, with all funding going
towards drilling, licence costs and administration
compelling, immediate and future economic value from a
development of a gas discovery alone with the Operator’s
recently upgraded NPV10% in excess of US$300 million
• proximity to existing gas pipelines and infrastructure
•
significant Contingent Resources being added to the
Company’s resource inventory
Success at the West Newton A-2 appraisal well will result,
in time, in the delivery of a major onshore gas development
of which the value of our investment would be Company-
changing and effectively transform Union Jack’s future.
2
UNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
Operational Highlights
Financial Highlights
• Portfolio expanded with further
selective asset value-accretive
transactions in Wressle and Biscathorpe
• Current cash balance in excess
of £2.5 million as at 1 May 2019
• Fully funded for all current drilling
• A 16.665% acquisition in PEDL183
and testing requirements
containing the West Newton A-1 gas
discovery with a Contingent Resource
of 189 bcfe
• Increased proven reserves and level
of resources
• The current drilling of the West
Newton A-2 appraisal well
The Company is fully prepared for success in this
venture and funds are in place for an extended well
production testing programme and a possible 3D
seismic programme over other structures which
have been highlighted within the licence area.
PEDL180/PEDL182 WRESSLE DISCOVERY
(27.5%)
Located in Lincolnshire on the Western margin of the
Humber Basin, PEDL180 and PEDL182 contain the
substantial Wressle oil discovery, with proven reserves
and significant upside, from which first commercial oil
is expected to flow at a constrained rate of 500 barrels
a day gross following successful planning approval.
During June 2018, the Company acquired a further
12.5% interest in PEDL180 and PEDL182 from
Celtique Energie Petroleum Limited, increasing
our holding in the project to a meaningful
27.5%. The acquisition platform involved no
initial cash consideration and the deferred cost
of £1.04 million is conditional on establishing
first commercial production at Wressle.
This acquisition had an immediate positive
impact on Union Jack by increasing its 2P
reserves and 2C resource base by 83% to in
excess of 855,000 barrels of oil equivalent.
The justification for the Company increasing its
interest in Wressle is the transformative economic
impact it will have, as we believe that when
commercial production is established at Wressle,
it would provide net cash flows to Union Jack of
circa US$3.5 million per annum in the current oil
price environment. After taking operating costs
into consideration, estimated to be below US$15
per barrel, such revenues would propel Union
Jack into a material cash generating oil production
company. In further support of the acquisition, the
economics are robust and net asset value accretive
down to an oil price of US$35 per barrel.
• Production revenue
increased by over 250%
• Company remains debt free
During 2018, two new applications were made to
North Lincolnshire Council (“NLC”) to extend the
planning term for PEDL180 and PEDL182 and to obtain
permission for development of the Wressle-1 discovery.
The application to extend the planning term was
denied by the NLC's Planning Committee despite being
recommended for approval by NLC’s Planning Officer.
A subsequent appeal was submitted to the Planning
Inspectorate and we were informed in January
2019 that the appeal had been successful and an
extension to the planning term had been granted
for a further year by the Planning Inspector.
Not unsurprisingly, the second and revised application
for development of the Wressle-1 discovery was
again denied by NLC’s Planning Committee, despite
recommendation to allow development by its own
Planning Officer and his positive conclusions within
his report being confirmed by external independent
technical consultants and experts ( JBA Consulting)
engaged by NLC to carry out a robust review of the
revised application. To quote JBA Consulting within its
independent report to the NLC, it stated, “In comparison
with the previous applications, in the new documentation the
main weaknesses identified by the Inspector appear to have
been addressed or can be addressed in planning conditions”.
An appeal submitted to the Planning Inspectorate by the
Operator on behalf of the joint venture partners will be
heard by the Planning Inspector on 5 November 2019.
A Queen’s Counsel has been appointed to assist our
appeal to obtain permission for development of this
conventional oil producing project that would be
beneficial, not only to the many companies which have
invested in this venture, but also to the surrounding
community as supported and vindicated by the “Economic
Growth Plan for North Lincolnshire”, launched by
NLC at the House of Lords in November 2018.
3
www.unionjackoil.comBUSINESS AND STRATEGY CHAIRMAN’S STATEMENT
The Economic Growth Plan for North Lincolnshire
champions the growth of, and diversification of, the
Humber chemical and energy cluster, currently contributing
some £6 billion to the economy. Industries include
petrochemicals, commodity and speciality chemicals,
composite materials, pigments and paints, wind turbines
and pharmaceuticals, and a raft of other associated
industries employing circa 15,000 people in at least
120 companies. Petroleum remains fundamental to these
locally-important industries including in the manufacture
of items such as wind turbines for the renewable energy
sector which rely upon composite materials involving
petroleum products, as do many industrial applications.
The oil that Wressle produced would contribute to
these industries and benefit the region as a whole,
and further afield in the UK. The oil produced at
Wressle would also help offset international oil imports
typically shipped over long distances and Wressle
oil would be refined nearby in Immingham, keeping
trucking and transportation to a minimum, reducing
the carbon footprint and greenhouse gas emissions.
PEDL253 BISCATHORPE (22%)
PEDL253 is within the proven hydrocarbon fairway
of the South Humber Basin and is on-trend with
the Saltfleetby gasfield, Keddington oilfield and
the Louth and North Somercotes Prospects.
Over a century ago, Henry Ward Beecher, the American
social reformer and speaker quoted “One’s best
success comes after their greatest disappointments”.
This statement reflects Union Jack’s thoughts in respect
of the result of the drilling of the Biscathorpe-2 well, the
results of which were reported upon during February 2019,
and more importantly the future and potential success
and remaining upside within the PEDL253 licence area.
Biscathorpe, in the opinion of Union Jack’s management
remains one of the UK’s largest onshore un-
appraised conventional hydrocarbon prospects.
In 1987, British Petroleum drilled the Biscathorpe-1
conventional exploration well and encountered a
thin, oil-saturated section of the sandstone reservoir.
The targeted Basal Westphalian sandstone reservoir
was expected to thicken at the Biscathorpe-2 well
location North of the crest of the “structural high”.
Following the completion of drilling and logging operations
at Biscathorpe-2, preliminary analysis indicated that the
primary objective, the Basal Westphalian Sandstone, was
not encountered as the well was drilled high to prognosis
and did not thicken as expected in the pre-drill model.
The Biscathorpe ’play’ has not been properly tested
by the Biscathorpe-2 well, with the results indicating
the targeted sandstone has the potential to be more
thickly developed to the North and North-East of
the Biscathorpe-2 location away from what appears
to be a more extensive than expected palaeo-high.
Union Jack’s independent technical team is greatly
encouraged by the significant elevated gas readings
and shows from logging supported by calculated oil
saturations in the Dinantian Carbonate over an interval
in excess of 500 feet which included a suite of gas
indications C1 to C5 and nC5 indicative of an effective
petroleum system existing in close proximity to the
Biscathorpe-2 well. Union Jack has commissioned
an independent geochemical evaluation of the gas
shows, the results of which will confirm whether
the gas ratios are consistent with oil associated gases.
The open-hole section of the well has now been
sealed and the well suspended to retain the option
for a potential future side-track following the receipt
of a new sub-surface model once the new well
data is integrated following the re-processing and
re-mapping of the existing 3D seismic data.
Union Jack retains its enthusiasm for the upside potential
within PEDL253 and looks forward to reporting
on events in respect of the licence during 2019.
PEDL143 WEALD BASIN (FORMERLY
HOLMWOOD) (7.5%)
During Q3 of 2018, the previous Operator, Europa Oil
and Gas Limited (“Europa”), announced that the relevant
Government body had not renewed the lease containing
the site of the proposed Holmwood-1 conventional
exploration well. Following this decision, the Operator
withdrew its planning application to drill Holmwood-1.
The well site has been reinstated to its original condition
and the value of the intangible asset has been fully
impaired by £205,308.
In April 2019, Union Jack reached agreement with, the
new Operator, UK Oil & Gas PLC (“UKOG”) to sell
its 7.5% interest in PEDL143 for a consideration of
£112,500. Payment in UKOG shares allows Union Jack
to not only benefit from UKOG’s increased interest in
PEDL143, but also exposure to UKOG’s wider Weald
Basin assets and other projects. Completion is subject
to Oil and Gas Authority approval.
This disposal will allow Union Jack to concentrate
on its focus areas of the East Midlands, Humber Basin
and East Yorkshire, where we hold interests in material
and potentially Company-changing assets.
4
UNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 CHAIRMAN’S STATEMENT
OTHER ASSETS
Union Jack holds interests in nine further projects in
addition to those highlighted above.
Union Jack’s wider portfolio includes licence interests in two
production assets, namely PEDL005(R) Keddington (20%)
and EXL294 Fiskerton Airfield (20%), where combined
production is a steady 50 barrels of oil a day gross.
Both projects hold upside, especially Keddington which
is currently being re-mapped to review future potential
and contains part of PEDL339 the Louth Prospect and
the North Somercotes Prospect. In respect of Fiskerton
Airfield the joint venture partners are investigating the
benefits of further workovers and in-fill drilling to increase
the production output.
PEDL241 North Kelsey (20%) contains the drill-ready
North Kelsey Prospect where an extension for planning
was granted by Lincolnshire County Council in June 2018.
PEDL241 is located within the proven Humberside
platform and the North Kelsey Prospect is situated some
10 kilometres to the South of the Wressle-1 discovery.
North Kelsey will be drilled during late 2019 or 2020,
subject to obtaining farminees.
An interest is held in both PEDL118 Dukes Wood
(16.67%) and PEDL203 Kirklington (16.67%) oilfields
where operations have commenced to re-establish long
term production.
PEDL201 Widmerpool Gulf (26.25%), formerly Burton-
on-the-Wolds, contains significant Bowland Hodder shale
potential. Awards of licences adjacent to PEDL201 to
other parties under the 14th Round offer encouragement
regarding this play type. The directors are considering the
options to generate value from this licence and the favoured
outcome from this potentially significant play type would be
through an industry sale.
PEDL209 Laughton (10%) has no immediate activity
planned on the licence and was fully impaired during 2016
and 2017.
A detailed review of Union Jack’s asset base can be
found in the Review of Operations section within this
Annual Report.
CORPORATE AND FINANCIAL
Union Jack remains debt free and our current cash balance
stands in excess of £2.5 million as at 1 May 2019, with
sufficient funds to pay our share of costs for an extended
well test in the event of a discovery at West Newton
A-2, the acquisition of 3D seismic over further prospects
on PEDL183, operations at Wressle, should there be a
successful outcome of the planning appeal, re-processing
of the 3D seismic in respect of Biscathorpe, and general
administration costs.
In March and October 2018, two oversubscribed placings
and subscriptions for shares were effected, raising £1.25
million and £2.25 million respectively, before expenses.
In April 2019, a further oversubscribed placing and
subscription took place, raising £1.75 million before
expenses. Details of this exercise are reported in note 23,
Events After the Balance Sheet Date.
Given the ongoing Brexit discussions it would be remiss
not to comment on this topic. In respect of the ongoing
discussions and the potential effect on the Company going
forward, it is impossible to predict the effects as Brexit,
or any variation upon that, has not happened at the time
of writing. However, Union Jack is aware that one of our
operators had an issue in respect of trying to hire the
most up-to-date sophisticated equipment from Europe,
however, the uncertainty surrounding the import
/ export and border processes led to some draconian
clauses being inserted into documentation that made
them impossible to accept. The result of this was that
British-based equipment with acceptable specifications
was hired instead.
I would like to thank our shareholders for their continued
support, as well as my colleagues and co-directors, who
provide invaluable advice and continue to champion the
development of the UK onshore hydrocarbon industry for
the benefit of both Union Jack and the wider economy.
I would also like to thank our wider suite of professional
advisers, who have contributed to the efficient running of
Union Jack and have enabled us to engage with investors
to source essential funding which enable our projects to
move forward.
SUMMARY
My confidence in respect of Union Jack’s future, since
the Company’s incorporation, is at its optimum.
The Company eagerly awaits the results of the current
drilling of West Newton A-2, the result of the Planning
Appeal at Wressle and the re-processing of 3D seismic
in respect of Biscathorpe. These ventures are expected
to provide a steady stream of newsflow throughout
2019 and success at any one of these projects has the
potential to dramatically transform your company.
Union Jack’s asset portfolio is well balanced
with the relevant components of production,
development, appraisal and discovery and we are
fully funded for our commitments going forward.
The future of Union Jack remains bright.
David Bramhill
Executive Chairman
13 May 2019
5
www.unionjackoil.comBUSINESS AND STRATEGY STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2018
STRATEGY
Our strategy is the appraisal and exploitation of the assets
currently owned. Simultaneous with this process, the
Company’s management expects to continue to use its
expertise and cash resources to acquire further licence
interests in the UK over areas where there is a short lead time
between the acquisition of the interest and either exploration
drilling or initial production from any oil or gas fields that may
be discovered.
During June 2018, the Company acquired a further
12.5% interest in PEDL180 and PEDL182 for a deferred
consideration of £1.04 million from Celtique Energie
Petroleum Limited. The deferred consideration will be
paid on first oil from the Wressle discovery on the licence
areas. As a result of this transaction the Company now
holds a 27.5% interest in the licences.
In October 2018, the Company raised £2.5 million before
expenses in an oversubscribed placing.
BUSINESS REVIEW
Union Jack Oil plc is a UK registered company, focused
on the exploration for, and future development of,
hydrocarbon projects.
A review of the Company’s operations during the year
ended 31 December 2018 and subsequently to the date
of this report is contained in the Chairman’s Statement
and Review of Operations.
The loss for the year amounted to £1,098,708 (2017:
£746,822).
The directors do not recommend the payment of a dividend
(2017: £nil).
In March 2018, 1,470,588,226 new ordinary shares were
issued for cash at 0.085 pence per share raising £1,250,000
before expenses of £100,390.
In October 2018, 2,647,058,823 new ordinary shares were
issued for cash at 0.085 pence per share raising £2,250,000
before expenses of £156,722.
The enlarged issued share capital following the issue of new
shares described above is 8,450,710,254 ordinary shares
of 0.025 pence each and 831,680,400 deferred shares of
0.225p each.
FUTURE DEVELOPMENTS
The directors intend to continue their involvement with
the licences as disclosed in the Review of Operations. They
continue to seek further acquisition opportunities for onshore
oil and gas exploration and development.
KEY PERFORMANCE INDICATORS
The Company has made good progress during the year ended
31 December 2018. Traditional KPIs are not appropriate
to the Company. Performance is measured by monitoring
exploration costs and ensuring sufficient funds are available
to meet exploration commitments.
The directors were successful in raising funds to ensure
the Company is adequately funded to meet all of its current
commitments.
During March 2018, the Company acquired a further 10%
interest pro-rata from Egdon Resources plc and Montrose
Industries Limited in PEDL253 containing the Biscathorpe-2
Prospect. As a result of this transaction the Company now
holds a 22% interest in the licence.
In March 2018, the Company raised £1.25 million before
expenses in an oversubscribed placing.
During May 2018, the Company acquired a 16.25% interest
in PEDL201 and a 12.5% interest in PEDL181 from Celtique
Energie Petroleum Limited for a cash consideration of £15,000.
During December 2018, the Company acquired a 16.665%
interest in PEDL183 containing the West Newton A-1 gas
discovery from Rathlin Energy (UK) Limited.
Further events which took place after the Balance Sheet date
are described in the Directors’ Report and note 23.
Intangible Assets totalled £3,485,961 (2017: £2,806,278).
Tangible assets totalled £611,139 (2017: £496,859).
The Company’s Income Statement reports revenues of
£165,270 (2017: £46,203) in respect of production income
from the Keddington oilfield and the Fiskerton Airfield oilfield.
PRINCIPAL RISKS AND UNCERTAINTIES
As with the majority of companies within the energy sector
the business of oil and gas exploration and development
includes varying degrees of risk. These risks broadly include
operating reliance on third parties, the ability to monetise
discoveries and the risk of cost overruns. There are also
specific political, regulatory and licensing risks attached
to various projects as well as issues of commerciality,
environmental, economic, competition, reliance on key
personnel, contractor and judicial factors.
Commodity prices will have an impact on potential revenues
and forward investment decisions by the Operator on the
projects invested in, as the economics may adversely be
affected. However, onshore development costs are lower
than for offshore developments. The Company does not use
hedging facilities. The Company holds adequate Directors’
Insurance cover and the Company is covered by the
Operator’s insurance during drilling and other operational
situations. The Board, in its opinion, has mitigated risks as
far as reasonably practicable.
The principal risks to the Company as well as the mitigation
actions are set out below:
Strategic: A weak or poorly executed development
process fails to create shareholder value
This can be effected by selection of exploration projects
where hydrocarbons are not located.
This risk is mitigated through performing a detailed technical
review, both internally by management and externally by
advisers before an investment decision is taken, for each
investment which includes a valuation exercise on the potential
return on monies spent. The amount of interest acquired
in each project is dependent upon the Company’s financial
capability to fulfil its obligation. The Company’s technical
management team is highly skilled with many years’ industry
experience.
6
UNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2018
Operational: Operational events can have
an adverse effect
The main risk is the potential failure to obtain planning
permission in respect of the Company’s licence interests.
This risk is mitigated by the appointment of specialist
professional entities who work together to compile planning
applications designed to achieve a positive result.
A further potential risk is the reliance upon the Operators
Egdon Resources plc, Europa Oil & Gas Limited and Rathlin
Energy (UK) Limited and their ability to determine timetables
and priorities which are beyond the control of Union Jack.
External Risk: Lack of growth caused by political,
industry or market factors
The Company operates exclusively within the United
Kingdom (“UK”) and the Board considers that the UK
onshore hydrocarbon arena offers excellent value under
a regime with a very clearly spelt out protocol giving
the opportunity to develop assets unhindered.
As mentioned in this review, oil and gas price volatility
can cause concern. However, onshore developments can
continue as planned in most cases as development costs
are lower than for offshore. Lack of control over key assets
is mitigated by the fact that our Operators of choice, Egdon
Resources plc, Europa Oil & Gas Limited and Rathlin Energy
(UK) Limited have a very transparent operating protocol and
all partners are involved, both formally and informally, with
offering input to the ongoing development of the projects in
which they are involved. The Company’s in-house technical
team is involved at all times and regular technical meetings
are held in which opportunity is given to comment.
Financial Risk: The lack of ability to meet financial
obligations
The main risk is the lack of funds being available to pay
for our future drilling commitments.
All drilling expenditure associated with exploration assets
is forecast and budgeted at least 12 months in advance.
The Company raises its funds through the financial
market by share issues and does not become involved in
derivatives and borrowing to fund its financial obligations.
Further comment in respect of Financial Risk Management
Objectives and Policies, Cash Flow Risk, Credit Risk, and
Liquidity Risk are also covered within this Strategic Report.
FINANCIAL RISK MANAGEMENT OBJECTIVES
AND POLICIES
The Company’s activities expose it to a number of financial
risks including liquidity risk, oil price risk, credit risk, and cash
flow risk.
The use of financial derivatives is governed by the Company’s
policies approved by the Board of Directors, which provide
written principles on the use of financial derivatives to manage
these risks. The Company does not use derivative financial
instruments for speculative purposes.
LIQUIDITY RISK
In order to maintain liquidity to ensure that sufficient
funds are available for ongoing operations and future
developments, the Company uses its existing cash funds.
OIL PRICE RISK
The Company is exposed to oil price risk associated with sales
of oil from production. The Company does not currently
consider it necessary to use hedging instruments to manage
its exposure to this risk.
CREDIT RISK
The Company’s principal financial assets are bank balances
and cash. The credit risk on liquid funds is limited because
the counterparty is a bank with high credit-rating.
CASH FLOW RISK
During the year the Company’s activities did not expose it to
financial risks of changes in foreign currency exchange rates.
GOING CONCERN
The Company’s business activities, together with the factors
likely to affect its future development, performance and
position are set out in the Chairman’s Statement, Review of
Operations and the Strategic Report. The directors’ forecasts
demonstrate that the Company will meet its day-to-day
working capital and share of estimated drilling costs over the
forecast period (being at least 12 months from the date the
financial statements were approved) from the cash held on
deposit on 31 December 2018 and funds raised subsequent
to the year end. The principal risk to the Company’s working
capital position is drilling cost overruns. The Company has
sufficient funding to meet planned drilling expenditures and a
level of contingency. Taking account of these risks, sensitised
forecasts show that the Company should be able to operate
within the level of funds currently held at the date of approval
of these financial statements. The directors have a reasonable
expectation that the Company has adequate resources
to continue in operational existence for the foreseeable
future. Thus they continue to adopt the going concern
basis of accounting in preparing the financial statements.
APPROVAL OF THE BOARD
This Strategic Report contains certain forward- looking
statements that are subject to the usual risk factors and
uncertainties associated with the oil and gas exploration
and production business. While the directors believe the
expectation reflected within the Annual Report to be
reasonable in light of the information available up to the
time of their approval of this report, the actual outcome
may be materially different owing to factors either beyond
the Company’s control or otherwise within the Company’s
control, for example owing to a change of plan or strategy.
Accordingly, no reliance may be placed on the forward-looking
statements.
On behalf of the Board
David Bramhill
Executive Chairman
13 May 2019
7
www.unionjackoil.comBUSINESS AND STRATEGY REVIEW OF OPERATIONS
PEDL180
PEDL182
Wressle
Discovery
PEDL182
Broughton
North
INTEREST HELD BY
UNION JACK OIL PLC 27.5%
Further acquisitions have
increased Union Jack’s
interest in PEDL180 and
PEDL182 containing the
Wressle hydrocarbon
discovery to 27.5%.
In January 2019, the Planning
Inspector consented to the
extension of planning for a
further year.
Following a further acquisition of
interest in PEDL180 and PEDL182
during 2018, Union Jack now holds
a 27.5% interest in these licences.
These licences contain the Wressle-1
conventional discovery well from
which first commercial oil is expected
to flow at an initial constrained rate
of approximately 500 barrels a day
following receipt of planning approval.
Located in Lincolnshire, on the
western margin of the Humber
Basin, the above licences contain the
Wressle-1 oil discovery and are on
trend with the nearby discoveries at
Crosby Warren, Brigg and Broughton.
In June 2018, the Company acquired
a further 12.5% interest in PEDL180
and PEDL182 from Celtique Energie
Petroleum Limited for deferred
consideration of £1.04 million.
The results of a Competent
Person’s Report prepared by ERC
Equipoise Limited (“ERCE”) were
published in September 2016.
ERCE made independent estimates
of the Reserves, Contingent and
Prospective Resources associated
with the Wressle-1 discovery and
the Broughton North Prospect.
There were several highlights
considered within this
report which included:
• Oil and gas reserves and
Contingent Resources identified
by the Competent Person in
aggregate exceed the Operator’s
original pre-drill estimates
• Gross P Mean Original Oil in Place
(“OOIP”) is 14.8 million stock tank
barrels in aggregate across three
reservoir sands, the Ashover Grit,
Wingfield Flags and Penistone Flags,
of which 2.15 million stock tank
barrels are potentially recoverable
• Gross 2P oil Reserves of 0.62 million
stock tank barrels identified across
two reservoir sands, the Ashover
Grit and Wingfield Flags that form
the basis of the initial development
plan which currently excludes
development of the material
Penistone Flags reservoir sands.
In respect of the Broughton North
Prospect ERCE commented;
• The Broughton North Prospect
has OOIP of 3.43 million stock
tank barrels, gross unrisked
Mean Prospective Resources of
0.51 million stock tank barrels
and 0.51 bcf of gas in aggregate
across two reservoir sands, the
Ashover Grit and Penistone Flags
• Broughton North is a drill-
ready prospect, subject to
obtaining planning permission
Union Jack’s asset
portfolio is well balanced,
combining production,
discovery, appraisal and
exploration.
1
PEDL180
PEDL182
Wressle Discovery
Broughton North
27.5%
2 PEDL183 West Newton
16.665%
3 PEDL253
Biscathorpe
PEDL005(R) Keddington Oilfield
Louth
North Somercotes
4
PEDL339
Louth Extension
5 EXL294
Fiskerton Airfield
Oilfield
6 PEDL241 North Kelsey
7
PEDL118 Dukes Wood
PEDL203
Kirklington
22%
20%
20%
20%
16.67%
8 PEDL201 Widmerpool Gulf
26.25%
9 PEDL181 Humber Basin
12.5%
10 PEDL209
Laughton
11 PEDL143 Weald Basin
10%
7.5%
8
UNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
REVIEW OF OPERATIONS
• The Broughton North Prospect
benefits from the results of the
Wressle-1 oil and gas discovery
and the Broughton-B1 exploration
well that significantly reduces the
geological risk over PEDL180 and
PEDL182. Consequently ERCE
attributes a high geological chance
of success (“COS”) with a range
of 40% to 49% for the prospect
• Mapping of the Broughton North
Prospect also benefits from the
same high quality 3D seismic
data as was used to identify the
Wressle-1 oil and gas discovery.
The Wressle-1 well was spudded in
July 2014. The Wressle-1 Prospect
was defined on proprietary 3D
seismic data acquired in 2012,
and the well was drilled as a
deviated well to a total depth
(“TD”) of 2,240 metres and was
designed to intersect a number of
prospective Upper Carboniferous
age sandstone reservoirs in a
structurally favourable position near
the crest of the Wressle structure.
During August 2014, TD was reached
and elevated mud gas readings were
observed over large parts of the
interval from the top of the Penistone
Flags reservoir target (1,831.5 metres
MD- measured depth) to TD.
C.E.
The well was logged using
measurement whilst drilling (MWD)
logging tools run on the drill string.
Petrophysical evaluation of the
log data indicated the presence of
hydrocarbon pay in three intervals.
• Penistone Flags – up to 19.8 metres
measured thickness
(15.9 metres vertical thickness)
• Wingfield Flags – up to 5.64 metres
measured thickness
(5.1 metres vertical thickness)
• Ashover Grit – up to 6.1 metres
measured thickness
(5.8 metres vertical thickness)
In February 2015, shareholders were
updated on the initial successful Ashover
Grit flow test which recorded 80 bopd
and 47,000 cubic feet of gas per day
during a 16 hour main flow period.
No appreciable volumes of water
were observed. The oil is of good
quality with a gravity of 39-40º API.
Following the Ashover Grit test,
shareholders were updated on the
initial successful Wingfield Flags flow
test which recorded up to 182 bopd
of good quality oil with a gravity
of 39-40º API along with up to
456,000 cubic feet of gas per day.
PEDL146
EXL288
1
6
1
L
D
E
P
NORTH SEA
PEDL183
PEDL182
Broughton
North
PEDL181
PEDL179
PL162
PEDL 178
8
8
2
L
X
E
PEDL 174
TRUMFLEET
PL161
HATFIELD
9
6
1
L
D
E
P
PEDL182
PEDL173
PEDL180
HATFIELD
PL162
PEDL241
PEDL043
PEDL043
PEDL140
PEDL209
ML004
BECKINGHAM
ML004
CORRINGHAM
ML004
PEDL012
PEDL200
PEDL
210
PEDL006
PEDL
210
WEST FIRSBY
PEDL006
COLD HANWORTH
EAST
GLENTWORTH
PEDL253
SOUTH LEVERTON
ML007
SCAMPTON NORTH
SCAMPTON
PEDL007
BOTHAMSALL
PEDL210
PL179
NEWTON-ON-TRENT
NETTLEHAM
FARLEYS WOOD
ML003
PEDL130
PEDL090
EGMANTON
WHISBY
BECKERING
STAINTON
WELTON
FISKERTON AIRFIELD
EXL294
PEDL180
PEDL182
Wressle
Discovery
PEDL005
PEDL005
PEDL005
SALTFLEETBY
EAKRING
KIRKLINGTON
PEDL
118
PEDL
203
PEDL202
PEDL255
PEDL208
PEDL254
PEDL204
PL220
PEDL201
REMPSTONE
PL220
10km
Gas Field
Oil Field/Discovery
Prospect
9
PEDL021
GOODWORTH
PL116
HUMBLY GROVE
PL233
PL249
STOCKBRIDGE
PEDL070
AVINGTON
DL004
ALBURY
BROCKHAM
PL235
PALMERS WOOD
ML021
PEDL246
BLETCHINGLEY
ML018
PL182
EXL189
EXL189
PEDL137
PEDL143
PEDL246
PEDL235
PEDL243
PEDL231
PEDL234
PEDL244
PL240
HORNDEAN
PL211
PEDL126
PEDL233
SINGLETON
PL205
STORRINGTON
PL241
LIDSEY
www.unionjackoil.comBUSINESS AND STRATEGY
REVIEW OF OPERATIONS
The table below shows the net volumes of hydrocarbons attributable to Union Jack
Gross Volumes
Net Volumes attributable to Union Jack
OIL MMSTB
GAS BCF
OIL EQUIV
MMBOE
OIL MMSTB
GAS BCF
OIL EQUIV
MMBOE
2P Ashover Grit and
Wingfield Flags
2C Penistone Flags
Broughton North Mean
Unrisked Prospective
Resources
0.62
1.53
0.51
The next horizon to be flow tested
was the Penistone Flags, the last of
three hydrocarbon bearing zones
identified in the well. The Penistone
Flags test produced gas at restricted
flow rates of up to 1.7 million cubic
feet of gas per day with associated
oil of up to 12 bopd and no free
water from a 9 metre perforated
zone at the top of the formation. Gas
flow rates were constrained by the
equipment and flaring limits imposed
by the environmental permit. The
gas and oil are of good quality with
the oil having a gravity of 35º API.
A further test was carried out to
evaluate the gas-oil and oil-water
contacts in the Penistone Flags by
perforating the formation deeper in
the section. Zone 3a was perforated
over a 7.5 metre interval and produced
good quality oil with a gravity of 33º
API. A total of 98.5 barrels of oil were
recovered during the test, of which
flow induced by swabbing operations
produced 34.3 barrels of oil. This
equates to approximately 77 bopd.
The Penistone Flags Zone 3a interval
was pumped for a period of time
and achieved average rates over
a three day period of 131 bopd
0.20
2.00
0.51
0.65
1.86
0.60
0.17
0.42
0.14
0.05
0.55
0.14
0.18
0.51
0.16
and 222,000 cubic feet of gas per
day, together totalling 168 barrels
of oil equivalent per day (“boepd”)
with an average producing gas oil
ratio of approximately 1,700 cubic
feet of gas per barrel of oil.
Due to increasing gas rates, the pump
was then stopped and the well allowed
to naturally flow to surface with a
series of decreasing choke sizes from
12/64” down to 8/64” (being the
smallest available). Average rates over
a two day period on the 8/64” choke
were 105 bopd with 465,000 cubic
feet of gas per day, together totalling
182 boepd.
Following the Extended Well Test on
Zone 3a, it was noted that both oil
and gas had flowed without evidence
of any water. Encouragingly, the well
test data together with the log data
indicate that the elevation of the oil
water contact is deeper than originally
considered for the Penistone Flags
reservoir.
In January 2018, an appeal against
the refusal of planning permission
for the development of Wressle was
declined. Having fully considered
information previously provided by
the Planning Inspector, the Operator
submitted a new planning application
for the extension of planning for a
further year.
A second application was later
submitted for the development of the
Wressle oil discovery to the North
Lincolnshire Council. Both applications
were denied by the North Lincolnshire
Council.
Subsequently, appeals were lodged by
the Operator against these decisions.
In January 2019, the joint venture
was informed that the appeal in
respect of the extension of planning
was approved by the Planning
Inspector and the planning period now
runs for a further year from the date
of consent to 24 January 2020.
The appeal documentation in respect
of the development of Wressle was
submitted in February 2019.
The appeal will be heard by the
Planning Inspector on 5 November
2019.
Confidence remains that the Wressle
development will be brought to
production status and all credible
avenues to achieve this objective will
be pursued. An Environment Agency
permit for production is in place.
On this basis the licence costs are not
impaired in these financial statements.
THE INTERESTS IN PEDL180 AND PEDL182 ARE HELD BY:
Egdon Resources U.K. Limited (Operator)
Europa Oil & Gas Limited
Union Jack Oil plc
Humber Oil & Gas Limited
30.0%
30.0%
27.5%
12.5%
10
UNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
REVIEW OF OPERATIONS
PEDL183
West Newton
INTEREST HELD BY
UNION JACK OIL PLC 16.665%
Best Estimate 189 billion
cubic feet equivalent
of recoverable gas
Contingent Resource
with NPV10% of in excess
of US$300 million.
West Newton A-2
appraisal well underway.
Proximity to gas markets
and infrastructure.
BUSINESS AND STRATEGY
In November 2018, Union Jack
completed a farm-in agreement with
Rathlin Energy (UK) Limited (“Rathlin”),
a subsidiary of Canadian registered
Connaught Oil & Gas Ltd, for a
16.665% licence interest in PEDL183.
Union Jack has acquired the interest in
PEDL183 by paying 25% of the West
Newton A-2 drilling appraisal costs.
PEDL183 is located onshore East
Yorkshire and within the Western
sector of the Southern Zechstein Basin
and contains the significant conventional
West Newton A-1 gas discovery with
a Best Estimate Contingent Resource
of 189 bcfe or 31.5 million barrels of
oil equivalent (“MMboe”) gross and
numerous other prospects and leads.
There are numerous positive
highlights to take from this farm-in;
• The acquisition of a 16.665%
interest in the large 176,000
acre PEDL183 licence containing
the significant West Newton
A-1 onshore gas discovery
• Best Estimate Contingent Resources
of 189 bcfe of gas equivalent or
31.5 million barrels of oil equivalent
gross, assigned to West Newton
in a Competent Person’s Report
• West Newton A-1 gas discovery
is on-trend with the prolific
offshore Hewett gas complex
• Proximity to existing gas
pipelines and infrastructure
• Fully funded
• West Newton A-2 conventional
appraisal well currently being drilled
• Compelling, immediate and
future value from a development
of the gas discovery alone
• Operator’s NPV10% of in
excess of US$300 million
• Considerable upside potential
from the lower Cadeby Reef
oil exploration target
• Further significant upside potential
from numerous other prospects
and leads within the licence area.
PEDL146
PEDL183
West Newton
PEDL183
WEST NEWTON A-1
NORTH SEA
PEDL005
PEDL005
PEDL005
SALTFLEETBY
EXL288
1
6
1
L
D
E
P
8
8
2
L
X
E
TRUMFLEET
PL161
HATFIELD
9
6
1
L
D
E
P
PL162
PEDL182
PEDL173
PEDL180
HATFIELD
PL162
PEDL181
PEDL241
PEDL043
PEDL043
PEDL209
PEDL140
ML004
BECKINGHAM
ML004
CORRINGHAM
ML004
PEDL012
PEDL200
PEDL
210
PEDL006
PEDL
210
WEST FIRSBY
PEDL006
COLD HANWORTH
EAST
GLENTWORTH
PEDL253
SOUTH LEVERTON
ML007
SCAMPTON NORTH
SCAMPTON
PEDL007
BOTHAMSALL
PEDL210
PL179
NEWTON-ON-TRENT
NETTLEHAM
FARLEYS WOOD
ML003
PEDL130
PEDL090
EGMANTON
WHISBY
BECKERING
STAINTON
WELTON
FISKERTON AIRFIELD
EXL294
C.E.
EAKRING
KIRKLINGTON
PEDL
118
PEDL
203
PEDL202
PEDL255
PEDL208
PEDL254
PEDL204
10km
Gas Field
Prospect
www.unionjackoil.com
PL220
PEDL201
REMPSTONE
PL220
11
PEDL021
GOODWORTH
PL116
HUMBLY GROVE
PL233
PL249
STOCKBRIDGE
PEDL070
AVINGTON
DL004
ALBURY
BROCKHAM
PL235
PALMERS WOOD
ML021
PEDL246
BLETCHINGLEY
ML018
PL182
EXL189
EXL189
PEDL137
PEDL143
PEDL246
PEDL235
PEDL243
PEDL231
PEDL234
PEDL244
PL240
HORNDEAN
PL211
PEDL126
PEDL233
SINGLETON
PL205
STORRINGTON
PL241
LIDSEY
REVIEW OF OPERATIONS
The drilling of the West Newton A-2
appraisal well is currently underway
and will be targeting the Kirkham
Abbey Shoal and Cadeby reef
formations for gas and oil respectively.
The West Newton A-1 discovery is
on-trend with the prolific offshore
Hewett gasfield complex. Regionally,
West Newton and Hewett are
located in the Southern Permian
Basin which contains approximately
24 trillion cubic feet (“Tcf ”) of
gas and 250 million barrels of
oil (“MMbbls”) of oil combined
in production areas in Poland,
Germany and the Netherlands.
The West Newton A-1 gas discovery
well was drilled and logged in 2014.
Reflecting its status as an existing
gas discovery, the current West
Newton appraisal well has a combined
geological and commercial Probability
of Success of over 60% in respect of
the Kirkham Abbey Shoal formation.
The Operator’s estimated unrisked
project economic evaluation indicates
NPV10% before tax of in excess of
US$300 million and offers an excellent
rate of return of circa 52.5%, Based
on Union Jack’s share of the drilling
costs and the Operator’s NPV10%,
the Company is acquiring an interest
in a gas discovery with Contingent
Resources for less than US$0.03
per barrel of oil equivalent.
The Kirkham Abbey Shoal Contingent Resources (gross)
Total Prospective Resource
(MMboe)
LOW
BEST
HIGH
MEAN
15.9
31.5
62.6
36.4
12
“
The Operator’s
estimated unrisked
Cadeby Reef
evaluation indicates
NPV10% before tax
of US$899 million
and yields a 111.3%
rate of return.
”
The Operator has also identified a
significant oil exploration target in the
Cadeby Reef formation located below
the existing discovered gas Contingent
Resources. This secondary target will
also be penetrated, if present during
the current drilling. The Cadeby
Reef has Best Estimate Prospective
Resources of 79.1 million boe gross.
The Cadeby Reef prospect has
an estimated geological chance
of success of some 26%.
The Operator’s estimated unrisked
project evaluation indicates NPV10%
before tax of US$899 million and
yields a 111.3% rate of return.
Rathlin has also mapped a number of
additional attractive prospects and
leads on the licence that would add to
the already significant resources in situ.
UNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 REVIEW OF OPERATIONS
Cadeby Reef Prospective Resources (gross)
Total Prospective Resource
(MMboe)
LOW
BEST
HIGH
MEAN
42.8
79.1
146.0
88.6
A Competent Person’s Report
(“CPR”) was prepared for Connaught
in July 2017 by Deloitte LLP, an
independent company, that conforms
to SPE-PRMS guidelines. The Deloitte
CPR incorporates data from a
proprietary three component 3D
seismic survey acquired in 2014,
following the drilling of the West
Newton A-1 discovery well, and
Deloitte has assigned Contingent
Resources to the discovery.
The licence is ideally situated with
already major infrastructure in place
or relatively nearby which enhances
marketing and sales options.
There are two key UK gas terminals
located on licence, the Perenco
operated Dimlington, and Easington,
operated by Centrica. Both terminals
are important to the UK National
Grid and are connected via pipeline to
offshore gasfields. There is also a well-
developed gas pipeline infrastructure
within and surrounding the licence
area as shown in the diagram below.
The Total operated Lindsey and Phillips
66 operated Humber oil refineries are
located to the South of PEDL183.
PEDL183
National Grid high pressure
gas pipe locations
RE indentified leads/prospects
National Grid gas compressor station
West Newton A-1
ALDBROUGH
HORNSEA
SSE
px group
SALTEND
CHEMICAL
(INEOS)
ENGIE
(MITSUI)
LINDSEY
(TOTAL)
KILLINGHOLME
(PHILLIPS 66)
Existing Pipeline Infrastructure
THE INTERESTS IN PEDL183 ARE HELD BY:
Rathlin Energy (UK) Limited
Union Jack Oil plc
Humber Oil & Gas Limited
DIMLINGTON
EASINGTON
(PERENCO)
(CENTRICA)
10km
66.67%
16.665%
16.665%
Also, in close proximity are gas
fired electric generation facilities
with a combined capacity of over
4,700MW of power. Nearby power
stations include Killingholme A
and B, Immingham and Saltend.
Other infrastructure includes the Saltend
Chemical Park, host to nine different
companies including Engie and Ineos.
13
www.unionjackoil.comBUSINESS AND STRATEGY REVIEW OF OPERATIONS
PEDL253
Biscathorpe
INTEREST HELD BY
UNION JACK OIL PLC 22%
Biscathorpe-2 well suspended
for potential side-track
operation.
C.E.
Significant oil and gas shows
over 500 feet in the Dinantian
Carbonate including a suite of
gas indications C1 to C5 and
nC5, indicative of an effective
petroleum system existing in
close proximity.
PEDL253 is located in Lincolnshire,
within the proven hydrocarbon fairway
of the Humber Basin, on trend with the
Saltfleetby gasfield and the Keddington
oilfield which produces oil from the
Upper Carboniferous Westphalian
aged reservoir sandstones.
In March 2018, the Company acquired
a further 10% economic interest
pro-rata from Egdon and Montrose
bringing the interest held to 22%.
The Biscathorpe structure was
initially drilled by BP in 1987 which
encountered a thin oil bearing sand
of lower Westphalian age.
In January 2019, the Biscathorpe-2
well was spudded and drilled to a
total depth of 2,133 metres within the
Dinantian. The sand unit was predicted
to thicken away from the crest of the
structure and the Operator’s Best
Estimate was a gross Prospective
Resource of 14 million barrels of oil,
with a chance of success of 40%.
PEDL146
EXL288
1
6
1
L
D
E
P
NORTH SEA
PEDL179
PL162
PEDL 178
PEDL183
PEDL181
8
8
2
L
X
E
PEDL 174
TRUMFLEET
PL161
HATFIELD
9
6
1
L
D
E
P
PEDL182
PEDL173
PEDL180
HATFIELD
PL162
PEDL241
PEDL043
PEDL043
PEDL140
PEDL209
ML004
BECKINGHAM
ML004
CORRINGHAM
ML004
PEDL012
PEDL200
PEDL
210
PEDL006
PEDL
210
WEST FIRSBY
PEDL006
COLD HANWORTH
EAST
GLENTWORTH
PEDL253
SOUTH LEVERTON
ML007
SCAMPTON NORTH
SCAMPTON
PEDL007
BOTHAMSALL
PEDL210
PL179
NEWTON-ON-TRENT
NETTLEHAM
FARLEYS WOOD
ML003
PEDL130
PEDL090
EGMANTON
WHISBY
BECKERING
STAINTON
WELTON
FISKERTON AIRFIELD
EXL294
PEDL005
PEDL005
PEDL005
SALTFLEETBY
EAKRING
KIRKLINGTON
PEDL
118
PEDL
203
PEDL202
PEDL253
Biscathorpe
PEDL255
PEDL208
10km
PEDL254
PEDL204
PL220
PEDL201
REMPSTONE
PL220
Gas Field
Oil Field/Discovery
Prospect
During February 2019, following logging
and other technical work, preliminary
analysis indicated that the primary
objective, the Basal Westphalian
Sandstone was not encountered at the
Biscathorpe-2 well location and did not
thicken with respect to Biscathorpe-1
as expected in the pre-drill model.
The Biscathorpe ‘play’ has thus not
been properly tested by the well.
The Basal Westphalian Sandstone
has potential to be thickly developed
to the North and North-East of the
Biscathorpe-2 location, away from
what appears to be a more extensive
than expected palaeo high.
The Union Jack technical team were
also highly encouraged by the presence
of a suite of gas indications, C1 to C5
and nC5 which are indicative of an
effective petroleum system existing in
the proximity of the Biscathorpe-2 well.
The Biscathorpe-2 well has been
suspended in order to retain the
option for a potential side-track
which will be considered once the
new well data is integrated into an
updated subsurface model and more
information has been acquired over
what remains a high potential project
in the view of Union Jack.
14
THE INTERESTS IN PEDL253 ARE HELD BY:
Egdon Resources U.K. Limited (Operator)
Montrose Industries Limited
Union Jack Oil plc
Humber Oil & Gas Limited
PEDL021
GOODWORTH
PL116
HUMBLY GROVE
DL004
ALBURY
BROCKHAM
PL235
PALMERS WOOD
ML021
PL182
BLETCHINGLEY
PEDL246
ML018
PEDL137
EXL189
EXL189
PEDL143
PEDL246
35.8%
22.2%
22.0%
20.0%
PL233
PL249
STOCKBRIDGE
PEDL070
AVINGTON
PEDL235
PEDL243
PEDL231
PEDL234
PEDL244
PL240
HORNDEAN
PL211
PEDL126
PEDL233
SINGLETON
PL205
STORRINGTON
PL241
LIDSEY
UNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
REVIEW OF OPERATIONS
PEDL005(R)
Keddington
Louth Prospect
North Somercotes
PEDL339
Louth Extension
INTEREST HELD BY
UNION JACK OIL PLC 20%
Producing oilfield with
increased production
potential from two
additional prospects.
Louth Prospect extends
into PEDL339.
KEDDINGTON OILFIELD
Union Jack owns a 20% interest
in Keddington and the associated
infrastructure and production
facilities. Union Jack receives 20%
of all production revenues. The
partners in Keddington are seeking
to maximise the value of the
“Greater Keddington” area through
two additional prospects located
within PEDL005(R), namely the
Louth oil and the North Somercotes
gas prospects. As part of the
acquisition, Union Jack also holds
a 20% interest in both of these
prospects.
Keddington has produced in
excess of 300,000 barrels of oil
to date and is currently producing
approximately 30 bopd from the
Keddington-3Z well. Testing of the
Keddington-5 sidetrack well, drilled
in 2016, saw production dominated
by formation water and plans are
being considered to target undrained
reservoir sequences.
The Operator is reviewing the
possibilities of further sidetrack
drilling at Keddington.
LOUTH PROSPECT
NORTH SOMERCOTES
The Louth oil prospect is located
mostly within PEDL005(R) and
extends into PEDL339. Located
on the margins of the Humber
Basin, the prospect is defined on
reprocessed 3D seismic data and
is estimated by the Operator to
contain stock tank oil initially in
place (“STOIIP”) of 5.5 million
barrels and gross mean Prospective
Resources of 1.2 million barrels
with an attractive COS of 37%.
Located on the margins of the Humber
Basin, the North Somercotes gas
prospect is within PEDL005(R) to the
North of the Saltfleetby gasfield and
is estimated by the Operator to contain
gross mean Prospective Resources
of 11.0 billion cubic feet of gas and
to have a COS of 25%.
THE INTERESTS IN PEDL005(R) ARE HELD BY:
Keddington
Oilfield
PEDL005(R)
Excluding Keddington
Egdon Resources
U.K. Limited (Operator)
Terrain Energy Limited
PEDL146
Union Jack Oil plc
PEDL179
PL162
PEDL 178
EXL288
1
6
1
L
D
E
P
8
8
2
L
X
E
PEDL 174
TRUMFLEET
PL161
HATFIELD
9
6
1
L
D
E
P
PEDL182
PEDL173
PEDL180
HATFIELD
PL162
45.0%
35.0%
20.0%
PEDL183
PEDL181
PEDL005(R)
Louth
Prospect
PEDL241
65.0%
15.0%
20.0%
NORTH SEA
PEDL005(R)
North
Somercotes
Prospect
PEDL043
PEDL043
PEDL140
PEDL209
ML004
BECKINGHAM
ML004
CORRINGHAM
ML004
PEDL012
PEDL200
EAST
GLENTWORTH
PEDL253
PEDL
210
PEDL006
PEDL
210
WEST FIRSBY
PEDL006
COLD HANWORTH
SOUTH LEVERTON
SCAMPTON NORTH
BECKERING
PEDL005
PEDL005
PEDL005
SALTFLEETBY
ML007
PEDL007
SCAMPTON
BOTHAMSALL
PEDL210
PL179
NEWTON-ON-TRENT
NETTLEHAM
FARLEYS WOOD
ML003
PEDL130
PEDL090
EGMANTON
WHISBY
C.E.
EAKRING
KIRKLINGTON
PEDL
118
PEDL
203
PEDL202
STAINTON
WELTON
FISKERTON AIRFIELD
EXL294
10km
PEDL005(R)
Keddington
Oilfield
Gas Field
Oil Field/Discovery
Prospect
PEDL255
PEDL208
PEDL254
PEDL204
PL220
PEDL201
REMPSTONE
PL220
15
PEDL021
GOODWORTH
PL116
HUMBLY GROVE
PL233
PL249
STOCKBRIDGE
PEDL070
AVINGTON
DL004
ALBURY
BROCKHAM
PL235
PALMERS WOOD
ML021
BLETCHINGLEY
PEDL246
ML018
PL182
EXL189
EXL189
PEDL137
PEDL143
PEDL246
PEDL235
PEDL243
PEDL231
PEDL234
PEDL244
PL240
HORNDEAN
PL211
PEDL126
PEDL233
SINGLETON
PL205
STORRINGTON
PL241
LIDSEY
www.unionjackoil.comBUSINESS AND STRATEGY
Oil production since resumption
of operations to date exceeds
7,000 barrels gross and product is
being sold and transported by road
tanker to a refinery at Immingham,
North East Lincolnshire.
There is also a dedicated water
disposal well (FA-2) to re-inject any
produced water into the reservoir
for pressure support.
Fiskerton has suffered from a marked
lack of investment by its previous
owners over the past few years.
The Joint Venture partners are
investigating the potential to increase
further production through infill drilling
and a further workover on FA-1.
THE INTERESTS IN EXL294 ARE HELD BY:
PEDL146
Egdon Resources U.K. Limited (Operator)
NORTH SEA
Union Jack Oil plc
PEDL179
PL162
PEDL 178
PEDL183
PEDL181
EXL288
1
6
1
L
D
E
P
8
8
2
L
X
E
PEDL 174
TRUMFLEET
PL161
HATFIELD
9
6
1
L
D
E
P
PEDL182
PEDL173
PEDL180
HATFIELD
PL162
PEDL241
80%
20%
PEDL043
PEDL043
PEDL140
PEDL209
ML004
BECKINGHAM
ML004
PEDL012
PEDL200
PEDL
210
PEDL006
CORRINGHAM
ML004
EXL294
Fiskerton
Airfield
Oilfield
EAST
GLENTWORTH
PEDL
210
WEST FIRSBY
PEDL006
SOUTH LEVERTON
ML007
SCAMPTON NORTH
SCAMPTON
PEDL007
BOTHAMSALL
PEDL210
PL179
NEWTON-ON-TRENT
NETTLEHAM
FARLEYS WOOD
ML003
PEDL130
PEDL090
EGMANTON
WHISBY
COLD HANWORTH
BECKERING
STAINTON
WELTON
FISKERTON AIRFIELD
EXL294
PEDL005
PEDL005
PEDL253
PEDL005
SALTFLEETBY
C.E.
EAKRING
KIRKLINGTON
PEDL
118
PEDL
203
PEDL202
PEDL255
PEDL208
PEDL254
PEDL204
PL220
PEDL201
REMPSTONE
PL220
10km
Gas Field
Oil Field/Discovery
Prospect
REVIEW OF OPERATIONS
EXL294
Fiskerton
Airfield Oilfield
INTEREST HELD BY
UNION JACK OIL PLC 20%
Successful workovers
on production wells.
In excess of 7,000
barrels of oil produced
during 2018.
In November 2017, Union Jack
acquired a 20% economic interest
in EXL294 containing the producing
Fiskerton Airfield oilfield.
EXL294 is located approximately
seven miles East of the City of
Lincoln. Fiskerton was discovered
in 1997 and cumulative production
has totalled approximately 440,000
barrels of oil from the mapped
Oil in Place of 2.2 million barrels.
Fiskerton was producing
approximately 16 barrels of oil per
day from one of two production wells
(FA-3). The second production well
(FA-1) had been shut in for several
months. Workovers of FA-1 and
FA-3 were successfully completed in
the period January to March 2018.
Production operations were
resumed at Fiskerton and initial
field production, prior to further
optimisation and further operations
during the coming period, including
the increasing of the pumping
rate, is approximately 25 bopd of
good quality (35.2° API gravity)
oil, a significant increase on the
pre-workover rate of 16 bopd.
16
PEDL021
GOODWORTH
PL116
HUMBLY GROVE
PL233
PL249
STOCKBRIDGE
PEDL070
AVINGTON
DL004
ALBURY
BROCKHAM
PL235
PALMERS WOOD
ML021
PEDL246
BLETCHINGLEY
ML018
PL182
EXL189
EXL189
PEDL137
PEDL143
PEDL246
PEDL235
PEDL243
PEDL231
PEDL234
PEDL244
PL240
HORNDEAN
PL211
PEDL126
PEDL233
SINGLETON
PL205
STORRINGTON
PL241
LIDSEY
BUSINESS AND STRATEGY
NORTH SEA
PEDL183
PEDL181
PEDL241
North Kelsey
PEDL146
EXL288
1
6
1
L
D
E
P
PEDL179
PL162
PEDL 178
8
8
2
L
X
E
PEDL 174
TRUMFLEET
PL161
HATFIELD
9
6
1
L
D
E
P
PEDL182
PEDL173
PEDL180
HATFIELD
PL162
PEDL241
PEDL043
PEDL043
PEDL140
PEDL209
ML004
BECKINGHAM
ML004
CORRINGHAM
ML004
PEDL012
PEDL200
PEDL
210
PEDL006
PEDL
210
WEST FIRSBY
PEDL006
COLD HANWORTH
EAST
GLENTWORTH
PEDL253
SOUTH LEVERTON
ML007
SCAMPTON NORTH
SCAMPTON
PEDL007
BOTHAMSALL
PEDL210
PL179
NEWTON-ON-TRENT
NETTLEHAM
FARLEYS WOOD
ML003
PEDL130
PEDL090
EGMANTON
WHISBY
BECKERING
STAINTON
WELTON
FISKERTON AIRFIELD
EXL294
PEDL005
PEDL005
PEDL005
SALTFLEETBY
C.E.
EAKRING
KIRKLINGTON
PEDL
118
PEDL
203
PEDL202
PEDL255
PEDL208
PEDL254
PEDL204
10km
PL220
PEDL201
REMPSTONE
PL220
Gas Field
Oil Field/Discovery
Prospect
In May 2018, Lincolnshire County
Council Planning Committee granted
an extension to the existing planning
consent to drill a conventional
exploration well at North Kelsey.
North Kelsey-1 will be drilled
during late 2019 or 2020, subject
to obtaining farminees.
REVIEW OF OPERATIONS
PEDL241
North Kelsey
INTEREST HELD BY
UNION JACK OIL PLC 20%
Drill-ready multi-target
prospect.
Union Jack holds a 20% interest in
PEDL241 containing the North Kelsey
Prospect.
PEDL241 is located within the
proven hydrocarbon fairway of
the Humberside platform. The
North Kelsey Prospect is located
approximately 10 kilometres to the
South of the Wressle-1 discovery
in PEDL180.
The prospect is defined on 3D
seismic data and has the potential
for up to four stacked sandstone
reservoirs in the Chatsworth,
Beacon Hill, Raventhorpe and Santon
sandstones. The nearby Crosby
Warren oilfield and the Brigg oil
discovery are productive from the
Upper Carboniferous Namurian
aged reservoirs.
The gross mean combined Prospective
Resources for these multiple objectives,
as calculated by Egdon, are estimated
to be 6.7 million barrels of oil.
The subsurface target location to
evaluate the exploration of the North
Kelsey Prospect has been defined and
a surface drilling location has been
identified from which a vertical well
can be drilled.
THE INTERESTS IN PEDL241 ARE HELD BY:
Egdon Resources U.K. Limited (Operator)
Union Jack Oil plc
80.0%
20.0%
17
PEDL021
GOODWORTH
PL116
HUMBLY GROVE
PL233
PL249
STOCKBRIDGE
PEDL070
AVINGTON
DL004
ALBURY
BROCKHAM
PL235
PALMERS WOOD
ML021
PEDL246
BLETCHINGLEY
ML018
PL182
EXL189
EXL189
PEDL137
PEDL143
PEDL246
PEDL235
PEDL243
PEDL231
PEDL234
PEDL244
PL240
HORNDEAN
PL211
PEDL126
PEDL233
SINGLETON
PL205
STORRINGTON
PL241
LIDSEY
REVIEW OF OPERATIONS
PEDL118
Dukes Wood
PEDL203
Kirklington
INTEREST HELD BY
UNION JACK OIL PLC 16.67%
Options have been
identified to re-
complete both wells to
re-establish long-term
production.
These licence interests contain
previously producing oilfields
that are currently shut-in. Union
Jack acquired these interests
in October 2017, when it
purchased Cairn Energy plc’s
entire onshore UK portfolio for
a consideration of £25,000.
PEDL118 DUKES WOOD
OILFIELD (16.67%)
PEDL203 KIRKLINGTON
OILFIELD (16.67%)
PEDL203 contains the Kirklington
oilfield that was originally discovered
by BP in 1985 and produced oil from
two Carboniferous reservoirs.
Work is ongoing to configure facilities
and wells for long-term production at
both Dukes Wood and Kirklington.
PEDL118 contains the Dukes Wood
oilfield originally discovered by a
predecessor company to BP in 1939.
The oilfield was decommissioned in
1966 having produced approximately
6.5 million barrels of oil from a mapped
25.6 million barrels of oil in place
representing a recovery factor of 24.5%.
The Dukes Wood-1 well was drilled in
2010 and encountered three reservoir
zones, the Ashover Grit, Crawshaw
sandstone and Loxley Edge Rock,
all of which were flow tested.
THE INTERESTS IN PEDL118 AND PEDL203 ARE HELD BY:
Egdon Resources U.K. Limited (Operator)
PEDL146
Terrain Energy Limited
Union Jack Oil plc
55.55%
27.78%
16.67%
NORTH SEA
PEDL179
PL162
PEDL 178
PEDL183
PEDL181
EXL288
1
6
1
L
D
E
P
8
8
2
L
X
E
PEDL 174
TRUMFLEET
PL161
HATFIELD
9
6
1
L
D
E
P
PEDL182
PEDL173
PEDL180
HATFIELD
PL162
PEDL241
PEDL043
PEDL043
PEDL140
PEDL209
ML004
BECKINGHAM
ML004
CORRINGHAM
ML004
PEDL012
PEDL200
PEDL
210
PEDL006
PEDL
210
WEST FIRSBY
PEDL006
COLD HANWORTH
EAST
GLENTWORTH
PEDL253
PEDL005
PEDL005
PEDL005
SALTFLEETBY
SOUTH LEVERTON
ML007
SCAMPTON NORTH
SCAMPTON
PEDL007
PEDL210
PL179
BOTHAMSALL
FARLEYS WOOD
ML003
PEDL130
NEWTON-ON-TRENT
PEDL118
Dukes Wood
PEDL090
WHISBY
EGMANTON
NETTLEHAM
BECKERING
STAINTON
WELTON
FISKERTON AIRFIELD
EXL294
C.E.
EAKRING
KIRKLINGTON
PEDL
118
PEDL
203
PEDL202
PEDL203
Kirklington
PEDL208
PEDL255
PEDL254
PEDL204
10km
PL220
PEDL201
REMPSTONE
PL220
Gas Field
Oil Field/Discovery
Prospect
18
PEDL021
GOODWORTH
PL116
HUMBLY GROVE
PL233
PL249
STOCKBRIDGE
PEDL070
AVINGTON
DL004
ALBURY
BROCKHAM
PL235
PALMERS WOOD
ML021
PEDL246
BLETCHINGLEY
ML018
PL182
EXL189
EXL189
PEDL137
PEDL143
PEDL246
PEDL235
PEDL243
PEDL231
PEDL234
PEDL244
PL240
HORNDEAN
PL211
PEDL126
PEDL233
SINGLETON
PL205
STORRINGTON
PL241
LIDSEY
REVIEW OF OPERATIONS
PEDL201
Widmerpool
Gulf
INTEREST HELD BY
UNION JACK OIL PLC 26.25%
Significant Bowland-Hodder
Shale potential.
Drilling operations were completed
in October 2014 on the Burton-on-
the-Wolds-1 well located on PEDL201
in Leicestershire which was drilled
on a geological feature known as
the Hathern Shelf, a stable platform
area, evaluating a conventional oil
prospect in the Rempstone sand,
productive at the Rempstone
oilfield to the West of PEDL201.
The well encountered the Rempstone
sand in the primary reservoir which
was water wet and as a result the
well was plugged and abandoned.
However, a thickness of Bowland
Shale was encountered during
drilling, which according to
studies undertaken by the British
Geological Survey, has potential for
unconventional resources of shale oil
or gas if buried to greater depths.
Drill cutting samples of the Bowland
Shale source rock collected at the well
were sent for analysis to Houston
based Weatherford Laboratories
to determine source rock quality.
Weatherford are recognised
experts in source rock evaluation.
Following analysis, Weatherford
concluded that the Upper
Bowland-Hodder Shale interval
in the Burton-on-the-Wolds well
from the East Midlands region
of the UK is a very good source
rock containing dominantly oil
prone Type 11 organic matter.
The Bowland Shale at the site of
the Burton-on-the-Wolds-1 well is
deemed, not unsurprisingly, to be
thermally immature owing to its
shallow depth. Source rock maturity
is a function of heat flow, burial depth
and time. To the North of the well
location is the Hoton Fault which
forms the southern boundary of
the Widmerpool Trough. Regional
well correlations show the Bowland
Shale to be buried at a much greater
depth and is believed to be thermally
mature for hydrocarbon generation.
The results of the Weatherford
analysis and the BGS studies suggest
an unconventional shale play is present
under the retained part of PEDL201.
Awards of licences adjacent to
PEDL201 to other parties under the
14th Round, offer encouragement
regarding the unconventional play
within the area under licence.
The directors are considering their
options to generate cash inflows from
this licence and the preferred outcome
from this potentially significant play
type would be through an industry sale.
No impairment is considered
appropriate at this time whilst further
evaluation is planned and budgeted.
THE INTERESTS IN PEDL201 ARE HELD BY:
PEDL146
Egdon Resources U.K. Limited (Operator)
NORTH SEA
45.00%
Union Jack Oil plc
Humber Oil & Gas Limited
PEDL179
Terrain Energy Limited
EXL288
8
8
2
L
X
E
PEDL 174
PL162
PEDL 178
PEDL182
PEDL173
PEDL180
1
6
1
L
D
E
P
TRUMFLEET
PL161
HATFIELD
9
6
1
L
D
E
P
HATFIELD
PL162
PEDL241
PEDL183
PEDL181
26.25%
16.25%
12.50%
PEDL043
PEDL043
PEDL140
PEDL209
ML004
BECKINGHAM
ML004
CORRINGHAM
ML004
PEDL012
PEDL200
PEDL
210
PEDL006
PEDL
210
WEST FIRSBY
PEDL006
COLD HANWORTH
EAST
GLENTWORTH
PEDL253
SOUTH LEVERTON
ML007
SCAMPTON NORTH
SCAMPTON
PEDL007
BOTHAMSALL
PEDL210
PL179
NEWTON-ON-TRENT
NETTLEHAM
FARLEYS WOOD
ML003
PEDL130
PEDL090
EGMANTON
WHISBY
BECKERING
STAINTON
WELTON
FISKERTON AIRFIELD
EXL294
PEDL005
PEDL005
PEDL005
SALTFLEETBY
C.E.
EAKRING
KIRKLINGTON
PEDL
118
PEDL
203
PEDL202
PEDL255
PEDL254
PEDL204
PEDL201
Widmerpool
Gulf
PEDL208
PL220
PEDL201
REMPSTONE
PL220
10km
Gas Field
Oil Field/Discovery
Prospect
19
PEDL021
GOODWORTH
PL116
HUMBLY GROVE
PL233
PL249
STOCKBRIDGE
PEDL070
AVINGTON
DL004
ALBURY
BROCKHAM
PL235
PALMERS WOOD
ML021
PEDL246
BLETCHINGLEY
ML018
PL182
EXL189
EXL189
PEDL137
PEDL143
PEDL246
PEDL235
PEDL243
PEDL231
PEDL234
PEDL244
PL240
HORNDEAN
PL211
PEDL126
PEDL233
SINGLETON
PL205
STORRINGTON
PL241
LIDSEY
BUSINESS AND STRATEGY
50.0%
25.0%
12.5%
12.5%
38.0%
28.0%
24.0%
10.0%
REVIEW OF OPERATIONS
PEDL146
PEDL183
WEST NEWTON A-1
NORTH SEA
PEDL181
Humber Basin
1
6
1
L
D
E
P
EXL288
8
8
2
L
X
E
TRUMFLEET
PL161
HATFIELD
9
6
1
L
D
E
P
PL162
PEDL182
PEDL173
PEDL180
HATFIELD
PL162
PEDL181
PEDL241
INTEREST HELD BY
UNION JACK OIL PLC 12.5%
PEDL043
PEDL140
PEDL043
PEDL209
ML004
BECKINGHAM
ML004
CORRINGHAM
ML004
PEDL012
EAST
GLENTWORTH
PEDL005
PEDL005
PEDL253
PEDL005
SALTFLEETBY
Significant Bowland-Hodder
Shale potential.
PEDL200
PEDL
210
PEDL006
PEDL
210
WEST FIRSBY
PEDL006
COLD HANWORTH
SOUTH LEVERTON
ML007
SCAMPTON NORTH
SCAMPTON
PEDL007
BOTHAMSALL
PEDL210
PL179
NEWTON-ON-TRENT
NETTLEHAM
FARLEYS WOOD
ML003
PEDL090
EGMANTON
WHISBY
PEDL181 is located within the Humber
Basin and holds unconventional upside.
C.E.
PEDL130
A budget for licence spend has been
prepared for 2019 and agreed by the
joint venture partners.
PEDL202
EAKRING
KIRKLINGTON
PEDL
118
PEDL
203
BECKERING
STAINTON
WELTON
FISKERTON AIRFIELD
EXL294
10km
PEDL181
Humber Basin
Gas Field
Oil Field/Discovery
Prospect
PEDL255
PEDL208
PEDL254
THE INTERESTS IN PEDL181 ARE HELD BY:
PEDL204
PL220
PEDL146
PEDL201
REMPSTONE
Europe Oil & Gas Limited
PL220
Egdon Resources U.K. Limited
NORTH SEA
Union Jack Oil plc
Humber Oil & Gas Limited
PEDL179
PL162
PEDL 178
EXL288
1
6
1
L
D
E
P
8
8
2
L
X
E
PEDL 174
TRUMFLEET
PL161
HATFIELD
9
6
1
L
D
E
P
PEDL182
PEDL173
PEDL180
HATFIELD
PL162
PEDL241
PEDL043
PEDL043
PEDL140
PEDL209
ML004
BECKINGHAM
ML004
CORRINGHAM
ML004
PEDL183
PEDL181
PEDL012
PEDL200
PEDL
210
PEDL006
PEDL
210
WEST FIRSBY
PEDL006
COLD HANWORTH
EAST
GLENTWORTH
PEDL253
SOUTH LEVERTON
ML007
SCAMPTON NORTH
SCAMPTON
PEDL007
BOTHAMSALL
PEDL210
PL179
NEWTON-ON-TRENT
NETTLEHAM
BECKERING
STAINTON
WELTON
FISKERTON AIRFIELD
FARLEYS WOOD
ML003
PEDL130
PEDL090
EGMANTON
WHISBY
EXL294
PEDL209
Laughton
EAKRING
KIRKLINGTON
PEDL
118
PEDL
203
PEDL202
PEDL209
Laughton
INTEREST HELD BY
UNION JACK OIL PLC 10%
Two additional conventional
prospects and hydrocarbon
potential to be further
evaluated.
C.E.
In January 2016, Union Jack acquired
from Egdon a 10% interest in PEDL209
in respect of the conventional
prospects only within the licence area.
PEDL255
PEDL208
PEDL254
PEDL204
10km
Gas Field
Oil Field/Discovery
Prospect
PEDL005
PEDL005
PEDL005
SALTFLEETBY
PEDL209 is located along the eastern
side of the Gainsborough Trough, a
proven hydrocarbon province within
the East Midlands.
PL220
In February 2016, the Laughton-1
well was spudded and reached a
total depth of 1,700 metres. The
well was plugged and abandoned
and the wellsite was restored to its
original condition.
20
PEDL201
REMPSTONE
PL220
THE CONVENTIONAL INTERESTS IN PEDL209 ARE HELD BY:
Egdon Resources U.K. Limited (Operator)
Blackland Park Exploration Limited
Stelinmatvic Industries Limited
Union Jack Oil plc
DL004
BROCKHAM
PALMERS WOOD
ML021
PL182
UNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
PEDL246
ML018
PL235
BLETCHINGLEY
ALBURY
PEDL021
GOODWORTH
PL116
HUMBLY GROVE
PEDL137
EXL189
EXL189
PEDL143
PEDL246
PL233
PL249
STOCKBRIDGE
PEDL070
AVINGTON
PEDL235
PEDL243
PEDL231
PEDL234
PEDL244
PL240
HORNDEAN
PL211
PEDL126
PEDL233
SINGLETON
PL205
STORRINGTON
PL241
LIDSEY
PEDL021
GOODWORTH
PL116
HUMBLY GROVE
PL233
PL249
STOCKBRIDGE
PEDL070
AVINGTON
DL004
ALBURY
BROCKHAM
PL235
PALMERS WOOD
ML021
PEDL246
BLETCHINGLEY
ML018
PL182
EXL189
EXL189
PEDL137
PEDL143
PEDL246
PEDL235
PEDL243
PEDL231
PEDL234
PEDL244
PL240
HORNDEAN
PL211
PEDL126
PEDL233
SINGLETON
PL205
STORRINGTON
PL241
LIDSEY
PEDL146
EXL288
1
6
1
L
D
E
P
PEDL043
PL220
C.E.
NORTH SEA
PEDL005
PEDL005
PEDL005
SALTFLEETBY
PEDL179
PL162
PEDL 178
PEDL183
PEDL181
8
8
2
L
X
E
PEDL 174
TRUMFLEET
PL161
HATFIELD
9
6
1
L
D
E
P
PEDL182
PEDL173
PEDL180
HATFIELD
PL162
PEDL043
PEDL140
PEDL209
PEDL241
REVIEW OF OPERATIONS
ML004
ML004
ML004
CORRINGHAM
BECKINGHAM
PEDL012
PEDL200
PEDL
210
PEDL006
PEDL
210
WEST FIRSBY
PEDL006
COLD HANWORTH
EAST
GLENTWORTH
PEDL253
SOUTH LEVERTON
ML007
SCAMPTON NORTH
SCAMPTON
PEDL007
BOTHAMSALL
PEDL210
PL179
NEWTON-ON-TRENT
NETTLEHAM
FARLEYS WOOD
ML003
PEDL130
PEDL090
EGMANTON
WHISBY
BECKERING
STAINTON
WELTON
FISKERTON AIRFIELD
EXL294
PEDL143
Weald Basin
PEDL
118
PEDL
203
KIRKLINGTON
EAKRING
PEDL202
INTEREST HELD BY
UNION JACK OIL PLC 7.5%
PEDL255
PEDL208
REMPSTONE
PL220
PEDL254
PEDL204
PEDL201
Post year end the licence
interest has subsequently
been conditionally agreed to
be sold to UK Oil & Gas PLC
(“UKOG”) for consideration
of £112,500 payable in ordinary
shares of UKOG.
In May 2016, Union Jack entered
into an agreement with the then
Operator, Europa to acquire a 7.5%
economic interest in PEDL143
located within the Weald Basin in
southern England and containing the
drill-ready Holmwood Prospect.
The Holmwood Prospect was a
conventional oil prospect first identified
by BP in 1988, and is estimated by
the Operator to hold gross mean
unrisked prospective resources of 5.6
million barrels of oil in the Portlandian
and Corallian sandstones with a
geological COS of 50%. The P90 –
P10 range of prospective resources
is 1 to 11 million barrels of oil which
is the typical range for the Weald
Basin, based on the 14 oil and gas
fields that have been discovered and
produced in the Weald Basin to date.
In September 2018, the Operator
Europa was notified by the Head of
Estates at the Forestry Commission
that the Minister for Environment,
Food and Rural Affairs had declined
to renew the lease at Bury Hill
Wood, Coldharbour Lane, Surrey.
This was the proposed site for the
Holmwood-1 exploration well to test
the conventional Holmwood Prospect.
The Operator withdrew its
application to extend the planning
permission to drill the Holmwood-1
well from the Bury Hill site.
The wellsite has been reinstated
to its original condition and the
value of the intangible asset has
been fully impaired by £205,308.
In April 2019, Union Jack conditionally
agreed to sell its 7.5% interest in
PEDL143 to the new Operator, UKOG.
The sale is subject to the execution
of a sale and purchase agreement, the
principal terms of which have been
agreed, and the subsequent approval
by the Oil and Gas Authority.
The aggregate purchase price by
UKOG for the licence interest is
£112,500 and will be settled in
cash that shall then be immediately,
simultaneously and irrevocably applied
by Union Jack for such number of
ordinary shares in UKOG which is equal
to £112,500 divided by 1.156 pence,
being the five day volume weighted
average price on 12 April 2019.
This agreement allows Union Jack to
now concentrate totally on our focused
areas of the East Midlands, Humber
Basin and East Yorkshire where we
hold material interests in potentially
Company-changing projects. Payment
in UKOG shares allows Union Jack
to not only benefit from UKOG’s
increased interest in PEDL143, but also
exposure to UKOG’s wider Weald
Basin assets and other projects.
THE INTERESTS IN PEDL143 FOLLOWING SALE WILL BE
UK Oil & Gas investments PLC (Operator)*
Egdon Resources U.K. Limited
Angus Energy plc
Altwood Petroleum Limited
67.5%
18.4%
12.5%
1.6%
* Subject to Oil and Gas Authority approval of sale by Union Jack and Europa
of their interest in PEDL143
10km
Gas Field
Oil Field/Discovery
Prospect
PEDL143
Weald Basin
PEDL021
GOODWORTH
PL116
HUMBLY GROVE
DL004
ALBURY
BROCKHAM
PL235
PALMERS WOOD
ML021
PL182
BLETCHINGLEY
PEDL246
ML018
PEDL137
EXL189
EXL189
PEDL143
PEDL246
PL233
PL249
STOCKBRIDGE
PEDL070
AVINGTON
PEDL235
PEDL243
PEDL231
PEDL234
PEDL244
PL240
HORNDEAN
PL211
PEDL126
PEDL233
SINGLETON
PL205
STORRINGTON
PL241
LIDSEY
21
BUSINESS AND STRATEGY
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 DECEMBER 2018
The directors present their report together with the
financial statements for the year ended 31 December 2018.
The directors have chosen, in accordance with section
414C(11) of the Companies Act 2006, to set out in the
Company’s Strategic Report information required by
Schedule 7 to the Accounting Regulations to be contained
in the Directors’ Report. This information includes future
developments of the Company and the risks associated
with the use of financial instruments.
DIRECTORS
The directors in office at the end of the year, and their
interests in the shares of the Company as at 1 January 2018
and 31 December 2018, were as shown in the table below.
ORDINARY SHARES
31 December
2018
1 January
2018
63,929,285
52,164,580
212,987,709
118,870,063
42,529,411
30,764,706
4,000,000
1,267,606,538
4,000,000
N/A
D Bramhill
J O’Farrell
R Godson
G Bull
F Lang
Frazer Lang is beneficially interested in 1,267,606,538
ordinary shares held by G.P. ( Jersey) Limited representing
11.76% of the share capital of the Company.
In March 2018, Joe O’Farrell purchased 58,823,529
new ordinary shares. In October 2018 Joe O’Farrell
purchased a further 35,294,177 following which he now
holds a beneficial interest in 212,987,709 ordinary shares
representing approximately 2.52% of the share capital of
the Company.
In March 2018, David Bramhill purchased 11,764,705 new
ordinary shares, following which he now holds a beneficial
interest in 63,929,285 ordinary shares representing
approximately 0.75% of the share capital of the Company.
In October 2018, Raymond Godson purchased 11,764,705
ordinary shares following which he now holds a beneficial
interest in 42,529,411 ordinary shares representing
approximately 0.05% in the share capital
of the Company.
Directors who served during the year are as follows:
David Bramhill (Executive Director);
Joseph O’Farrell (Executive Director);
Raymond Godson (Non-executive Director);
Graham Bull (Non-executive Director).
Frazer Lang (Non-executive Director)*
* Frazer Lang was appointed on 4 December 2018.
22
DIRECTORS’ REMUNERATION
The remuneration of the directors for the year ended
31 December 2018 and the year ended 31 December 2017
was as follows:
SALARIES AND FEES
2017
£
2018
£
110,000
55,833
25,000
25,000
2,083
86,667
50,000
25,000
25,000
–
OPTIONS
2018
120,000,000
60,000,000
30,000,000
30,000,000
30,000,000
2017
–
–
–
–
–
D Bramhill
J O’Farrell
R Godson
G Bull
F Lang
D Bramhill
J O’Farrell
R Godson
G Bull
F Lang
Directors’ remuneration is disclosed in note 3 of these
financial statements.
Copies of the Service Agreements in respect of D Bramhill
and J O’Farrell are available for inspection at the Company’s
Registered Office. Copies of the Letters of Appointment
in respect of G Bull, R Godson and F Lang are available for
inspection at the Company’s Registered Office.
In July 2018, David Bramhill and Joe O’Farrell were granted
120,000,000 and 60,000,000 options respectively. The
options are exercisable at 0.9 pence per share and the
earliest vesting date is 18.07.21.
In November 2018, Raymond Godson, Graham Bull
and Matt Small (Company Secretary) were each granted
30,000,000 options respectively. The options are
exercisable at 0.11 pence per share and the earliest
vesting date is 07.11.21.
In December 2018, Frazer Lang was granted 30,000,000
options. These options are exercisable at 0.11 pence per
share and the earliest vesting date is 04.12.21.
Further information in respect of these options can be
found in note 13(c) within the Notes to the Financial
Statements section.
UNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
DISCLOSURE OF INFORMATION TO THE
AUDITOR
The directors at the date of the approval of this Annual
Report confirm that:
•
•
so far as the directors are aware, there is no relevant
audit information of which the Company’s auditor
is unaware; and
the directors have taken all the steps that they ought
to have taken as directors in order to make themselves
aware of any relevant audit information and to establish
that the Company’s auditor is aware of that information.
This confirmation is given and should be interpreted
in accordance with the provisions of Section 418 of
the Companies Act 2006.
AUDITOR
A resolution to reappoint BDO LLP will be proposed
at the forthcoming Annual General Meeting.
COMPANY NAME AND REGISTERED NUMBER
The registered number of Union Jack Oil plc is 07497220.
On behalf of the Board
David Bramhill
Executive Chairman
13 May 2019
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2018
ANNUAL GENERAL MEETING
The Annual General Meeting of the Company will be held
on 13 June 2019, in accordance with the Notice of Annual
General Meeting on page 63. Details of the resolutions to
be passed are included in this notice.
EVENTS AFTER THE BALANCE SHEET DATE
The following events have taken place after the year end:
During January 2019, the Planning Inspectorate informed
the Operator that the appeal in respect of a planning
extension on PEDLs 180/182 was successful and the
planning permit now expires in January 2020.
During February 2019, documentation in respect of the
appeal for development of the Wressle discovery was
submitted to the Planning Inspectorate. Confirmation
of the acceptance of the documentation has been received
and the appeal will be heard on 5 November 2019.
During February 2019, the Biscathorpe-2 conventional
well reached target depth and logging revealed that the
well was drilled high to prognosis. The well has been
suspended for a potential side-track in the future.
In March 2019, the Company raised £1,750,000 before
expenses in an oversubscribed fundraising. This fundraising
was subject to approval by shareholders via a General
Meeting, held on 8 April 2019, whereby the resolutions
were all passed by a majority. Following this fundraising there
are now 10,784,043,588 ordinary shares in issue.
In April 2019, Union Jack reached agreement with UK Oil
& Gas PLC (“UKOG”) to sell its 7.5% interest in PEDL143.
The aggregate purchase price by UKOG for the licence
interest is £112,500 and will be settled in cash that shall
then be immediately, simultaneously and irrevocably applied
by Union Jack for such number of ordinary shares in UKOG
which is equal to £112,500 divided by 1.156 pence, being
the 5 day volume weighted average price on 12 April 2019.
CAPITAL STRUCTURE
Details of the issued share capital, together with details
of the movements in the Company’s issued share capital
during the year, are shown in note 13(a).
23
www.unionjackoil.comGOVERNANCE CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 DECEMBER 2018
CORPORATE GOVERNANCE REPORT
The Company’s securities are traded on the Alternative
Investment Market (“AIM”) of the London Stock Exchange.
The London Stock Exchange has recently introduced
changes to the AIM rules requiring all AIM listed companies
to adopt and comply with a recognised corporate
governance code.
This corporate governance statement has been prepared
by David Bramhill,the Executive Chairman of the Company
and has been approved by the Company's
Board of directors (the "Board") in accordance with the
recommendations of the QCA Corporate Governance
Code 2018 (the "Code"), which the Company has adopted
as its code of governance.
This statement explains how the 10 principles of the Code
are applied by the Company, and where the Company
departs from the Code, an explanation of the reasons
for doing so is provided.
QCA Code Recommendation
Application by the Company
1.
Principle 1
Establish a strategy and business
model which promotes long-
term value for shareholders.
• The Board must be able to express
a shared view of the Company’s
purpose, business model and
strategy.
•
It should go beyond the simple
description of products and
corporate structures and set out
how the Company intends to
deliver shareholder value in the
medium to long-term.
It should demonstrate that the
delivery of long-term growth is
underpinned by a clear set of
values aimed at protecting the
Company from unnecessary risk
and securing its long-term future
• The primary objective of the Company is to build a sustainable
and successful conventional onshore hydrocarbon exploration,
development and production business, which the Board seeks
to deliver through the acquisition of, and subsequent investment
in, carefully selected licence interests in the UK onshore. The
Company undertakes this in conjunction with a number of joint
venture operating partners (including, but not limited to, Europa
Oil & Gas (Holdings) plc, Egdon Resources plc and Rathlin Energy
(UK) Limited).
• The Company's strategy is the appraisal and exploitation of the
assets currently owned. Simultaneous with this process, the Board
expects to continue to use its expertise and cash resources to
acquire further licence interests and production in the UK in the
future.
• The Board is optimistic about the prospect of delivering
shareholder value in the medium to long term via the acquisition
and increased interest in various high impact licence areas with
proven reserves, contingent resources and drill-ready prospects.
• The Company's strategy is underpinned by a well-balanced
and diverse onshore UK asset portfolio, ensuring the relevant
components of production, development, appraisal and discovery
are all in place, as is adequate and prudently sourced funding for
the Company’s commitments going forward.
24
UNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 DECEMBER 2018
QCA Code Recommendation
Application by the Company
2.
Principle 2
Seek to understand and
meet shareholder needs and
expectations.
• Directors must develop a good
understanding of the needs and
expectations of all elements of the
Company’s shareholder base.
• Since the Company's incorporation in January 2011, members of
the Board have been very active in encouraging and participating
in direct dialogue with shareholders in order to ensure the
Company’s shareholders are kept regularly updated and are
able to discuss strategy and performance directly with the
Board (subject always to compliance with legal and regulatory
requirements, including the Market Abuse Regulations ("MAR")).
This also allows the Board to obtain a clear understanding of
shareholders’ motivations and concerns.
• The Board must manage
• All shareholders are encouraged to attend the Company’s
shareholders’ expectations and
should seek to understand the
motivations behind shareholder
voting decisions.
Annual General Meeting and investors have access to current
information on the Company through its website and via the
info@unionjackoil.com email address.
•
In addition, due to the volatility of the industry in which the
Company operates, the Board recognises the particular
importance of frequent and regular communications with
shareholders, so they can keep abreast of major potential risks
and uncertainties in the industry.
3.
Principle 3
• As set out above, due to the specific nature of the Company's
Take into account wider
stakeholder and social
responsibilities and their
implications for long-term
success.
• Long-term success relies upon
good relations with a range of
different stakeholder groups
both internal (workforce) and
external (suppliers, customers,
regulators and others). The Board
needs to identify the Company’s
stakeholders and understand their
needs, interests and expectations.
• Feedback is an essential part of all
control mechanisms. Systems need
to be in place to solicit, consider
and act on feedback from all
stakeholder groups.
business, the Company currently relies on three key joint venture
partners: Egdon Resources U.K. Limited, Europa Oil & Gas
Holdings Limited and Rathlin Energy (UK) Limited, who manage
and operate the Company’s licence interests on its behalf.
• The Company takes its relationship with its joint venture partners
and its third party professional advisors (both of whom it sees
as its key stakeholders) very seriously. The manner in which
the Company seeks to ensure the long term success of these
relationships includes:
o
o
ensuring the Executive Chairman and other members of
the Board continue to openly discuss any issues and queries
their joint venture partners may have in an open, direct and
constructive manner.
adhering to the Company’s policy of settling all invoices on
return, as the Company regards its third party professional
advisors as critical to the Company’s continued success.
• The Board is also keenly aware of the local environment and its
inhabitants in which the Company’s licence interests are situated.
While the Company does not manage these relationships directly
on a day to day basis, the Board works with the Company’s joint
venture operating partners to ensure any queries or concerns any
community members may have are swiftly addressed and, at the
same time, all community members are treated with the respect
and attention they deserve.
25
www.unionjackoil.comGOVERNANCE
CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 DECEMBER 2018
QCA Code Recommendation
Application by the Company
4.
Principle 4
• The management of the business and the execution of the
Embed effective risk
management, considering both
opportunities and threats,
throughout the organisation.
• The Board needs to ensure that
the Company’s risk management
framework identifies and addresses
all relevant risks in order to execute
and deliver strategy; companies
need to consider their extended
business, including the Company’s
supply chain, from key suppliers
to end-customer.
• Setting strategy includes
determining the extent of exposure
to the identified risks that the
Company is able to bear and
willing to take (risk tolerance and
risk appetite).
Company’s strategy are subject to a number of risks. The Board
ensures risks are mitigated as far as reasonably practicable by
performing a detailed review of the issues pertaining to each
significant decision. Significant decisions are reviewed by the Board
having consulted the Company’s professional third party advisers
(be they legal, financial or technical).
• As with the majority of companies within the energy sector, the
business of oil and gas exploration and development includes
varying degrees of risk. These risks include operating reliance
on third parties, the ability to monetise discoveries, the price
of products and the costs of exploration and/or production.
• The principal risks to the Company as well as the mitigation
actions by the Board are set out below:
o
o
o
o
o
Strategic risk: a weak or poorly executed acquisition and
development process fails to create shareholder value. This
risk is mitigated through performing a detailed technical
review, both internally by management and externally by
advisers, for each investment which includes valuation
exercises on the potential return on capital invested.
Operational risk: operational events can have an adverse
effect. The main risk is the potential failure to obtain planning
permission in respect of the Company’s licence interests. This
risk is mitigated by the appointment of specialist professional
entities who work together to compile planning applications
designed to achieve a positive result. On site operational risks
and its mitigation are managed by the site Operators, Egdon
Resources U.K. Limited, Europa Oil & Gas Holdings Limited
and Rathlin Energy (UK) Limited, whom have to date safety
records of the highest standard.
External Risk: Lack of growth caused by political, industry
or market factors. The Company operates exclusively
within the UK and the Board considers that the UK onshore
hydrocarbon arena offers political security and excellent value
under a regime with a very clearly spelt out protocol giving
the opportunity to develop assets unhindered. In respect of
the ongoing Brexit discussions and the potential effect on the
Company going forward, it is impossible to predict the effects
as Brexit, or any variation upon that, has not happened as yet.
Financial Risk: the lack of ability to meet financial
obligations. The Company raises its funds through the financial
market by share issues and does not become involved in
derivatives and borrowing to fund its financial obligations.
Product Price Risk: due to the nature of the periodic
fluctuation of oil, any such adverse fluctuation could
potentially have an impact on the Company’s resulting return
to its shareholders.
• The Company also holds Directors’ Insurance cover and the
Company is covered by the Operator’s insurance during drilling
and other operational situations for specific projects.
26
UNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 DECEMBER 2018
QCA Code Recommendation
Application by the Company
5.
Principle 5
Maintain the Board as a well-
functioning, balanced team led by
the Chairman.
• The Board have a collective
responsibility and legal obligation
to promote the interests of the
Company, and are collectively
responsible for defining corporate
governance arrangements. Ultimate
responsibility for the quality of, and
approach to, corporate governance
lies with the Chairman.
• The Board (and any committees)
should be provided with high
quality information in a timely
manner to facilitate proper
assessment of the matters requiring
a decision or insight.
• The Board should have an
appropriate balance between
executive and non-executive
directors and should have at least
two independent non-executive
directors. Independence is a Board
judgement.
• The Board should be supported
by committees (e.g. audit,
remuneration, nomination) that
have the necessary skills and
knowledge to discharge their duties
and responsibilities effectively.
• Directors must commit the time
necessary to fulfil their roles.
• The Board consists of two executive directors and three non-
executive directors, who are responsible for the management of
the Company.
• No members of the Board have other commitments that would
prevent them from spending as much time as required to ensure
the aims and best interests of the Company are met. None of
the directors of the Company are independent and the Board
will review this on an ongoing basis. Any changes to directors’
commitments and interests will be reported to and, where
appropriate, agreed with the rest of the Board.
• The Board meets formally in person and by telephone multiple
times during the year, attendance of which has always been
100%, since the Company’s incorporation. The Board also holds
numerous informal project appraisal and strategy discussions
(sometimes on a daily basis), and meet at least four times in
each year to review trading performance and budgets, ensure
adequate funding, set and monitor strategy, examine acquisition
opportunities and report to the shareholders.
• The Board’s culture is one of collaboration regarding decisions, to
ensure each decision reached is always in the Company’s (and by
extension, its shareholders’) best interest and that one individual
opinion never dominates decision making. The Board seeks, so far
as possible, to achieve decisions by consensus and all directors are
encouraged to use their independent judgement and to challenge
all matters whether strategic or operational. To date all decisions
have been unanimous.
• The Company’s three non-executive directors hold shares and
options in the Company. The Board are satisfied that these
shareholdings and options are not "significant" with the exception
of Frazer Lang who is the beneficial owner of a 11.76% interest
in shares held by G.P. (Jersey) Limited. Frazer Lang is bound by
the Company’s dealing code in relation to the ordinary shares
held. Therefore such shareholdings do not contravene the
provisions of the Code.
• During 2018, the Board held eight meetings, either by telephone
or in person.
• There are no mandatory hours for directors to be available for
Company business. The Executive directors and Non-executive
directors are available for any Company business when it may arise.
• The Board delegates certain decisions to an Audit Committee
and a Remuneration Committee. The Audit Committee has joint
responsibility for reviewing the year end accounts with the Auditor.
The Remuneration Committee annually review the remuneration
of the executive directors. establishing and maintaining robust
internal financial control systems for the Company.
27
www.unionjackoil.comGOVERNANCE CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 DECEMBER 2018
QCA Code Recommendation
Application by the Company
6.
Principle 6
• The current Board composition of the Company and each
Ensure that between them the
directors have the necessary
up-to-date experience, skills
and capabilities.
• The Board must have an
appropriate balance of sector,
financial and public markets skills
and experience, as well as an
appropriate balance of personal
qualities and capabilities. The Board
should understand and challenge
its own diversity, including gender
balance, as part of its composition.
• The Board should not be
dominated by one person or a
group of people. Strong personal
bonds can be important but can
also divide a board.
• As companies evolve, the mix of
skills and experience required on
the Board will change, and Board
composition will need to evolve
to reflect this change.
director’s experience is set out in this report. The Board’s view
is that the directors have a variety of complimentary experiences
and skillsets, including experience in: industry specific technical,
financial and public capital markets sectors.
• The directors are mindful of the need to ensure the Company has
in place a diverse Board that encompasses the right skills required
to ensure the Company’s continued success, including creating
an atmosphere of constructive challenge and consensus for any
decision reached. As such, and given the current size of the
Company, the Board is of the opinion its current composition
and skillset is currently sufficient to maintain and drive the long
term success for the Company’s shareholders.
• Each director takes their continued professional and technical
development seriously, so in order to ensure the Board keeps
abreast of the current challenges faced by the industry the
Company operates in, the directors attend both trade shows
and technical sessions during the course of any given year.
• The Board ensures it is well advised and supported by utilising a
range of external experts in various fields, and employs external:
accountants, legal counsel, a company secretary and a nominated
adviser in accordance with the AIM rules. On the industry
specific front, it also employs two technical consultancies:
Sotwell Exploration Ltd and Calderdale Geoscience Limited.
7.
Principle 7
• While the Board is very much aware of the needs of the
Company in ensuring effectiveness of Board performance and
the periodic refreshment of the composition of the Board, the
Board believes that due to the Company’s current size and its
current corporate culture of constructive challenge and consensus
on each decision reached, the procedures already in place are
sufficient for monitoring Board performance and no external
performance reviews are required at this time. This will be kept
under review.
• The Board is also of the opinion that the Company has
appropriate measures in place to ensure any refreshment of
the Board occurs in a timely manner, and always with the best
interests of the shareholders in mind.
Evaluate Board performance
based on clear and relevant
objectives, seeking continuous
improvement.
• The Board should regularly
review the effectiveness of its
performance as a unit, as well as
that of its committees and the
individual directors.
• The Board performance review
may be carried out internally or,
ideally, externally facilitated from
time to time. The review should
identify development or mentoring
needs of individual directors or the
wider senior management team.
•
It is healthy for membership of the
Board to be periodically refreshed.
Succession planning is a vital
task for the board. No member
of the Board should become
indispensable.
28
UNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 DECEMBER 2018
QCA Code Recommendation
Application by the Company
8.
Principle 8
Promote a corporate culture
that is based on ethical values
and behaviours.
• The Board should embody and
promote a corporate culture that
is based on sound ethical values
and behaviours and use it as an
asset and a source of competitive
advantage.
• The policy set by the Board
should be visible in the actions
and decisions of the chief executive
and the rest of the management
team. Corporate values should
guide the objectives and strategy
of the Company.
• The culture should be visible in
every aspect of the business,
including recruitment, nominations,
training and engagement. The
performance and reward system
should endorse the desired ethical
behaviours across all levels of the
Company.
• The corporate culture should
be recognisable throughout the
disclosures in the Annual Report,
website and any other statements
issued by the Company.
• The directors recognise that their decisions regarding strategy and
risk will impact the corporate culture of the Company as a whole
and that this will impact the performance of the Company. The
Board seeks to embody and promote a corporate culture that is
based on sound ethical values as it believes the tone and culture
set by the Board impacts all aspects of the Company, including the
way that employees and other stakeholders behave.
• The Company has adopted a share dealing code which is
appropriate for a company whose securities are traded on AIM
and is in accordance with the requirements of MAR which came
into effect in 2016.
• The Board believes that evidenced through the disclosures made
throughout this statement, its corporate governance regime and
culture are at the core of its operations and are appropriate given
the current size of the Company.
• Furthermore, through its interaction with its stakeholders and
in the communities in which it operates in (described above), it
maintains a collaborative and constructive dialogue that embodies
a dynamic, accessible, open door and vibrant corporate culture.
• The Company’s corporate culture is monitored/assessed regularly
taking on board immediately any changes made by AIM Rule
26 and where advisors may advise. All financial transactions are
reviewed independently by Berkeley Hall Marshall Limited.
An anti-bribery policy is in place.
• As such, and taking into account the Board interaction with each
of its professional advisors described above, the Board is satisfied
that its governance regime is more than adequate given the size
of the Company, its shareholder base and business pipeline.
29
www.unionjackoil.comGOVERNANCE CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 DECEMBER 2018
QCA Code Recommendation
Application by the Company
• As disclosed throughout this statement, the Company maintains
and employs robust corporate governance practices to support
an effective and collaborative Board, always working in the best
interests of its shareholders.
• Details of Board committees, under Principle 5 above, are
covered within the Company’s latest Annual Report (available at:
http://unionjackoil.com/).
• The Board intends that the Company’s governance structures
evolve over time in parallel with its objectives, strategy and
business model to reflect the development of the Company.
9.
Principle 9
Maintain governance structures
and processes that are fit for
purpose and support good
decision-making by the Board.
• The Company should maintain
governance structures and
processes in line with its corporate
culture and appropriate to its:
o
size and complexity; and
o
capacity, appetite and tolerance
for risk.
• The governance structures should
evolve over time in parallel with its
objectives, strategy and business
model to reflect the development
of the Company.
30
UNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 DECEMBER 2018
QCA Code Recommendation
Application by the Company
10.
Principle 10
• As set out above, the Company ensures:
Communicate how the Company
is governed and is performing
by maintaining a dialogue with
shareholders and other relevant
stakeholders.
• A healthy dialogue should exist
between the Board and all
of its stakeholders, including
shareholders, to enable all
interested parties to come to
informed decisions about the
Company.
•
In particular, appropriate
communication and reporting
structures should exist between
the Board and all constituent parts
of its shareholder base.
• This will assist:
o
o
the communication of
shareholders’ views to the
Board; and
the shareholders’ understanding
of the unique circumstances
and constraints faced by the
Company.
•
It should be clear where these
communication practices are
described (Annual Report or
website).
Other
Consider relationship agreement
where there is a dominant shareholder.
o
o
a printed annual and half year report is delivered to each
shareholder, and also made available on the Company’s website.
all RNS announcements are released in a timely manner, while
also ensuring all announcements are drafted in a clear and
concise fashion.
•
In addition, all shareholders are encouraged to attend the
Company’s Annual General Meeting. The outcomes of all
shareholder votes are disclosed in a clear and transparent manner
via a RNS.
• The Company includes historical Annual Reports, notices of
General Meetings and RNS announcements over the last five years
on its website. The Company also lists contact details on its website,
should shareholders wish to communicate with the Board.
The Company intends to include, where relevant, in its annual
report, any matters of note arising from the Audit or Remuneration
committees.
• Each shareholder is actively encouraged to both attend the
Company’s Annual General Meeting and throughout the year
to contact the Chairman to discuss any queries or concerns they
may have.
• Given the size of the Company, the Board is of the opinion that
no formal communication structures are required at this time.
The Company does however:
o
o
o
ensure continued disclosure of all items in conjunction with
AIM Rule 26 on its website;
disclose the results of all shareholder votes once held, in
conjunction with the Company’s Annual General Meeting; and
keeps in constant communication and dialogue with its key
stakeholders and joint-venture partners through an accessible
and open door policy, with the Chairman acting as the key
conduit. For avoidance of doubt, it is important to note that
any conversations shareholders and the Chairman may have
are always in accordance of what is permissible under MAR.
• The Company’s communication practices are set out on its website
at: http://unionjackoil.com/company-information/aim-rule-26/
The Company has no dominant shareholder, however the Company
does have one "Significant Shareholder" (as defined under the
AIM Rules).
One of these Significant Shareholders is G.P. ( Jersey) Limited, which
holds 11.76% of the issued share capital of the Company. A Related
Party (again, as defined under the AIM Rules) to G.P. (Jersey) Limited
is a director of Humber Oil & Gas Limited, a commercial joint venture
partner of the Company.
It is important to note that the above disclosures do not represent
any conflict of interest from the Company’s perspective, and as such
no relationship agreement is in place between the Company and
Humber Oil & Gas Limited regarding this matter.
Further details of Humber Oil & Gas Limited can be found on its
website: https://humberoilandgas.co.uk
31
www.unionjackoil.comGOVERNANCE
CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 DECEMBER 2018
THE BOARD
During the year the Board of Directors of Union Jack
Oil plc consisted of two executive directors and three
non-executive directors as disclosed within the Directors,
Officers and Advisers section of this report, who were
responsible for the proper management of the Company.
The Board met in person or by telephone, as permitted
by the current Articles of Association, three times during
the year. In addition, the Board held numerous project
appraisal and strategy discussions during the year.
The Board will meet at least four times in the coming
year to review trading performance and budgets,
ensure adequate funding, set and monitor strategy,
examine acquisition opportunities and report to
shareholders. The Board has a formal schedule of
matters specifically reserved to it for decisions.
REMUNERATION COMMITTEE
The Remuneration Committee comprises Graham Bull,
who acts as its Chairman, and Raymond Godson.
The current executive director remuneration package
comprises basic salary and share options. Directors’
remuneration for the year is noted in the Directors’ Report
and shown in note 3 on page 50.
Those disclosures form part of this report and are disclosed
within the Directors’ Report, and note 3 within the Notes
to the Financial Statements section of this Annual Report.
The remuneration of non-executive directors is determined
by the Board.
AUDIT COMMITTEE
The Audit Committee comprises Raymond Godson,
who acts as its Chairman, and Graham Bull. The Audit
Committee is responsible for considering a wide range of
financial matters which include the reviewing of Half Yearly
and Year End Reports, discussions with the Auditor and
share placing agreements.
This Committee also provides a forum for reporting
by the Company’s auditor. The executive directors may
attend meetings by invitation.
INTERNAL FINANCIAL CONTROL
The directors are responsible for establishing and
maintaining the Company’s internal financial control
systems. These are designed to meet the particular needs
of the Company and the risks to which it is exposed, and
by their nature can provide reasonable but not absolute
assurance against material misstatement or loss.
The key procedures that the directors have established
to provide effective internal financial controls are:
•
Identification of Business Risks
The Board is responsible for identifying the major
business risks faced by the Company and for
determining the appropriate course of action
to manage these risks.
•
Investment Appraisal
Capital expenditure is regulated by authorisation limits.
For expenditure beyond the specified limits including
investments in exploration projects, detailed proposals
are submitted to the Board for review and sign-off.
• Financial Reporting
The Company has a comprehensive system for
reporting financial results to the Board.
• Audit Committee
The Audit Committee considers and determines
relevant action in respect of any control issues raised
by the external auditor.
32
UNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
DIRECTORS’ RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2018
The directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Company’s transactions and disclose with
reasonable accuracy at any time the financial position of
the Company and enable them to ensure that the financial
statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The directors are responsible for ensuring the annual
report and the financial statements are made available
on a website. Financial statements are published on
the Company’s website in accordance with legislation
in the United Kingdom governing the preparation and
dissemination of financial statements, which may vary
from legislation in other jurisdictions. The maintenance
and integrity of the Company’s website is the responsibility
of the directors. The directors’ responsibility also extends
to the ongoing integrity of the financial statements
contained therein.
The directors are responsible for preparing the Annual
Report and the Financial Statements in accordance with
applicable law and regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the
directors have elected to prepare the Company financial
statements in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European
Union. Under company law the directors must not approve
the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the
Company and of the profit or loss of the Company
for that period. The directors are also required to prepare
financial statements in accordance with the rules of the
London Stock Exchange for companies trading securities
on the Alternative Investment Market. In preparing these
financial statements the directors are required to:
•
select suitable accounting policies and then apply them
consistently;
• make judgements and accounting estimates that are
reasonable and prudent;
•
state whether they have been prepared in accordance
with IFRSs as adopted by the European Union, subject
to any material departures disclosed and explained in
the financial statements;
• prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Company will continue in business.
33
www.unionjackoil.comGOVERNANCE INDEPENDENT AUDITOR’S REPORT
ON THE FINANCIAL STATEMENTS
TO THE MEMBERS OF UNION JACK OIL PLC
CONCLUSIONS RELATING TO GOING CONCERN
We have nothing to report in respect of the following
matters in relation to which the ISAs (UK) require us to
report to you where:
•
•
the directors’ use of the going concern basis of
accounting in the preparation of the financial statements
is not appropriate; or
the directors have not disclosed in the financial
statements any identified material uncertainties that may
cast significant doubt about the Company’s ability to
continue to adopt the going concern basis of accounting
for a period of at least twelve months from the date
when the financial statements are authorised for issue.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the
financial statements of the current period and include the
most significant assessed risks of material misstatement
(whether or not due to fraud) we identified, including those
which had the greatest effect on the overall audit strategy,
the allocation of resources in the audit and directing the
efforts of the engagement team. These matters were
addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
OPINION
We have audited the financial statements of Union Jack Oil
plc (the ‘Company’) for the year ended 31 December 2018
which comprise the income statement, the statement of
comprehensive income, the balance sheet, the statement
of changes in equity, the statement of cash flows and the
notes to the financial statements, including a summary of
significant accounting policies.
The financial reporting framework that has been applied in
the preparation of the financial statements is applicable law
and International Financial Reporting Standards (IFRSs) as
adopted by the European Union.
In our opinion:
• give a true and fair view of the state of the Company’s
affairs as at 31 December 2018 and of its loss for the
year then ended;
• have been properly prepared in accordance with IFRSs
as adopted by the European Union;
• have been prepared in accordance with the
requirements of the Companies Act 2006.
BASIS FOR OPINION
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit
of the financial statements section of our report. We
are independent of the Company in accordance with the
ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC’s Ethical
Standard as applied to listed entities, and we have fulfilled
our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for
our opinion.
34
UNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 INDEPENDENT AUDITOR’S REPORT
ON THE FINANCIAL STATEMENTS
TO THE MEMBERS OF UNION JACK OIL PLC
CARRYING VALUE OF THE OIL & GAS ASSETS
Matter identified
How we addressed the matter
The Company’s oil and gas assets are classified as intangible
assets where the Company has exploration and evaluation
interests (‘E&E’) and as property, plant and equipment where
the Company has development and producing interests
(‘D&P’). See note 7 and 8.
In respect of both the Company’s E&E assets and D&P
assets, management and the directors are required to assess
for any indicators of impairment of the assets.
In respect of both the E&E assets and the D&P assets
we evaluated management’s and the Board’s impairment
review for each of the assets held. We critically
challenged the considerations made of whether or
not there were any indicators of impairment identified
in accordance with the requirements of the relevant
accounting standards.
Our specific audit testing for the E&E Assets included:
Given the significance of the assets on the Company’s
Balance Sheet and the significant management judgement
involved in the assessment of the carrying values of the
assets there is an increased risk of material misstatement.
•
•
•
•
the verification of licence status in order to confirm
legal title and validity of each of the licences
reviewing activity to assess whether there was
evidence from technical work undertaken to date
by management and third parties which would
indicate a potential impairment trigger
reviewing approved budget forecasts and minutes
of management and Board meetings to confirm the
Company’s intention to continue exploration work
on the licences, and
in order to obtain an understanding of management’s
expectation of commercial viability, we reviewed
available technical documentation and discussed
results and operations with management.
Our specific audit testing for the D&P assets included:
•
•
•
the verification of licence status in order to confirm
legal title and validity of each of the licences;
reviewing the external and internal sources of
information, such as third party reports and reports
provided by operators in order to assess whether
any impairment triggers were identified
reviewing third party reports and management
estimates relating to the assessment of the potential
recoverable value of the assets
Key Observations: Based on our work we found no evidence that the carrying value of the Company’s Oil and Gas
assets is impaired
35
www.unionjackoil.comGOVERNANCE INDEPENDENT AUDITOR’S REPORT
ON THE FINANCIAL STATEMENTS
TO THE MEMBERS OF UNION JACK OIL PLC
OUR APPLICATION OF MATERIALITY
Company materiality as at 31 December 2018
Basis for materiality
£74,000 (2017: £75,000)
1.0% of total assets (2017: 1% of total assets)
We apply the concept of materiality both in planning
and performing our audit and in evaluating the effect of
misstatements. We consider materiality to be the magnitude
by which misstatements, including omissions, could influence
the economic decisions of reasonable users that are taken
on the basis of the financial statements. Importantly,
misstatements below these levels will not necessarily be
evaluated as immaterial as we also take account of the
nature of identified misstatements, and the particular
circumstances of their occurrence, when evaluating their
effect on the financial statements as a whole.
In performing the audit we applied a lower level of
performance materiality in order to reduce to an
appropriately low level the probability that the aggregate
of uncorrected and undetected misstatements exceeds
financial statement materiality. Performance materiality
for the financial statements was set at £55,500, being 75%
of financial statement materiality.
We agreed with the Audit Committee that we would
report to them all individual audit differences identified
during the course of our audit in excess of £1,500
(2017: £3,500). We also agreed to report differences
below these thresholds that, in our view, warranted
reporting on qualitative grounds.
OVERVIEW OF THE SCOPE OF OUR AUDIT
We performed a full scope audit on the financial statements
of the Company. All audit work was undertaken by
BDO LLP.
OTHER INFORMATION
The directors are responsible for the other information.
The other information comprises the information included
in the Annual Report and Financial Statements, other than
the financial statements and our Auditor’s Report thereon.
Our opinion on the financial statements does not cover
the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form
of assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing
so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to
determine whether there is a material misstatement in the
financial statements or a material misstatement of the other
information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact. We have
nothing to report in this regard.
36
UNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 RESPONSIBILITIES OF DIRECTORS
As explained more fully in the Directors’ Responsibilities
Statement the directors are responsible for the preparation
of the financial statements and for being satisfied that they
give a true and fair view, and for such internal control as the
directors determine is necessary to enable the preparation
of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the Company’s ability to continue
as a going concern, disclosing, as applicable, matters related
to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate
the Company or to cease operations, or have no realistic
alternative but to do so.
INDEPENDENT AUDITOR’S REPORT
ON THE FINANCIAL STATEMENTS
TO THE MEMBERS OF UNION JACK OIL PLC
OPINIONS ON OTHER MATTERS PRESCRIBED BY
THE COMPANIES ACT 2006
In our opinion, based on the work undertaken in the course
of the audit:
•
•
the information given in the Strategic Report and
the Directors’ Report for the financial year for which
the financial statements are prepared is consistent
with the financial statements; and
the Strategic Report and the Directors’ Report have
been prepared in accordance with applicable legal
requirements.
MATTERS ON WHICH WE ARE REQUIRED TO
REPORT BY EXCEPTION
In the light of the knowledge and understanding of the
Company and its environment obtained in the course
of the audit, we have not identified material misstatements
in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following
matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the
Company, or returns adequate for our audit have not
been received from branches not visited by us; or
•
the Company financial statements are not in agreement
with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified
by law are not made; or
• we have not received all the information and
explanations we require for our audit.
37
www.unionjackoil.comGOVERNANCE INDEPENDENT AUDITOR’S REPORT
ON THE FINANCIAL STATEMENTS
TO THE MEMBERS OF UNION JACK OIL PLC
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT
OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and
to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but
is not a guarantee that an audit conducted in accordance
with ISAs (UK) will always detect a material misstatement
when it exists.
Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate,
they could reasonably be expected to influence the
economic decisions of users taken on the basis of these
financial statements.
A further description of our responsibilities for the audit
of the financial statements is located on the Financial
Reporting Council’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part
of our Auditor’s Report.
USE OF OUR REPORT
This report is made solely to the Company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken
so that we might state to the Company’s members those
matters we are required to state to them in an Auditor’s
Report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company’s
members as a body, for our audit work, for this report,
or for the opinions we have formed.
Anne Sayers, Senior Statutory Auditor
For and on behalf of BDO LLP, Statutory Auditor
London, United Kingdom
13 May 2019
BDO LLP is a limited liability partnership registered in
England and Wales (with registered number OC305127).
38
UNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2018
Notes
31.12.18
£
31.12.17
£
Revenue
Cost of sales - operating costs
Cost of sales - depreciation
Gross loss
Administrative expenses (excluding impairment charge)
Impairment
Total administrative expenses
Operating loss
Finance income
Loss before taxation
Taxation
Loss for the financial year
Attributable to:
Equity shareholders of the Company
Loss per share
Basic and diluted loss per share (pence)
2
2
4
5
6
165,270
(159,046)
(32,186)
46,203
(48,627)
(17,322)
(25,962)
(19,746)
(871,489)
(205,308)
(722,502)
(5,078)
(1,076,797)
(727,580)
(1,102,759)
(747,326)
4,051
504
(1,098,708)
(746,822)
–
–
(1,098,708)
(746,822)
(1,098,708)
(746,822)
(0.01)
(0.02)
The accompanying accounting policies and notes form an integral part of these financial statements.
39
www.unionjackoil.comFINANCIAL STATEMENTS
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2018
Loss for the financial year
Other comprehensive income
31.12.18
£
31.12.17
£
(1,098,708)
–
(746,822)
–
Total comprehensive loss for the financial year
(1,098,708)
(746,822)
The accompanying accounting policies and notes form an integral part of these financial statements.
40
UNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
BALANCE SHEET
AS AT 31 DECEMBER 2018
Assets
Non-current assets
Exploration and evaluation assets
Property, plant and equipment
Investments
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Trade and other payables
Non-current liabilities
Provisions
Total liabilities
Net assets
Notes
31.12.18
£
31.12.17
£
7
8
10
11
12
19
20
3,485,961
611,139
40,000
2,806,278
496,859
40,000
4,137,100
3,343,137
198,054
3,123,287
65,872
1,578,514
3,321,341
1,644,386
7,458,441
4,987,523
396,688
310,079
453,165
229,918
849,853
539,997
6,608,588
4,447,526
3,983,958
7,593,146
78,319
(5,046,835)
2,954,547
5,379,670
61,438
(3,948,129)
6,608,588
4,447,526
Capital and reserves attributable to the
Company’s equity shareholders
Share capital
Share premium
Share-based payments reserve
Accumulated deficit
13(a)
14
14
14
Total equity
The financial statements of Union Jack Oil plc, registered number 07497220, were approved and authorised for issue
by the Board of Directors on 13 May 2019 and were signed on its behalf by:
David Bramhill
Director
The accompanying accounting policies and notes form an integral part of these financial statements.
41
www.unionjackoil.comFINANCIAL STATEMENTS
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2018
Share Accumulated
deficit
capital
£
£
Share
premium
£
Share-based
payment
reserve
£
Total
£
Balance at 1 January 2018
2,954,547
(3,948,129)
5,379,670
61,438
4,447,526
Total comprehensive loss
–
(1,098,708)
–
–
(1,098,708)
Contributions by and
distributions to owners
Issue of share capital
Share issue costs
Share-based payments
Total contributions by and
distributions to owners
1,029,411
–
–
–
–
–
2,470,589
(257,113)
–
–
–
16,881
3,500,000
(257,113)
16,881
1,029,411
(1,098,708)
2,213,476
16,881
2,161,162
Balance at 31 December 2018
3,983,958
(5,046,835)
7,593,146
78,319
6,608,588
Balance at 1 January 2017
2,696,399
(3,489,703)
4,566,072
167,924
3,940,692
Total comprehensive loss
–
(746,822)
–
–
(746,822)
Contributions by and
distributions to owners
Issue of share capital
Share issue costs
Prior period exercised and expired warrants
Current year expired share warrants
258,148
–
–
–
–
–
215,366
–
1,135,849
(140,342)
(114,074)
5,194
–
–
(101,292)
(5,194)
1,393,997
(140,342)
–
–
Total contributions by and
distributions to owners
258,148
288,395
813,598
(106,486) 1,253,675
Balance at 31 December 2017
2,954,547
(3,948,129)
5,379,670
61,438
4,447,526
The accompanying accounting policies and notes form an integral part of these financial statements.
42
UNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2018
Notes
31.12.18
£
31.12.17
£
Cash flow from operating activities
Cash flow from investing activities
Purchase of intangible assets
Purchase of property, plant and equipment
Interest received
15
7
8
(893,956)
(503,331)
(755,919)
(52,291)
4,051
(872,482)
(161,797)
504
Net cash used in investing activities
(804,159)
(1,033,775)
Cash flow from financing activities
Proceeds on issue of new shares
Cost of issuing new shares
13(a)
13(a)
3,500,000
(257,113)
1,393,997
(140,342)
Net cash generated from financing activities
3,242,887
1,253,655
Net increase / (decrease) in cash and cash equivalents
1,544,773
(283,450)
Cash and cash equivalents at beginning of financial year
1,578,514
1,861,964
Cash and cash equivalents at end of financial year
12
3,123,287
1,578,514
The accompanying accounting policies and notes form an integral part of these financial statements.
43
www.unionjackoil.comFINANCIAL STATEMENTS
PRINCIPAL ACCOUNTING POLICIES
Union Jack Oil plc is a company incorporated in the United
Kingdom under the Companies Act 2006. The address
of the registered office is 6 Charlotte Street, Bath BA1
2NE, England. The nature of the Company’s operations and
its principal activities are set out in the Directors’ Report,
Strategic Report and Review of Operations. These financial
statements are presented in pounds sterling because that is
the currency of the primary economic environment in which
the Company operates.
BASIS OF PREPARATION
The annual financial statements of Union Jack Oil plc
(“the Company”) have been prepared in accordance
with International Financial Reporting Standards (“IFRS”)
as adopted by the European Union (“EU”) applied in
accordance with the provisions of the Companies Act 2006.
IFRS is subject to amendment and interpretation by the
International Accounting Standards Board (“IASB”) and
the IFRS Interpretations Committee, and there is an ongoing
process of review and endorsement by the European
Commission. These accounting policies comply with each
IFRS that is mandatory for accounting periods ending on
31 December 2018.
The financial statements have been prepared under the
historical cost convention except for the valuation of certain
warrants for shares. The principal accounting policies set out
below have been consistently applied to all periods presented.
GOING CONCERN
The Company’s business activities, together with the factors
likely to affect its future development, performance and
position are set out in the Chairman’s Statement, Review of
Operations and the Strategic Report. The directors’ forecasts
demonstrate that the Company will meet its day-to-day
working capital and share of estimated drilling costs over
the forecast period (being at least 12 months from the date
the financial statements were approved) from the cash held
on deposit on 31 December 2018 and funds raised
subsequent to the year end. The principal risk to the
Company’s working capital position is drilling cost overruns.
The Company has sufficient funding to meet planned drilling
expenditures and a level of contingency. Taking account of
these risks, sensitised forecasts show that the Company
should be able to operate within the level of funds currently
held. The directors have a reasonable expectation that the
Company has adequate resources to continue in operational
existence for the foreseeable future. Thus they continue to
adopt the going concern basis of accounting in preparing the
financial statements.
REVENUES
Revenues represent amounts receivable for the sale of crude
oil, net of taxes, and are recognised on delivery to a third
party storage facility on behalf of a customer.
Under IFRS 15 these revenues have been assessed on
page 47 (under the new accounting standards adopted).
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash on hand and
deposits held at call with banks.
FINANCIAL INSTRUMENTS
Recognition and Derecognition
Financial assets and financial liabilities are recognised when
the Company becomes a party to the contractual provisions
of the financial instrument.
Financial assets are derecognised when the contractual rights
to the cash flows from the financial asset expire, or when
the financial asset and substantially all the risks and rewards
are transferred.
A financial liability is derecognised when it is extinguished,
discharged, cancelled or expires.
Classification and Initial Measurement of Financial
Assets
Except for those trade receivables that do not contain a
significant financing component and are measured at the
transaction price in accordance with IFRS 15, all financial assets
are initially measured at fair value adjusted for transaction
costs (where applicable).
Financial assets are classified into the following categories:
•
•
•
amortised cost
fair value through profit or loss (FVTPL)
fair value through other comprehensive income (FVOCI).
In the periods presented the Company does not have any
financial assets categorised as FVTPL.
The classification is determined by both:
•
•
the entity’s business model for managing the financial asset
the contractual cash flow characteristics of the financial
asset.
Subsequent Measurement of Financial Assets
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets
meet the following conditions:
•
•
they are held within a business model whose objective
is to hold the financial assets and collect its contractual
cash flows
the contractual terms of the financial assets give rise
to cash flows that are solely payments of principal and
interest on the principal amount outstanding
After initial recognition, these are measured at amortised cost
using the effective interest method. Discounting is omitted
where the effect of discounting is immaterial. The Company’s
cash and cash equivalents, trade and most other receivables
fall into this category of financial instruments.
Financial assets at fair value through other comprehensive
income (FVOCI)
44
UNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 PRINCIPAL ACCOUNTING POLICIES
The Company accounts for financial assets at FVOCI if the
assets meet the following conditions:
•
they are held under a business model whose objective it is
“hold to collect” the associated cash flows and sell; and
•
the contractual terms of the financial assets give rise
to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
The Company’s investment in unlisted shares are classified
as financial assets at FVOCI. Any gains or losses recognised
in other comprehensive income (OCI) will be recycled upon
derecognition of the asset.
Classification and Measurement of Financial
Liabilities
The Company’s financial liabilities include trade and
other payables.
Financial liabilities are initially measured at fair value,
and, where applicable, adjusted for transaction costs.
Subsequently, financial liabilities are measured at amortised
cost using the effective interest method.
All interest-related charges are included within finance costs
or finance income.
Impairment of Financial Assets
In relation to the impairment of financial assets, IFRS 9
requires an expected credit loss model to be applied. The
expected credit loss model requires the Company to account
for expected credit losses and changes in those expected
credit losses at each reporting date to reflect changes in
credit risk since initial recognition of the financial assets.
IFRS 9 requires the Company to recognise a loss allowance
for expected credit losses on trade receivables.
In particular, IFRS 9 requires the Company to measure the
loss allowance for a financial instrument at an amount equal
to the lifetime expected credit losses (ECL) if the credit risk
on that financial instrument has increased significantly since
initial recognition, or if the financial instrument is a purchased
or originated credit-impaired financial asset. However, if
the credit risk on a financial instrument has not increased
significantly since initial recognition, the Company is required
to measure the loss allowance for that financial instrument
at an amount equal to 12 months ECL.
INTANGIBLE ASSETS – EXPLORATION AND
EVALUATION ASSETS
Costs (including research costs) incurred prior to obtaining
the legal rights to explore an area will be expensed
immediately to the Income Statement, as these are classified
as pre-licence costs.
Expenditure incurred on the acquisition of a licence interest
will initially be capitalised on a licence-by-licence basis.
Costs will be held within exploration and evaluation costs
until such a time as the exploration phase on the licence area
is complete or commercial reserves have been discovered.
Exploration expenditure incurred in the process of
determining exploration targets will be capitalised initially
within intangible assets as exploration and evaluation costs.
Exploration costs will initially be capitalised whilst exploration
and evaluation activities are continuing, and until the success
or otherwise has been established. The success or failure of
each exploration/evaluation effort will be judged generally on
a licence-by-licence basis. Capitalised costs will be written off
on completion of exploration and evaluation activities unless
the results indicate that hydrocarbon reserves exist and that
these reserves are commercially viable.
All such costs will be subject to regular technical, commercial
and management review for indicators of impairment
which includes confirming the continued intent to develop
or otherwise extract value from the licence, prospect or
discovery. Where this is no longer the case, the costs will
be immediately expensed.
Following evaluation of successful exploration wells, if
commercial reserves are established and the technical
feasibility of extraction is demonstrated, and once a project
is sanctioned for commercial development, then the related
capitalised exploration/evaluation costs will be transferred
into a single field cash generating units within development/
producing assets after testing for impairment, within Property,
Plant and Equipment. Where results of exploration drilling
indicate the presence of hydrocarbons which are ultimately
not considered commercially viable, all related costs will be
written off to the Income Statement.
PROPERTY, PLANT AND EQUIPMENT –
DEVELOPMENT AND PRODUCTION ASSETS
Development and production (“D&P”) assets are accumulated
into cash generating units ("CGU") and represent the cost of
developing the commercial reserves and bringing them into
production together with the E&E expenditures previously
transferred from E&E assets as outlined in the policy above.
All costs incurred after the technical feasibility and commercial
viability of producing hydrocarbons have been demonstrated
will be capitalised within development/producing assets on a
field-by-field basis. Subsequent expenditure will be capitalised
only where it either enhances the economic benefits of the
development/producing asset or replaces part of the existing
development/producing asset.
On acquisition of a D&P asset from a third party, the asset
will be recognised in the financial statements on signature
of the sale and purchase agreement, subject to satisfaction
of any substantive conditions within the agreement.
Costs relating to each CGU are depleted on a unit of
production method based on the commercial Proven and
Probable Reserves for that CGU. Development assets
are not depreciated until production commences. The
depreciation calculation takes account of the residual
value of site equipment and the estimated future costs of
development of recognised Proven and Probable Reserves,
based on current price levels. Changes in reserve quantities
and cost estimates are recognised prospectively.
45
www.unionjackoil.comFINANCIAL STATEMENTS PRINCIPAL ACCOUNTING POLICIES
DECOMMISSIONING AND SITE RESTORATION
PROVISIONS
Licensees have an obligation to restore fields to a condition
acceptable to the relevant authorities at the end of their
commercial lives.
Provision for decommissioning and reinstatement is recognised
in full as a liability and an asset when the obligation arises.
The asset is included within exploration and evaluation
assets or property, plant and equipment as is appropriate.
The liability is included within provisions.
The amount recognised is the estimated cost of
decommissioning and reinstatement, discounted where
appropriate to its net present value, and is reassessed each
year in accordance with local conditions and requirements.
Revisions to the estimated costs of decommissioning and
reinstatement which alter the level of the provisions required
are also reflected in adjustments to the decommissioning
and reinstatement asset.
The increase in the net present value of the future cost
arising from the unwinding of the discount is included within
finance costs.
CONTINGENT LIABILITIES
Contingent consideration payable in respect of the Company’s
interest in certain licences is considered to be a contingent
liability, which is not recognised due to the lack of estimation
certainty of both the timing and amount payable. These will
be recognised as a provision when it is possible to accurately
estimate costs and the timing is known.
IMPAIRMENT
The carrying amounts of non-current assets are reviewed for
impairment if events or changes in circumstances indicate the
carrying value may not be recoverable. If there are indicators
of impairment, such as a well not encountering commercial
quantities of oil or a site being shut-in, an exercise is undertaken
to determine whether the carrying values are in excess of their
recoverable amount. Such review is undertaken on an asset
by asset basis, except where such assets do not generate cash
flows independent of other assets, in which case the review is
undertaken at the cash generating unit level on a field-by-field
basis. For intangible exploration and evaluation assets potential
impairment triggers may include the short term expiry of a
licence, lack of budgeted spend, or the lack of potential for
commercial development of the asset. The potential recoverable
value of such assets is assessed by the directors based on
their knowledge of the assets and available information. The
Company’s cash-generating units are the smallest identifiable
groups of assets that generate cash inflows that are largely
independent of the cash inflows from other assets or groups
of assets.
A previously recognised impairment loss is reversed if the
recoverable amount increases as a result of a reversal of
the conditions that originally resulted in the impairment.
This reversal is recognised in the profit and loss account and
is limited to the carrying amount that would have been
determined, net of depreciation, had no impairment loss
been recognised in the prior years.
The recoverable amount of assets is the higher of their value
in use and fair value less costs to sell. In assessing value in use,
the estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific
to the asset. For an asset that does not generate cash inflows
largely independent of those from other assets, the recoverable
amount is determined for the cash-generating unit to which the
asset belongs.
Impairments are recognised in the Income Statement to the
extent that the carrying amount exceeds the assets’ recoverable
amount. The revised recoverable amounts are amortised in line
with the Company’s accounting policies.
JOINT ARRANGEMENTS, FARM-IN AND PROFIT
SHARING AGREEMENTS
The Company is party to a joint arrangement when there
is a contractual agreement that sets out the terms of the
relationship over the relevant activities of the Company
and at least one other party.
The management have a legal degree of control over these joint
operating arrangements through Joint Operating Agreements.
The Company classifies its interests in joint arrangements as
joint operations: where the Company has both the rights to
assets and obligations for the liabilities of the joint arrangement.
The Company accounts for its interests in joint operations
by recognising its share of assets, liabilities, revenues and
expenses in accordance with its contractually conferred
rights and obligations.
The Company accounts for its own assets, liabilities and cash
flows measured in accordance with the terms of the production
sharing agreement and the accounting treatment reflects the
agreement’s commercial effect. The Company’s revenue and
cost of sales include revenues and operating costs associated
with the Company’s interest.
CURRENT TAX
Current tax is based on taxable profit for the year. Taxable profit
differs from net profit as reported in the Income Statement
because it excludes items of income or expense that are taxable
or deductible in other years and it further excludes items that
are never taxable or deductible. The Company’s liability for
current tax is calculated using tax rates that have been enacted
or substantively enacted by the Balance Sheet date.
DEFERRED TAX
Deferred tax is the tax expected to be payable or recoverable
on differences between the carrying amounts of assets and
liabilities in the financial statements and the corresponding
tax bases used in the computation of taxable profit, and
is accounted for using the Balance Sheet liability method.
Deferred tax liabilities are generally recognised for all taxable
temporary differences and deferred tax assets are recognised
to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can
be utilised. Such assets and liabilities are not recognised if
the temporary difference arises from the initial recognition
of goodwill or from the initial recognition (other than in a
46
UNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 PRINCIPAL ACCOUNTING POLICIES
business combination) of other assets and liabilities in a
transaction that affects neither the taxable profit nor the
accounting profit.
The carrying amount of deferred tax assets is reviewed at
each Balance Sheet date and reduced to the extent that it is no
longer probable that sufficient taxable profits will be available
to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised based on tax laws and rates that have been enacted or
substantively enacted at the Balance Sheet date. Deferred tax
is charged or credited in the Income Statement, except when
it relates to items charged or credited in other comprehensive
income, in which case the deferred tax is also dealt with in
other comprehensive income.
Deferred tax assets and liabilities are offset when there
is a legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes
levied by the same taxation authority and the Company intends
to settle its current tax assets and liabilities on a net basis.
EQUITY INSTRUMENTS
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Company are
recognised at the proceeds received, net of direct issue costs.
The equity instrument in respect of the Company is in relation
to the issue of ordinary shares.
SHARE-BASED PAYMENTS
Equity-settled share-based payments in respect of warrants
and options issued by the Company are measured at the fair
value of the equity instruments at the grant date, on the basis
that this is immaterially different from the fair value of the
services provided.
Details regarding the determination of the fair value of
equity-settled share-based transactions are set out in note
13(b) and 13 (c). The fair value determined at the grant date
of the equity-settled share-based payments is expensed over
the vesting period, based on the Company’s estimate of the
number of equity instruments that will eventually vest.
At each Balance Sheet date, the Company revises its estimate
of the number of equity instruments expected to vest as a
result of the effect of non-market-based vesting conditions.
The impact of the revision of the original estimates, if any, is
recognised in the Income Statement such that the cumulative
expense reflects the revised estimate, with a corresponding
adjustment to equity reserves.
When a share-based payment expires, the cumulative expense
recognised in the share based payment reserve is reclassified
to the relevant component of equity in line with the original
recognition of the expense.
ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS
The Company has adopted the following standards, amendments to standards and interpretations which are effective for the first
time this year. The impact is shown below:
New and revised International Financial Reporting
Standards
Effective Date: Annual periods
beginning on or after:
EU adopted
IFRS 9
IFRS 15
Financial Instruments: Classification and
Measurement
Revenue from Contracts with Customers and
Clarifications to IFRS 15 Revenue from Contracts
with Customers
1 January 2018
1 January 2018
Yes
Yes
IFRS 15 ‘Revenue from Contracts with Customers’ and the related ‘Clarifications to IFRS 15 Revenue from Contracts with
Customers’ (hereinafter referred to as ‘IFRS 15’) replace IAS 18 ‘Revenue’, IAS 11 ‘Construction Contracts’, and several
revenue-related Interpretations.
The new Standard has been applied retrospectively without restatement.
The Company’s accounting policy for revenue is disclosed above. Apart from providing more disclosures for the Company’s
revenue transactions, the application of IFRS 15 has not had an impact on the Balance Sheet and/or financial performance
of the Company.
IFRS 9 replaces IAS 39 ‘Financial Instruments: Recognition and Measurement’. It makes major changes to the previous guidance
on the classification and measurement of financial assets and introduces an ‘expected credit loss’ model for the impairment of
financial assets.
When adopting IFRS 9, the Company has applied transitional relief and opted not to restate prior periods.
47
www.unionjackoil.comFINANCIAL STATEMENTS PRINCIPAL ACCOUNTING POLICIES
ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (CONTINUED)
All of the Company’s financial assets and financial liabilities continue to be held at amortised cost, with the exception of its equity
investments. The Company has elected to classify these as held at fair value through other comprehensive income under IFRS
9 - they were previously measured at cost in the Balance Sheet. This means that any changes in the fair value of such assets up
to the point of disposal will be recorded in other comprehensive income. Therefore, in contrast to the previous accounting
treatment, significant or prolonged declines in value below cost will not be recognised in the Income Statement, and the Income
Statement will not reflect gains or losses on disposal because gains and losses recognised in other comprehensive income will not
be recycled to profit or loss on any such disposal.
There were no material changes in fair value of the Company’s equity investments and therefore the values are unchanged.
Under IFRS 9 the equity investment is held at fair value, however, there is no material change to the cost model.
At the date of authorisation of the consolidated financial statements, the IASB and IFRS Interpretations Committee have issued
standards, interpretations and amendments which are applicable to the Company.
Whilst these standards and interpretations are not effective for, and have not been applied in the preparation of, these
consolidated financial statements, the following could potentially have a material impact on the Company’s financial statements
going forward:
New and revised International Financial Reporting Standards
Effective Date: Annual
periods beginning on
or after:
EU
adopted
IAS 1
Amendments to IAS 1 and IAS 8: Definition of Material
1 January 2020
IFRS 3
Amendment to IFRS 3 Business Combinations
IFRS 16
Leases
1 January 2020
1 January 2019
No
No
Yes
New and revised International Financial Reporting Standards which are not considered to potentially have a material impact
on the Company’s financial statements going forwards have been excluded from the above.
Management anticipates that all relevant pronouncements will be adopted in the Company's accounting policies for the first
period beginning after the effective date of the pronouncement.
IFRS 16 ‘Leases’ provides a new model for lessee accounting in which all leases, other than short-term and small-ticket-
item leases, will be accounted for by the recognition on the balance sheet of a right-to-use asset and a lease liability, and the
subsequent amortisation of the right-to-use asset over the lease term. IFRS 16 will be effective for annual periods beginning
on or after 1 January 2019.
The Company adopted IFRS 16 on 1 January 2019. The Company’s evaluation of the effect of adoption of the standard is
ongoing but it is not currently expected that it will have a material effect on the Company’s financial statements as the Company
does not hold any leases at the date of sign off of these financial statements.
There are no other standards and interpretations in issue but not yet adopted that the directors anticipate will have a material
effect on the reported income or net assets of the Company.
CRITICAL ACCOUNTING JUDGEMENTS AND
KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Company’s accounting policies, which are described in this note, the directors are required to make
judgements regarding the choice and application of accounting policies, as well as estimates and assumptions about the carrying
amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions
are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these
estimates.
The estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision
affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
The following are the critical judgements and estimates that the directors have made in the process of applying the Company’s
accounting policies and that have the most significant effect on the amounts recognised in the financial statements:
48
UNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 PRINCIPAL ACCOUNTING POLICIES
CRITICAL ESTIMATES
Share-based Payments
In determining the fair value of warrants and options and the
related charges to the Income Statement, the Company makes
assumptions about future events and market conditions.
The fair value is determined using a valuation model which is
dependent on estimates, including the future volatility of the
Company’s share price and the expected life of the share-
based payments. This is determined by using historic data from
similar companies and historic trends on exercising share-
based payments by holders. See note 13(b) and 13(c).
Exploration and Evaluation Costs
The Company’s accounting policy leads to the development of
tangible and intangible fixed assets, where it is considered likely
that the amount will be recoverable by future exploitation or
sale, or alternatively where the activities have not reached a
stage which permits a reasonable assessment of the existence
of reserves.
This requires management to make assumptions as to the
future events and circumstances, especially in relation to
whether an economically viable extraction operation can be
established. Such estimates are subject to change and following
initial capitalisation, should it become apparent that recovery
of the expenditure is unlikely, the relevant capitalised amount
will be written off to the Income Statement.
Decommissioning Provision
Management use estimates for future decommissioning
expenditure, discount rates and inflation rates provided by
the operator to determine appropriate decommissioning
provisions. These may change as a result of revisions to the
estimated timing and future cost of decommissioning.
Carrying Value of Property, Plant and Equipment
The Company assesses at each reporting period whether
there is any indication that these assets may be impaired
as indicated in note 8.
If such indication exists, the Company estimates the
recoverable amount of the asset. The recoverable amount
is assessed by reference to the higher of ‘value in use’ (being
the net present value of expected future cash flows of the
relevant cash generating unit) and ‘fair value less cost to sell’.
The Company considers the quantities of the proven and
probable reserves, future production levels and future oil
prices as well as other IAS 36 criteria in their assessment of
indicators of impairment. The directors do not believe there
are any indicators of impairment in respect of the assets.
Judgements in Applying Accounting Policies and Key
Sources of Estimation Uncertainty – Impairment
Management is required to assess the exploration and
evaluation assets for indicators of impairment. Note 7
discloses the carrying value of the exploration and evaluation
assets. Note 8 discloses the carrying value of the development
and production assets.
Impairment is considered on a licence-by-licence basis.
In assessing the need to impair exploration and evaluation
assets the Board makes assumptions about the future
progress and likely successful outcome of exploration and
drilling activities. Due diligence is performed at the outset
of the investment before an investment is made. At an
early stage of exploration of each investment the need for
impairment is determined through monitoring market and
industry conditions, competent person reports on each
prospect and any available information from each licence’s
main Operator.
In the case of those licences where drilling has commenced
and management is committed to further exploration and
evaluation with sufficient financial resources available to do so,
impairment is not recognised unless technical analysis confirms
that commercially viable hydrocarbons are insufficient to
recover costs incurred.
In respect of the Widmerpool Gulf licence PEDL201, the
Burton on the Wolds-1 well was drilled and no conventional
commercial hydrocarbons were discovered.
However, unconventional potential has been highlighted
within the licence area, of which the potential revenues would
exceed costs as at 31 December 2018.
The directors are considering their options to generate cash
inflows from this development and accordingly the directors
continue to actively evaluate the licence with a view to
possible future explorative drilling. As unconventional potential
has been highlighted in the licence area, of which the potential
revenues would exceed costs, no impairment is considered
appropriate at this time.
In respect of the Weald Basin (formerly known as
Holmwood) PEDL143, due to the loss of the designated
wellsite the directors have decided to impair total costs spent
to date on this licence. This has incurred an impairment charge
of £205,308.
In respect of Wressle, PEDL180 and PEDL182, a planning
appeal has been submitted for the development of the
Wressle discovery, therefore the directors do not consider
these licences as requiring impairment given the remaining line
of recourse still available to the licence partners to develop
the asset.
49
www.unionjackoil.comFINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
1
BUSINESS AND OPERATING SEGMENTS
The Company is considered to have two operating segments, being the exploration and development of, and the
production of hydrocarbon discoveries onshore United Kingdom.
For the year ending 31 December 2018
Revenue
Operating expenses
Depreciation
Impairment
Other administrative expenses
Loss from continuing operations before tax
Finance income
Loss for the year
For the year ending 31 December 2017
Revenue
Operating expenses
Depreciation
Impairment
Other administrative expenses
Loss from continuing operations before tax
Finance income
Loss for the year
Exploration
and development
Production
Corporate
Total
–
–
–
(205,308)
–
(205,308)
–
(205,308)
165,270
(159,046)
(32,186)
–
–
(25,962)
–
(25,962)
–
–
–
(5,078)
–
(5,078)
–
(5,078)
46,203
(48,627)
(17,322)
–
–
(19,746)
–
(19,746)
–
–
–
–
(871,489)
(871,489)
4,051
(867,438)
–
–
–
–
(722,502)
(722,502)
504
(721,998)
165,270
(159,046)
(32,186)
(205,308)
(871,489)
(1,102,759)
4,051
(1,098,708)
46,203
(48,627)
(17,322)
(5,078)
(722,502)
(747,326)
504
(746,822)
50
UNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
1
BUSINESS AND OPERATING SEGMENTS (CONTINUED)
For the year ending 31 December 2018
Exploration
and development
Production
Corporate
Total
Non-current assets
Current assets
Non-current liabilities
Current liabilities
3,485,961
–
(286,937)
(275,179)
611,139
173,906
(166,228)
(50,497)
40,000
3,147,435
–
(71,012)
4,137,100
3,321,341
(453,165)
(396,688)
Net assets/(liabilities)
2,923,845
568,320
3,116,423
6,608,588
For the year ending 31 December 2017
Non-current assets
Current assets
Non-current liabilities
Current liabilities
2,806,278
–
(51,489)
(15,315)
496,859
48,725
(178,429)
(163,325)
40,000
1,595,661
–
(131,439)
3,343,137
1,644,386
(229,918)
(310,079)
Net assets/(liabilities)
2,739,474
203,830
1,504,222
4,447,526
2
OPERATING LOSS
Operating loss is stated after charging:
Impairment charge
Depletion of producing assets
Staff costs (see note 3)
Fees payable to the Company’s auditor for:
– The audit of these financial statements
– Tax compliance services
31.12.18
£
31.12.17
£
205,308
32,186
240,051
28,000
6,500
5,078
17,322
204,920
25,500
16,400
The impairment charge of £205,308 (2017: £nil) is in respect of PEDL143 Weald Basin.
The impairment shown for 2017 in last year's Annual Report and Financial Statements was in respect of PEDL249 Laughton.
51
www.unionjackoil.comFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3
EMPLOYEE INFORMATION AND REMUNERATION OF DIRECTORS
The aggregate payroll cost in the year of the employees, all of whom are directors, was as follows.
Salaries
Social security costs
31.12.18
£
31.12.17
£
217,916
22,135
186,667
18,253
240,051
204,920
The number of persons employed by the Company was 5 (2017: 4).
Details of each director’s emoluments are included in the Director’s Report and within this note.
The salaries and fees of individual directors were as follows
D Bramhill
J O’Farrell
R Godson
G Bull
F Lang
2018
£
110,000
55,833
25,000
25,000
2,083
2017
£
86,667
50,000
25,000
25,000
-
217,916
186,667
The emoluments of the highest paid director were £110,000 (2017: £86,667).
Director’s share options.
D Bramhill
J O’Farrell
R Godson
G Bull
F Lang
Number
Grant date
Exercise price
Vesting date
120,000,000
60,000,000
30,000,000
30,000,000
30,000,000
18.07.18
18.07.18
07.11.18
07.11.18
04.12.18
0.9p
0.9p
0.11p
0.11p
0.11p
18.07.21
18.07.21
07.11.21
07.11.21
04.12.21
Nil options were in issue at 31 December 2017.
52
UNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
4
FINANCE INCOME
Bank interest
5
TAXATION
Current tax
UK Corporation Tax
Adjustment in respect of prior periods
Total UK Corporation Tax charge
31.12.18
£
31.12.17
£
4,051
504
31.12.18
£
31.12.17
£
–
–
–
–
–
–
£
The differences between the current tax shown above and the amount calculated by applying the standard rate of UK
Corporation Tax for oil and gas companies of 40% (2017: 40%) to the loss before tax is as follows:
£
Loss on ordinary activities before tax
Tax on Company loss on ordinary activities at standard UK
corporation tax rate of 40% (2017: 40%)
Effects of:
Impairment of intangible assets not deductible for tax purposes
Finance income
Losses carried forward
Adjustment in respect of prior periods
Current tax charge for year
(1,098,708)
(746,822)
439,483
298,729
(82,123)
–
(357,360)
–
–
(2,031)
–
(296,698)
–
–
A deferred tax asset of £2,169,026 (2017: £1,811,666) relating to the carry forward of losses from trading and pre-trading
expenditure has not been recognised in the year as at present it is not envisaged that any tax will become payable in the
foreseeable future against which those losses could be utilised as deductions.
The Company has total carried forward losses of £5,046,835 (2017: £3,948,129).
53
www.unionjackoil.comFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
6
LOSS PER SHARE
The Company has issued warrants and options over ordinary shares which could potentially dilute the basic loss per share
in the future. Further details are given in note 13(b) and 13(c).
Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number
of ordinary shares outstanding during the year.
During the current and prior year, the Company had warrants and options in issue as detailed in note 13(b) and 13(c).
At 31 December 2018 the Company had 51,407,842 (2017: 51,407,842) warrants in issue and 300,000,000 (2017: nil)
options in issue.
These warrants and options have not been taken into account when calculating the diluted loss per share as their impact
was anti-dilutive. Therefore, the basic and diluted loss per share are the same.
Loss per share
2018
Pence
2017
Pence
Loss per share from continuing operations
(0.01)
(0.02)
The loss and weighted average number of ordinary shares used in the calculation of loss per share are as follows:
2018
£
2017
£
Loss used in the calculation of total basic and diluted earnings per share
(1,098,708)
(746,822)
Number of shares
2018
2017
Weighted average number of ordinary shares for the purposes of basic
and diluted loss per share
7,532,096,235
4,149,180,372
As detailed in note 13, the Company has 831,680,400 (2017: 831,680,400) deferred shares. These have not been included
within the calculations of basic shares above on the basis that IAS 33 defines an ordinary share as an equity instrument
that is subordinate to all other classes of equity instruments. Any residual interest in the assets of the Company would
not currently, on liquidation, go to the deferred shareholders, hence they are not currently considered subordinate.
These deferred shares have not been taken into account when calculating the diluted loss per share as their impact
was anti-dilutive.
The Company issued 4,117,647,049 new ordinary shares during the year (2017: 1,032,589,694).
54
UNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
7
INTANGIBLE ASSETS
At 1 January
Costs incurred during the year
Transfer to development and production assets
Costs impaired
At 31 December
31.12.18
£
31.12.17
£
2,806,278
911,172
(106,181)
(205,308)
2,079,340
977,340
(245,324)
(5,078)
3,485,961
2,806,278
Additions to exploration and evaluation costs represent exploration and appraisal costs incurred in the year in respect of
unproven properties and provisions recognised for decommissioning and restoration liabilities.
Total costs of £205,308 have been impaired with regard to PEDL143.
The directors have reviewed whether there were any potential triggers for impairment evidence for each of the assets.
If a trigger was identified the directors considered the potential value of the projects and licences. The directors have
also considered the likely opportunities for realising the value of licences and have concluded that the likely value of each
exploration area is individually in excess of its carrying amount with the exception of PEDL143 as noted above.
In respect of PEDL180 and PEDL182, confidence remains that the Wressle development will be brought to production status
and all credible avenues to achieve this objective will be pursued. An Environment Agency permit for production is already
place, and with the remaining avenues of recourse for development of the asset still available to the licence, no impairment
of the asset has been recorded.
On this basis the licence costs are not impaired in these financial statements.
In respect of PEDL201, the directors are considering their options to generate cash inflows from this development.
As unconventional potential has been highlighted in the licence area, of which the potential revenues would exceed costs,
no impairment is considered appropriate at this time whilst further evaluation is planned and budgeted.
Included in the above intangible asset additions during the year are amounts arising in relation to increases in decommissioning
and restoration provisions (note 20).
Intangible assets (less any impairment) comprise amounts capitalised as follows:
Wressle
Widmerpool Gulf
West Newton
Biscathorpe
North Kelsey
Weald Basin
Louth Extension
Broughton North
Dukes Wood
Kirklington
Humber Basin
Laughton
PEDL180
PEDL201
PEDL183
PEDL253
PEDL241
PEDL143
PEDL339
PEDL182
PEDL118
PEDL203
PEDL181
PEDL209
31.12.18
£
31.12.17
£
2,280,866
367,730
329,784
387,137
83,851
–
16,003
6,236
–
–
12,881
1,473
2,097,870
355,087
–
86,737
51,232
121,895
8,304
881
49,279
34,993
–
–
55
www.unionjackoil.comFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
8
PROPERTY, PLANT AND EQUIPMENT
Cost
At 1 January
Transfer from exploration and evaluation assets
Additions
At 31 December
Depreciation
At 1 January
Charge for the year
At 31 December
Net book value
At 31 December
At 1 January
Development and Production assets comprise amounts capitalised as follows:
Fiskerton Airfield
Keddington
Dukes Wood
Kirklington
EXL294
PEDL005(R)
PEDL118
PEDL203
31.12.18
£
31.12.17
£
514,181
106,181
40,285
660,647
17,322
32,186
49,508
–
245,324
268,857
514,181
–
17,322
17,322
611,139
496,859
496,859
–
31.12.18
£
222,048
282,910
59,566
46,615
31.12.17
£
193,206
303,653
–
–
611,139
496,859
The Board has assessed the development and production assets as at 31 December 2018 and have not identified any
indicators of impairment as set out in IAS 36 Impairment of assets.
56
UNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
JOINT OPERATIONS
9
The Company is party to eleven joint arrangements which carry out exploration and development of hydrocarbons
in the United Kingdom. The parties to the arrangements and the Company’s percentage interest for the respective
operations are described in the Review of Operations. The joint operations in which the Company held an interest
as at 31 December 2018 are as below:
Licence
Name
Proportion of
ownership interest
Principal place
of business
PEDL180
PEDL183
PEDL201
PEDL005(R)
PEDL253
PEDL241
PEDL143
PEDL339
PEDL182
PEDL118
PEDL203
EXL294
PEDL181
PEDL209
Wressle
West Newton
Widmerpool Gulf
Keddington
Biscathorpe
North Kelsey
Weald Basin
Louth Extension
Broughton North
Dukes Wood
Kirklington
Fiskerton Airfield
Humber Basin
Laughton
27.5%
16.665%
26.25%
20%
22%
20%
7.5%
20%
27.5%
16.67%
16.67%
20%
12.5%
10%
England
England
England
England
England
England
England
England
England
England
England
England
England
England
57
www.unionjackoil.comFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
10
INVESTMENTS
2018
2017
Investments in equity instruments designated as at FVTOCI
Shares
40,000
40,000
These investments in equity instruments are not held for trading. Instead, they are held for medium to long-term strategic
purposes. Accordingly, the directors of the Company have elected to designate these investments in equity instruments as
at FVTOCI as they believe that recognising short-term fluctuations in these investments’ fair value in profit or loss would
not be consistent with the Company’s strategy of holding these investments for long-term purposes and realising their
performance potential in the future.
At 1 January
Changes in fair value of investments
At 31 December
31 December
2018
£
31 December
2017
£
40,000
–
40,000
–
40,000
40,000
The Company is the beneficial owner of 169,959 (2017: 169,959) ordinary shares in Elephant Oil Limited, a company
registered in England and Wales, which represents a 0.73% (2017: 0.73%) interest in that company. The principal activity
of Elephant Oil Limited is the exploration and evaluation of hydrocarbon assets.
11
TRADE AND OTHER RECEIVABLES
The average credit period on sales of goods is 30 days. No interest is charged on outstanding trade receivables. The
Company measures the loss allowance for trade receivables at an amount equal to 12 months ECL. The expected credit
losses on trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and
an analysis of the debtor’s current financial position, adjusted for factors that are specific to the debtors, general economic
conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast
direction of conditions at the reporting date.
The Company has recognised no loss allowance as the receivables are not past due nor has there been historical experience
to indicate that these receivables are generally not recoverable.
There has been no change in the estimation techniques or significant assumptions made during the current reporting period.
Trade receivables
VAT
Prepayments
58
31.12.18
£
31.12.17
£
77,678
75,538
44,838
19,048
29,677
17,147
198,054
65,872
UNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
12
CASH AND CASH EQUIVALENTS
Cash at bank
31.12.18
£
31.12.17
£
3,123,287
1 ,578,514
Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months or less.
The carrying amount of these assets is equal to their fair value.
13(a)
SHARE CAPITAL
Allotted and issued:
Number
Class
Nominal
value
31.12.18
£
31.12.17
£
8,450,710,254
(31 December 2017: 4,333,063,205)
831,680,400
(31 December 2017: 831,680,400)
Total
Ordinary
0.025p
2,112,677
1,083,266
Deferred
0.225p
1,871,281
1,871,281
3,983,958
2,954,547
Ordinary shares hold voting rights and are entitled to any distributions made on winding up. Deferred shares do not hold
voting rights and are not entitled to distributions made on winding up.
Allotments during the year
In March 2018, 1,470,588,226 new ordinary shares were issued for cash at 0.085 pence per share raising £1,250,000 before
expenses of £100,390.
In October 2018, 2,647,058,823 new ordinary shares were issued for cash at 0.085 pence per share raising £2,250,000
before expenses of £156,722.
59
www.unionjackoil.comFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
13(b) SHARE-BASED PAYMENTS – WARRANTS
Details of the number of warrants and the weighted average exercise price (WAEP) outstanding during the year
are as follows:
Year ended December 2018
Number of warrants
Outstanding and exercisable at the beginning of the year
Outstanding and exercisable at the end of the year
51,407,842
51,407,842
Year ended December 2017
Number of warrants
Outstanding and exercisable at the beginning of the year
Expired in the year
55,052,548
(3,644,706)
WAEP
£
0.003
0.003
WAEP
£
0.003
0.003
Outstanding and exercisable at the end of the year
51,407,842
0.003
The fair values of warrants in issue are calculated using the Black-Scholes model. The inputs into the model are as follows:
Date of grant
04.12.12
17.03.14
26.09.14
Number in issue at 31 December 2018
Share price at date of grant
Exercise price
Expected volatility
Expected life (years)
Risk-free rate
Expected dividend yield
Fair value at date of grant
Earliest vesting date
Expiry date
During the year no warrants expired (2017: 3,644,706).
6,074,510
0.3p
0.25p
69%
5.0
0.8464%
0%
£11,099
20.12.12
20.12.22
5,333,333
0.23p
0.225p
77%
2.5
0.26%
0%
£22,000
17.03.14
17.03.19
39,999,999
0.38p
0.225p
77%
2.5
0.26%
0%
£43,570
26.09.14
26.09.19
60
UNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
13(c) SHARE-BASED PAYMENTS – OPTIONS
During the year, options were granted to directors of the Company. Options are Issued with an exercise price
equating to the mid-market closing price on the date of Issue.
Options have a vesting period of 3 years but subject to a further condition that the options can only be exercised
if the share price is at a 30% premium to the exercise price.
Details of the number of options and the weighted average exercise price (WAEP) outstanding during the year
are as follows:
Year ended December 2018
Number of options
Outstanding and exercisable at the beginning of the year
Granted
Outstanding at the end of the year
Exercisable at the end of the year
–
300,000,000
300,000,000
–
Year ended December 2017
Number of options
Outstanding and exercisable at the beginning of the year
Outstanding and exercisable at the end of the year
–
–
WAEP
£
–
0.00098
0.00098
–
WAEP
£
–
–
The fair values of options in issue are calculated using the Black-Scholes model. The inputs into the model are as follows:
Date of grant
18.07.18
07.11.18
04.12.18
Number in issue at 31 December 2018
Share price at date of grant
Exercise price
Expected volatility
Expected life (years)
Risk-free rate
Expected dividend yield
Fair value at date of grant
Earliest vesting date
Expiry date
180,000,000
0.09p
0.09p
55%
6.5
0.9427%
0%
£85,822
18.07.21
18.07.28
90,000,000
0.11p
0.11p
62%
6.5
1.1035%
0%
£58,106
07.11.21
07.11.28
30,000,000
0.11p
0.11p
63%
6.5
0.8840%
0%
£19,491
04.12.21
04.12.28
The Company recognised total expenses in the Income Statement of £16,881 in relation to share options accounted
for as equity-settled share-based payment transactions during the year (2017: £nil).
61
www.unionjackoil.comFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
14
RESERVES
The nature and purpose of each reserve within equity is as follows:
Share capital – represents the nominal value of shares issued.
Share premium – represents the amount subscribed for share capital in excess of nominal value, less related
share issue costs.
Share-based payment reserve – represents the cumulative cost of warrants and options issued in return for
professional services.
Accumulated deficit – represents cumulative profits or losses, and all other net gains and losses and transactions
with owners not recognised elsewhere.
15
RECONCILIATION OF LOSS TO CASH GENERATED FROM OPERATIONS
Loss before taxation
Depletion of producing assets
Impairment of intangibles
Share-based payments
Finance income
(Increase) in trade and other receivables
Increase in trade and other payables
31.12.18
£
31.12.17
£
(1,098,708)
32,186
205,308
16,881
(4,051)
(746,822)
17,322
5,078
–
(504)
(848,384)
(724,926)
(132,182)
86,609
(3,172)
224,767
Cash used in operations
(893,956)
(503,331)
16
FINANCIAL INSTRUMENTS
Classification of measurement of financial instruments
The fair value hierarchy groups financial assets and liabilities into three levels based on the significance of inputs used
in measuring the fair value of the financial assets and liabilities.
The fair value hierarchy has the following levels:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices); and
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The level within which the financial asset or liability is classified is determined based on the lowest level of significant input
to the fair value measurement.
The Group holds investments at fair value through other comprehensive income. Investments in unlisted shares are
a level 3 valuation as the quoted price is not available.
62
UNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
16
FINANCIAL INSTRUMENTS (CONTINUED)
The tables below set out the Company’s accounting classification of each class of its financial assets and liabilities.
Financial assets measured at fair value
At 31 December 2018
Investments: FVOCI
At 31 December 2017
Investments: FVOCI
Financial assets measured at amortised cost
At 31 December 2018
Trade receivables
Cash and cash equivalents
Total carrying value
At 31 December 2017
Trade receivables
Cash and cash equivalents
Total carrying value
All of the above financial assets’ carrying values approximate to their fair values at 31 December 2018 and
31 December 2017 given their nature and short times to maturity.
Financial liabilities measured at amortised cost
At 31 December 2018
Trade payables
Accruals
Total carrying value
At 31 December 2017
Trade payables
Accruals
Total carrying value
All of the above financial liabilities’ carrying values approximate to their fair values at 31 December 2018 and
31 December 2017 given their nature and short times to maturity.
£
40,000
40,000
£
77,678
3,123,287
3,200,965
19,048
1,578,514
1,597,562
£
351,454
45,234
396,688
250,225
59,854
310,079
63
www.unionjackoil.comFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
17
FINANCIAL INSTRUMENT RISK EXPOSURE AND MANAGEMENT
The principal financial risks to which the Company is exposed are: liquidity risk, oil price risk and credit risk. This note
describes the Company’s objectives, policies and processes for managing those risks and the methods used to measure
them.
Credit risk
The Company’s credit risk is primarily attributable to its cash balances and such risk is limited because the third party
is an international bank.
The Company’s total credit risk amounts to the total of the sum of the receivables, cash and cash equivalents. At the year
end this amounted to £3,200,965 (2017: £1,597,562).
Liquidity risk
In managing liquidity risk, the main objective of the Company is to ensure that it has the ability to pay all of its liabilities as they
fall due. The Company monitors its levels of working capital to ensure that it can meet its debt repayments as they fall due.
The table below shows the undiscounted cash flows on the Company’s financial liabilities as at 31 December 2018 and
31 December 2017 on the basis of their earliest possible contractual maturity.
Oil price risk
The Company is exposed to oil price risk associated with sales of oil from production. The Company does not currently
consider it necessary to use hedging instruments to manage its exposure to this risk.
At 31 December 2018
Trade payables
Accruals
At 31 December 2017
Trade payables
Accruals
Capital management
Total
£
Within
2 months
£
Within Greater than
6 months
£
2-6 months
£
351,454
45,234
351,454
10,734
–
34,500
396,688
362,188
34,500
250,225
59,854
250,225
28,354
–
31,500
310,079
278,579
31,500
–
–
–
–
–
–
The Company’s objectives when managing capital are to safeguard its ability to continue as a going concern, add shareholder
value and to maintain an optimal capital structure to reduce the cost of capital. The Company defines capital as being share
capital plus reserves as disclosed in the Balance Sheet.
The Board of Directors monitors the level of capital as compared to the Company’s commitments, and adjusts the level
of capital as is determined to be necessary, by issuing shares.
The Company is not subject to any externally imposed capital requirements.
64
UNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
18
FINANCIAL COMMITMENTS
The Company had no financial commitments as at 31 December 2018 or 31 December 2017, other than those recognised
in the Balance Sheet.
19
TRADE AND OTHER PAYABLES
Trade payables
Accruals
20
PROVISIONS
As at 1 January 2017
Adjustment to provision estimates
New provisions arising on licences
At 31 December 2017
Adjustment to provision estimates
New provisions arising on licences
Accretion of provision
At 31 December 2018
31.12.18
£
31.12.17
£
351,454
45,234
250,225
59,854
396,688
310,079
Decommissioning
and restatement
provision
£
18,000
33,489
178,429
229,918
6,604
213,071
3,571
453,165
Provision has been made for decommissioning costs on productive fields. Provision has also been made for reinstatement
costs relating to exploration and evaluation assets where work performed to date gives rise to an obligation, principally for
site restoration. Assumptions, based on the current economic environment, have been made which the directors believe
are a reasonable basis upon which to estimate the future liability. This estimate will be reviewed regularly to take into
account any material changes to assumptions. Actual costs will depend on a number of factors, including future market
prices and any variation in the extent of decommissioning and reinstatement to be performed.
Decommissioning and reinstatement costs are currently expected to be utilised between 2019 and 2039.
Provisions created during the year, based on information provided by the Operators, relate to obligations in respect
of Keddington, Fiskerton Airfield Oilfield, Dukes Wood, Kirklington and West Newton assets. An additional provision
has been made in relation to Wressle, based on information provided by the Operator. No provisions have been utilised
during the year.
65
www.unionjackoil.comFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
21
RELATED PARTY TRANSACTIONS
Details of key management personnel remuneration are disclosed in note 3. Key management comprises only the directors.
Charnia Resources (UK), an entity owned by Graham Bull, non-executive director, was paid £55,200 (2017: £59,446)
in respect of consulting fees. No amounts were outstanding at the year end (2017:nil).
Jayne Bramhill, spouse of David Bramhill, received the sum of £6,000 (2017: £6,000) from the Company in respect
of IT maintenance and administration costs. No amounts were outstanding at the year end.
22
CONTINGENT LIABILITIES
In respect of PEDL143 a balance would have become payable to one of the other parties to the licence. This is no longer
a contingent liability as the Holmwood-1 well will not be drilled in the forseeable future.
In respect of PEDL180 and PEDL182 a sum of £1,040,000 is to be paid to the entity Calmar LP on first oil production
from the Wressle discovery.
23
EVENTS AFTER THE BALANCE SHEET DATE
The following events have taken place after the year end:
During January 2019, the Planning Inspectorate informed the Operator that the appeal in respect of a planning extension
on PEDLs 180/182 was successful and the planning permit now expires in January 2020.
During February 2019, documentation in respect of the appeal for development of the Wressle discovery was submitted
to the Planning Inspectorate. Confirmation of the acceptance of the documentation has been received and the appeal will
be heard on 5 November 2019.
During February 2019, the Biscathorpe-2 conventional well reached target depth and logging revealed that the well was
drilled high to prognosis. The well has been suspended for a potential side-track in the future.
In March 2019, the Company raised £1,750,000 before expenses in an oversubscribed fundraising. This fundraising was
subject to approval by shareholders via a General Meeting, held on 8 April 2019, whereby the resolutions were all passed
by a majority. Following this fundraising there are now 10,784,043,588 ordinary shares in issue.
In April 2019, Union Jack reached agreement with UK Oil & Gas PLC (“UKOG”) to sell its 7.5% interest in PEDL143.
The aggregate purchase price by UKOG for the licence interest is £112,500 and will be settled in cash that shall then be
immediately, simultaneously and irrevocably applied by Union Jack for such number of ordinary shares in UKOG which
is equal to £112,500 divided by 1.156 pence, being the 5 day volume weighted average price on 12 April 2019.
66
UNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the Annual General Meeting
(the “AGM”) of Union Jack Oil plc (the “Company”) will
be held at the offices of Osborne Clarke, 2 Temple Back
East, Temple Quay, Bristol BS1 6EG on 13 June 2019 at
11.00 a.m. to consider and, if thought fit, pass the following
resolutions, of which resolutions numbered 1 to 7 will be
proposed as ordinary resolutions and resolution number
8 will be proposed as a special resolution:
ORDINARY RESOLUTIONS
1 Report and accounts
To receive the audited annual accounts of the Company
for the year ended 31 December 2018, together with
the Directors’ Report and the Auditor’s Report on
those annual accounts.
2 Re-election of director retiring by rotation
To re-elect Frazer Lang as a director, who retires
by rotation in accordance with the Company’s Articles
of Association.
3 Re-election of director retiring by rotation
To re-elect David Bramhill as a director, who retires
by rotation in accordance with the Company’s Articles
of Association.
4 Re-election of director retiring by rotation
To re-elect Graham Bull as a director, who retires
by rotation in accordance with the Company’s Articles
of Association.
5 Re-appointment of auditor
To re-appoint BDO LLP as auditor of the Company
to hold office from the conclusion of this AGM until
the conclusion of the next general meeting at which
accounts are laid before the Company.
6 Auditor’s remuneration
To authorise the directors to determine the
remuneration of the auditor.
7 Directors’ authority to allot shares
That, in substitution for any equivalent authorities and
powers granted to the directors prior to the passing
of this resolution, the directors be and they are
generally and unconditionally authorised pursuant to
Section 551 of the Companies Act 2006 (the “Act”)
to exercise all powers of the Company to allot shares
in the Company, and to grant rights to subscribe for
or to convert any security into shares in the Company
(“Relevant Securities”) up to an aggregate nominal
amount of £1,348,006 (representing approximately
50% of the issued share capital of the Company at the
date of this notice) provided that, unless previously
revoked, varied or extended, this authority shall
expire on the conclusion of the next AGM of the
Company, except that the Company may at any
time before such expiry make an offer or agreement
which would or might require Relevant Securities to
be allotted after such expiry and the directors may
allot Relevant Securities in pursuance of such an offer
or agreement as if this authority had not expired.
SPECIAL RESOLUTION
8 Directors’ power to issue shares for cash
That, conditional upon the passing of resolution
number 7, the directors be and they are empowered
pursuant to Section 570(1) of the Act to allot equity
securities (as defined in Section 560(1) of the Act)
of the Company wholly for cash pursuant to the
authority of the directors under Section 551 of the
Act conferred by resolution 7 above as if Section
561(1) of the Act did not apply to such allotment
provided that the power conferred by this resolution
shall be limited to the allotment of equity securities
up to an aggregate nominal value equal to £1,348,006
(representing approximately 50% of the issued share
capital of the Company at the date of this notice) and,
unless previously revoked, varied or extended, this
power shall expire on the conclusion of the next AGM
of the Company, except that the Company may before
the expiry of this power make an offer or agreement
which would or might require equity securities to
be allotted after such expiry and the directors may
allot equity securities in pursuance of such an offer
or agreement as if this power had not expired.
By order of the Board
Matthew Small
Company Secretary
Dated: 13 May 2019
Registered Office:
6 Charlotte Street,
Bath BA1 2NE
www.unionjackoil.com
67
ANNUAL GENERAL MEETING
8 Copies of the executive directors’ service contracts with the
Company and letters of appointment of the non-executive
directors are available for inspection at the registered office
of the Company during the usual business hours on any weekday
(Saturday, Sunday or public holidays excluded) from the date
of this notice until the conclusion of the AGM.
Notes:
1 Pursuant to Regulation 41 of the Uncertificated Securities
Regulations 2001 (as amended), only those members registered
in the register of members of the Company at 6.00 p.m.
on 11 June 2019 (or if the AGM is adjourned, 48 hours
before the time fixed for the adjourned AGM) shall be
entitled to attend and vote at the AGM in respect of
the number of shares registered in their name at that
time. In each case, changes to the register of members
after such time shall be disregarded in determining the
rights of any person to attend or vote at the AGM.
2 If you wish to attend the AGM in person, you should arrive at
the offices of Osborne Clarke, 2 Temple Back East, Temple
Quay, Bristol BS1 6EG in good time before the AGM, which
will commence at 11.00 a.m. In order to gain admittance to
the AGM, members may be required to prove their identity.
3 A member who is entitled to attend, speak and vote at the AGM
may appoint a proxy to attend, speak and vote instead of him.
A member may appoint more than one proxy provided each
proxy is appointed to exercise rights attached to different shares
(so a member must have more than one share to be able to
appoint more than one proxy). A proxy need not be a member
of the Company but must attend the AGM in order to represent
you. A proxy must vote in accordance with any instructions
given by the member by whom the proxy is appointed.
Appointing a proxy will not prevent a member from attending
in person and voting at the AGM (although voting in person at
the AGM will terminate the proxy appointment). A proxy form
is enclosed. The notes to the proxy form include instructions on
how to appoint the Chairman of the AGM or another person as
a proxy. You can only appoint a proxy using the procedures set
out in these notes and in the notes to the proxy form.
4 To be valid, a Proxy Form, and the original or duly certified
copy of the power of attorney or other authority (if any) under
which it is signed or authenticated, should reach the Company’s
registrar, Computershare Investor Services PLC of The Pavilions,
Bridgwater Road, Bristol BS99 6ZY, by no later than 11.00 a.m.
on 11 June 2019.
5 The notes to the proxy form include instructions on how to
appoint a proxy by using the CREST proxy appointment service.
6 In the case of joint holders of shares, the vote of the first named
in the register of members who tenders a vote, whether in
person or by proxy, shall be accepted to the exclusion of the
votes of other joint holders.
7 A member that is a company or other organisation not having
a physical presence cannot attend in person but can appoint
someone to represent it. This can be done in one of two ways:
either by the appointment of a proxy (described in notes 3 to 5
above) or of a corporate representative. Members considering
the appointment of a corporate representative should check
their own legal position, the Company’s Articles of Association
and the relevant provision of the Companies Act 2006.
68
UNION JACK OIL PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 ANNUAL GENERAL MEETING
Union Jack Oil plc
6 Charlotte Street,
Bath BA1 2NE,
England
Telephone: +44 (0) 1225 428139
Fax:
+44 (0) 1225 428140
Email: info@unionjackoil.com
Web: www.unionjackoil.com