UNION JACK OIL plc
Annual Report and
Financial Statements
2020
PRODUCTION, DRILLING, DEVELOPMENT
AND INVESTMENT IN THE UNITED KINGDOM
HYDROCARBON SECTOR
UNION JACK OIL PLC
Directors, Officers and Advisers
DIRECTORS
David Bramhill
Executive Chairman
Joseph O’Farrell
Executive
Graham Bull
Non-Executive
Raymond Godson
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
REGISTRARS
Computershare Investor Services PLC
The Pavilions,
Bridgwater Road,
Bristol BS13 8AE,
England
AUDITOR
BDO LLP
55 Baker Street,
London W1U 7EU,
England
SOLICITORS
Osborne Clarke
2 Temple Back East,
Temple Quay,
Bristol BS1 6EG,
England
BANKERS
Royal Bank of Scotland plc
8-9 Quiet Street,
Bath BA1 2JN,
England
NOMINATED ADVISER
AND BROKER
SP Angel Corporate Finance LLP
Prince Frederick House,
35-39 Maddox Street,
London W1S 2PP,
England
PUBLIC RELATIONS
CONSULTANTS
Novus Communications Ltd
Fountain House,
130 Fenchurch Street,
London EC3M 5DJ,
England
Cassiopeia Services Ltd
Second Floor,
4-5 Gough Square,
London EC4A 3DE,
England
Union Jack Oil plc is primarily an onshore oil
and gas 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.
1
Contents
BUSINESS AND STRATEGY
Chairman’s Statement
Strategic Report
Licence Interests
GOVERNANCE
Directors’ Report
Corporate Governance Report
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
10
18
20
23
36
41
42
43
44
45
46
Notes to the Financial Statements
54
ANNUAL GENERAL MEETING
Notice of Annual General Meeting 71
“Fully funded for all current
well testing and planned
development commitments,
and remain debt free”
www.unionjackoil.com
2
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 2020.
Union Jack’s strategy remains consistent with the objective
of the Board; to build a successful and sustainable, UK-
focused, predominantly onshore hydrocarbon production
and development business. In this respect, we have
delivered demonstrable growth in asset value and 2020
has seen the continued expansion of our portfolio with
what we consider to be high quality, asset value accretive
project interests with substantial upside potential in
our primary focus areas of the East Midlands, Humber
Basin and East Yorkshire, with an expectation in 2021
of significantly increasing oil production and revenues.
The COVID-19 pandemic has meant very few,
if any, companies and individuals have not felt the
unwelcome consequences that have resulted from
this unprecedented virus.
We continue to remain vigilant in the way we operate
both technically and financially and we have tried our
best to keep shareholders and our Joint Operating
Agreement (“JOA”) partners informed of any changes
being implemented to our operations in respect of
the effects of COVID-19.
Notwithstanding COVID-19, reassuringly it has been
business as usual, however, I would like to add that any
forward-looking statements made within this report are
made with good intent, as the effects of this virus, although
perhaps are now better understood, remain unclear and
expected to prevail in some form for the foreseeable future.
I am pleased to report that disruption to our projects
due to COVID-19 has been minimal through 2020
and up to present time although the potential for any
changes in working and planning in respect of our
project interests remain possible, and we will continue
to be guided by the regulatory bodies and our JOA
partners in respect of COVID-19 best practice.
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 shown on page 3.
PEDL183 WEST NEWTON (16.665%)
Union Jack completed a farm-in in late 2018, on licence
PEDL183, covering 176,000 acres and containing the
West Newton A-1 discovery, with Rathlin Energy (UK)
Limited (“Rathlin”).
Since that time the JOA partners have seen excellent
success in respect of subsequent drilling campaigns with
both the WNA-2 and WNB-1Z wells being recorded
as significant discoveries with both wells suspended and
awaiting testing during Spring 2021.
PEDL183 is located onshore UK, north of the river
Humber, also encompassing the town of Beverley, East
Yorkshire. The licence area is within the western sector of
the Southern Zechstein Basin. The West Newton A-1 and
A-2 and the recent B-1Z discoveries are on-trend with the
prolific offshore Hewett gas complex.
In the UK, the carbonates of the Permian Basin have been
our principal targets and produced offshore and onshore
in the Southern North Sea Gas Basin. These reservoirs
have been extensively explored and produced onshore
in the Netherlands, Germany and Poland, which provide
several direct analogues for West Newton and the overall
licence area.
The WNB-1Z side-track appraisal well commenced during
November 2020 and reached a Measured Depth of 2,114
metres.
A substantial hydrocarbon column in excess of 118 metres
gross has been demonstrated within this formation.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC OPERATIONAL HIGHLIGHTS
FINANCIAL HIGHLIGHTS
3
• Increased revenue of £158,004
(2019: £136,959)
• Operating loss of £1,883,893 (2019:
£1,705,198), primarily as a result of higher
administrative costs due to additional
technical work in respect of West Newton,
Wressle, Biscathorpe and Keddington
• Cash balance in excess of £5.7 million at
1 May 2021, not including loan receivables
and royalty accruals of over £1 million
• Net assets increased by 35% to over
£18 million from £13 million in 2019
• Fully funded for all current well testing
and planned development commitments
• Company remains debt free
• Successful drilling of the West Newton B-1Z
conventional appraisal well where initial
petrophysical evaluation has demonstrated a
gross hydrocarbon saturated interval of at least
118 metres within the Kirkham Abbey formation
• West Newton B-1Z and A-2 well tests are
imminent
• Following the successful re-perforation of the
Ashover Grit formation at Wressle, oil is free
flowing and the Wressle-1 well has been placed
on continuous production test and is awaiting
a proppant squeeze
• 12.5% interest acquired in PEDLs 180 and 182,
containing the Wressle discovery, bringing
Union Jack’s holding to 40%
• Purchase of a 35% interest in the producing
Keddington Oilfield PEDL005(R) acquired,
bringing Union Jack’s interest to 55%
• Completion of the purchase of a further 15%
interest in PEDL253 containing the Biscathorpe
Prospect bringing Union Jack’s interest to 45%
during January 2021
• Purchase of a 2.5% royalty interest in the North
Sea Claymore Piper and Scapa oilfields
18 metres of core was successfully cut and recovered
from the hydrocarbon bearing Kirkham Abbey
formation. Production casing has been run in
preparation for the testing of this interval.
Highlights
• Porosities of up to 14% observed on wireline logs
• Hydrocarbon-water contact has yet to
be encountered at West Newton
• WNB-1Z well is approximately 2.5 kilometres
south of the WNA-1 and WNA-2 appraisal
wells, confirming extensive areal continuity of
hydrocarbon trap and hydrocarbon reservoir
• Well results provide a further material
de-risking and are a significant step
forward in determining the development
potential of the West Newton project
• Cased Hole Logging programmes and Vertical
Seismic Profiling completed confirming the presence
of a good cement bond of the production liner
and good quality data retrieved which will be
used in calculations towards reserve/resource
quantification for the West Newton field and
for the identification of future drill locations
The JOA partners believe that West Newton has the
potential to assist in replacing the requirement for
imported hydrocarbons locally while simultaneously
developing indigenous energy sources, contributing
to the economic welfare of the Humber region.
With the view of advancing this vision, Union Jack
and its JOA partner Reabold Resources plc commissioned
Gaffney, Cline & Associates Limited (“GaffneyCline”),
an international energy consultancy to conduct a
Carbon Intensity Study over the West Newton
hydrocarbon project.
www.unionjackoil.comBUSINESS AND STRATEGY 4
Chairman’s Statement
“Union Jack’s mission and
focus is to minimise the carbon
footprint generated by its
hydrocarbon developments in
the most efficient way possible,
whilst continuing to contribute
positively to the growing demand
for energy and hydrocarbon
products in the supply chain”
The GaffneyCline study highlighted the following:
• The West Newton project has an AA rating for Carbon
Intensity for its potential upstream crude oil production
• Carbon intensities at West Newton are significantly
lower than the UK average and compared with other
onshore analogues
• As the development proceeds and project knowledge
increases, there is scope to even further improve
the Carbon Intensity by reducing fugitive flaring
and venting emissions through the use of the best
available technologies
Union Jack’s mission and focus is to minimise the carbon
footprint generated by its hydrocarbon developments
in the most efficient way possible, whilst continuing to
contribute positively to the growing demand for energy
and hydrocarbon products in the supply chain.
GaffneyCline have also been appointed to compile a
Competent Persons Report in respect of PEDL183
and the West Newton project.
All the results to date continue to support our belief that
West Newton is a large scale, conventional onshore oil
and gas development asset with potential offshore-sized
resources in place.
The preliminary results to date vindicate Union Jack’s faith
and financial commitment over the past two years to what
management has always believed to be an exceptional
UK onshore hydrocarbon enterprise and development
opportunity.
The imminent well testing programme is the next important
milestone in determining the development potential of
West Newton.
PEDL180/PEDL182 WRESSLE DEVELOPMENT
(40%)
Located in Lincolnshire on the Western margin of the
Humber Basin, PEDL180 and PEDL182 contain the
substantial Wressle oil development, with proven reserves
and significant upside.
The Wressle-1 oil discovery was defined on proprietary
3-D seismic data. The structure is on-trend with the
producing Crosby Warren oil field and the Broughton
B-1 oil discovery, both to the immediate northwest, and
the Brigg-1 discovery to the southeast. All these wells
contain oil in various different sandstone reservoirs
within the Upper Carboniferous succession.
The well was drilled and logged and the presence
of hydrocarbon pay was noted within the
Penistone Flags, Wingfield Flags and Ashover Grit
intervals. Subsequent testing of these intervals
demonstrated flow from all three zones.
During January 2020, the JOA partners received the
welcome news that, after several years of planning setbacks
in respect of the development of the Wressle discovery,
the Planning Inspectorate had upheld the appeal and
granted planning consent for the development of this
company changing project. The Inspector also allowed
the application for an award of costs against the North
Lincolnshire Council (“NLC”). Subsequently, the NLC
has paid costs of £403,000. Union Jack has received
its proportion of this payment from the Operator.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC 5
Chairman’s Statement
Excellent progress has been made at Wressle, culminating in commencement of oil-flow at the end of January 2021,
following the installation of cutting-edge, purpose-built surface facilities and the successful re-perforation of the
Ashover Grit, one of three reservoir intervals. The well is currently undergoing test production with oil sold and
transported to the Phillips 66 Humber refinery.
The well test results to date are in line with expectations and consent for a proppant squeeze in respect of the next
stage of operations is awaited. At optimum production levels Wressle-1 is projected to produce at a gross rate
of a constrained 500 barrels of oil per day (“bopd”), adding a net 200 bopd to Union Jack’s production profile.
Translated into 2P and 2C reserves and resources, using figures quoted from the Competent Person’s
report compiled by ERCE during 2016, the net volumes attributable to Union Jack are as shown below.
Gross and Net Volumes of Wressle 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
Source: CPR by ERCE (2016)
0.62
1.53
0.51
0.20
2.00
0.51
0.65
1.86
0.60
0.25
0.61
0.20
0.08
0.80
0.20
0.26
0.75
0.24
The Economic Growth Plan for North Lincolnshire
champions the growth 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.
Oil produced at Wressle is now contributing to these
industries and benefiting the region as a whole, as well
as further afield in the UK. Oil produced at Wressle
is also helping offset international oil imports typically
shipped over long distances, as the oil is refined nearby
in Immingham, keeping trucking and transportation
to a minimum, and consequently reducing the overall
carbon footprint and greenhouse gas emissions.
In June 2020, the Company acquired a further 12.5%
interest from Humber Oil & Gas Limited (“Humber”) in
PEDLs 180 and 182 containing the Wressle development
project for an initial cash consideration of £500,000 with
a deferred cash consideration element of £1,040,000
payable to Calmar LP, appointees of Celtique Energie
Petroleum Limited (the original vendors in the acquisition
by Humber) on commercial oil production being
established. Following this transaction the Company
now holds a 40% interest in PEDLs 180 and 182.
PEDL253 BISCATHORPE (45%)
PEDL253 is situated within the proven hydrocarbon fairway
of the South Humber Basin and is on-trend with the
Keddington oilfield, Saltfleetby gasfield and the Louth and
North Somercotes Prospects.
In February 2019, the Biscathorpe-2 well was drilled and
logging operations were conducted. Preliminary analysis
indicated that the primary objective, the Basal Westphalian
Sandstone, was not encountered at this location.
www.unionjackoil.comBUSINESS AND STRATEGY
6
Chairman’s Statement
However, this result has subsequently been turned full
circle, driven by the determination of the respective
technical teams and their detailed technical analysis that
has demonstrated that PEDL253 is a viable hydrocarbon
play. Union Jack’s technical team believe that Biscathorpe
remains one of the largest untested onshore prospects
within the UK.
In support of this interpretation, the JOA partnership
completed extensive and detailed studies of the
Biscathorpe Prospect, including the re-processing and
re-mapping of 264 square kilometres of 3-D seismic.
This exercise has significantly enhanced the understanding
of the prospectivity over the licence area.
Accessible targets have also been identified where evidence
for a thickened Westphalian sandstone reservoir exists.
These targets can be drilled using a side-track from the
existing Biscathorpe-2 well which was suspended once
site operations were concluded in 2019.
The Gross Mean Prospective Resources associated
within the Westphalian target area are estimated by the
Operator, in accordance with 2018 PRMS Standard, to be
3.95 mmbbls of oil, with an upside case of 6.69 mmbbls.
Preliminary economic modelling demonstrates that the
Westphalian target is economically robust in the current
oil price environment with a full cycle economic valuation
of £55.6 million gross (NPV10%) and a US$18.07 per bbl
breakeven oil price.
While drilling the B-2 well, there were hydrocarbon shows
indicated by elevated gas readings and sample fluorescence,
observed over the entire interval from the top of the
Dinantian to the Total Depth (“TD”) of the well (an interval
of over 157 metres), with a total of 68 metres interpreted
as being oil-bearing in the petrophysical analysis.
A geochemical analysis of the gas data and hydrocarbons
extracted from drill cuttings was originally commissioned
by Union Jack and carried out by Applied Petroleum
Technology (UK) Limited (“APT”). The results of this
analysis indicate a hydrocarbon column of 33º-34º API
gravity oil in the Dinantian Carbonate and a proven likely
live oil column, comparable with that produced at the
nearby Keddington oilfield.
Following the results of the APT exercise, an assessment
of the Dinantian oil volumes was modelled with volumetric
assumptions as being “filled to spill” with resulting Mean
Stock Tank Oil Initially in Place (“STOIIP”) within the
Dinantian calculated to be 24.3 mmbbls with an upside
case of 36 mmbbls.
The JOA partnership now proposes to drill the Biscathorpe
B-2Z conventional side-track well targeting the Westphalian
and the oil column logged in the underlying Dinantian
Carbonate.
In February 2021, a Planning Application was submitted
to the Lincolnshire County Council for a proposed side-
track drilling operation, associated testing and, in a success
case, the long-term production of hydrocarbons at the
Biscathorpe well site.
In June 2020, Union Jack were advised that a legally binding
and confidential settlement agreement between Egdon
Resources and the JOA parties in respect of PEDL253
resolving a dispute with Humber, had been signed.
In January 2021 and subsequent to the year end,
Union Jack purchased a further 15% of PEDL253 for
an initial cash consideration of £500,000 from Humber,
bringing the Company’s interest to 45%. Following receipt
of various planning approvals, a further contingent cash
payment of £500,000 will become payable to Humber.
PEDL241 NORTH KELSEY (50%)
North Kelsey is a conventional oil prospect along trend
from and analogous to the Wressle oil development,
which lies approximately 15 kilometres to the northwest.
The prospect has been mapped from 3-D seismic data
and has the potential for oil in four stacked Carboniferous
reservoir targets. The Operator estimates that the Gross
Prospective Resources range from 4.66 million barrels
up to 8.47 million barrels of oil, with a Mean Resource
volume of 6.47 million barrels.
During September 2020, the existing planning consent
was extended by the Lincolnshire County Council.
Requisite permits for drilling have also been received
from the Environment Agency.
In October 2020, the Company announced a further
acquisition of 30% of PEDL241 and the alignment of
equity interests in that licence with the Operator, Egdon
Resources U.K. Limited, and to jointly pursue a farm-out
for the drilling of the North Kelsey-1 exploration well.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC 7
Chairman’s Statement
Under the terms of the agreement, Union Jack acquired
a 30% interest in the licence for a cash consideration of
£100,000 that was paid on completion, subsequent to the
year end. The Company’s previous farm-in obligations in
respect of the 20% the Company held lapsed and all future
financial obligations will be executed on an equal basis with
the Operator.
PRODUCTION ASSETS
Union Jack’s portfolio includes licence interests in two
production assets, PEDL005(R) (55%) and EXL294 (20%)
containing the Keddington and Fiskerton Airfield oilfields,
respectively.
Combined production of high-quality oil from these two
assets is averaging 50 barrels of oil per day gross from
Carboniferous age sandstone reservoirs.
A further production asset, the Wressle-1 discovery
well, within PEDL180 and PEDL182, currently under
test production and awaiting further process, was added
to Union Jack’s production portfolio in early 2021. An
operational update in respect of Wressle can be found
earlier within this statement.
Keddington is located along the very prospective East
Barkwith Ridge, an east-west structural high on the
southern margin of the Humber Basin.
A detailed, subsurface review of the Keddington field
and the surrounding licence area was conducted by
Egdon and Union Jack during 2019, resulting in a fully
audited and consistent data set that supports updated
resource estimates generated by the Operator.
These geological and geophysical studies indicate that
potentially significant resources remain unswept at
Keddington, highlighting an excellent opportunity to
increase production volumes multi-fold by the drilling
of a relatively inexpensive development well from the
existing production site. The gross remaining Mean
Contingent Resource at Keddington is 567,000 bbls
of oil (311,000 bbls net to Union Jack).
The Operator is finalising the assessment of potential
in-fill drilling locations at Keddington with a view to
targeting a side-track drilling location.
The Keddington site lease has been extended until
2029, and planning consent expires in 2058, with
approval in place for the drilling of a further two wells.
In addition to the unswept resources at Keddington, a near-
field exploration opportunity exists at Keddington South,
which has a gross Mean Prospective Resource Volume of
635,000 bbls of oil (349,250 bbls net to Union Jack).
During March 2020, Union Jack acquired a further 35%
economic interest in PEDL005(R) from Terrain Energy
Limited, increasing its holding to 55%. The consideration
in respect of the acquisition was £200,000, financed from
existing cash resources. This transaction provided an
immediate uplift in oil production which had a beneficial
effect when consolidated into the production revenues
from Fiskerton Airfield.
Production at Fiskerton Airfield remains consistent and the
focus will continue to be the maximising of oil output from
the existing wells.
OTHER LICENCE INTERESTS
Union Jack holds licence interests in a number of other
non-core projects outlined below.
An interest is held in PEDL118 Dukes Wood (16.67%)
and PEDL203 Kirklington (16.67%). The JOA partners
are examining the geothermal potential of these licences.
These licence interests were fully impaired during the 2020
financial year.
PEDL201 Widmerpool Gulf (26.25%), formerly known as
Burton-on the-Wolds, contains significant unconventional
Bowland Hodder potential. This asset was fully impaired
during 2019.
PEDL181 Humber Basin (12.5%) is located within the
Humber Basin and holds unconventional upside. This
licence was fully impaired during 2019.
An interest is held in PEDL209 Laughton (10%). The
Company is currently in the process of withdrawing
from this licence interest.
“Excellent progress has been
made at Wressle, where a
cutting-edge, purpose-built
production site has been
constructed”
www.unionjackoil.comBUSINESS AND STRATEGY 8
Chairman’s Statement
NORTH SEA ROYALTIES
Post period end, during March 2021, the Company
purchased a 2.5% royalty interest over the Claymore,
Piper and Scapa oilfields located in the Central North
Sea from Cambridge Petroleum Royalties Limited for a
total consideration of £93,730 including working capital
adjustments.
Management view this purchase as an attractive, cash
generating and high yielding investment, consistent with
Union Jack’s wider strategy and objectives to invest in
the UK oil and gas sector.
This particular transaction generates a compelling
estimated Internal Rate of Return of approximately
129% and payback, including accrued royalty payments
of the original investment is anticipated to be less than
12 months.
The Company benefits from an indirect contractual
exposure to North Sea oil and gas production revenues
without any ongoing capital investment, decommissioning
or joint venture operating costs.
This acquisition within this area represents our first
investment in the Claymore Piper Complex and the Board
has the objective of pursuing further interests in this asset.
COVID-19 STATEMENT
Following the outbreak of Coronavirus (COVID-19) during
2020, the priority of the Company has been on the health
and safety of its employees and technical staff. Like many
organisations, plans have been implemented and active
measures have been taken to mitigate risk, such as no
one-to-one contact and numerous telephone and video
meetings. The Board is also in frequent contact with the
Company’s JOA partners and our external technical team
to assess any potential impact on the assets in which the
Company has invested.
We continue to follow the most up-to-date Government
advice and engage with the regulatory bodies and
stakeholders.
To date, the exploration, development and production
activities of the Company have continued in line with
plans and with minimal impact from COVID-19.
However, the Company recognises COVID-19 and
associated geo-political factors have created uncertainty
around the price and demand for oil.
The Board does not currently plan to make changes going
forward. However, the Board continues to monitor the
situation closely and will, with its JOA partners, make
adjustments if and when appropriate.
I would like to bring to the attention of shareholders the
Notice of Annual General Meeting (“AGM”) within this
Annual Report. We will be holding the AGM on Thursday
24 June 2021. The Company wishes to advise that in order
to limit the risk of infection and to protect the health and
safety of shareholders and employees, shareholders are
strongly recommended not to attend the AGM.
I would like to reassure shareholders that their engagement
in the AGM process is welcomed. The Board has proposed
that a remote pre-AGM question and answer event is made
available. Please email your questions to info@unionjackoil.
com. All questions will be answered before the time of the
AGM via our Company website: www.unionjackoil.com.
The Company encourages shareholders to appoint the
Chairman as their proxy with their voting instructions.
Forms of Proxy must be received by no later than 48 hours
before the commencement of the meeting.
The Company will continue to monitor the pandemic
and if Government advice dictates that further changes
to the arrangements for the AGM are necessary, details
will be published on the website and via a Regulatory
Information Service.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC 9
Chairman’s Statement
CORPORATE AND FINANCIAL
The September 2020 oversubscribed placing and
subscription for £7 million before expenses, has enhanced
the financial well-being of the Company and strengthened
our Balance Sheet. With the resulting cash injection, the
Company currently has more than adequate monies in
place to fund our share of testing the West Newton
A-2 and West Newton B-1Z wells and the ongoing
development of the Wressle production site.
Union Jack remains debt free and had a cash balance at
1 May 2021, in excess of £5.7 million, not including loan
receivables and royalty accruals of over £1 million due
during 2021 and 2022.
The 2020 oil price crash and COVID-19 pandemic
were the catalyst for falling activity within the industry
sector, however, Union Jack used these circumstances
to purchase additional assets at attractive prices to further
expand the Company’s portfolio interests. Encouragingly,
during the period under review, our net assets increased
significantly from circa £13 million in 2019, to in excess
of £18 million, demonstrating a material increase of over
35% during the year.
We continue to identify and add value-accretive asset
interests to our portfolio and execute a very rigid technical
and financial regime, thus adding value to the Company
and its shareholders.
Post period end, during March 2021, the Board made
the decision to consolidate the ordinary shares of the
Company on a 200 for 1 basis. The directors unanimously
believed that the previous share capital structure was no
longer acceptable and that it was an appropriate time to
consolidate the shares in issue as the Company was, and
remains, in an excellent financial and operating position,
given the progress made in recent years on its key projects,
namely, West Newton, Wressle and Biscathorpe.
In April 2021, Union Jack launched a new state-of-the-art
corporate website. The Board hopes that this new website
will turn web searchers into visitors and those visitors into
new shareholders.
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 enables our core projects
to move forward and create additional value.
OUTLOOK
My confidence in respect of Union Jack’s future remains
highly positive.
During 2020 and to date, the Company has advanced its
key projects, executed drilling, development and appraisal
activity, supported by technical evaluation and analysis
provided by our own highly competent technical team.
This has resulted in an accretion in the Company’s asset
value, delivered demonstrable progress and provided
greater clarity on the next steps towards commerciality
of its projects.
I have no doubt, even in these unprecedented times that we
will achieve our goal of increasing production materially and
so continue to make meaningful progress towards becoming
a significant, principally onshore mid-tier UK producer in
due course. In the meantime, I am confident that the news
stream arising from the ongoing progress in our many
attractive ventures will vindicate our optimism.
Union Jack’s wider asset portfolio continues to be well
balanced with the relevant components of production,
development, appraisal and discovery.
The Company remains in sound financial health, with
a robust balance sheet, continues to be debt free with
ample cash reserves to fund its well testing and planned
development commitments, offering shareholders ongoing
and significant scope for growth.
The future of Union Jack remains bright.
David Bramhill
Executive Chairman
17 May 2021
www.unionjackoil.comBUSINESS AND STRATEGY 10
Strategic Report
FOR THE YEAR ENDED 31 DECEMBER 2020
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.
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 2020 and subsequent to the date
of this report is contained in the Chairman’s Statement
and this Strategic Report.
The loss for the year amounted to £1,865,515 (2019:
£1,692,383).
The loss for the year includes impairments to Property,
Plant and Equipment of which total costs are £106,714
(2019: nil). These impairments are in relation to PEDL118,
£59,627 (2019: nil) and PEDL203, £47,087 (2019: £nil).
No impairment costs were applied to the Intangible Assets
(2019: £393,697).
Administrative expenses amounted to £1,590,576
(2019: £1,343,362). The increase in this cost was due
to additional technical work in respect of West Newton,
Wressle, Biscathorpe, and Keddington, undertaken by
the Company’s external consultants.
Cash and cash equivalents at year end amounted to
£7,269,014 (2019: £6,626,322).
Total assets at year end amounted to £21,340,804
(2019: £14,234,850).
Non-current assets at year end amounted to £13,725,734
(2019: £7,428,331).
Intangible Assets totalled £6,134,717 (2019: £6,726,743).
Tangible assets totalled £6,452,287 (2019: £581,300).
The Company’s Income Statement reports revenues
of £158,004 (2019: £136,959) in respect of production
income from the Keddington oilfield and the Fiskerton
Airfield oilfield.
The directors do not recommend the payment of a dividend
(2019: £nil).
In January 2020, the Planning Inspectorate informed the
Operator that the appeal in respect of obtaining planning
consent for the development of the Wressle oilfield,
situated on licences PEDL180 and PEDL182 located in
North Lincolnshire, was successful. The Inspector also
allowed the application for an award of costs against the
North Lincolnshire Council (“NLC”). Subsequently, the
NLC paid costs of £403,000. Union Jack has received its
pro-rata proportion of this payment from the Operator.
In September 2020, 4,375,000,000 new ordinary shares
were issued for cash at a price of 0.16 pence per ordinary
share, raising £7,000,000 before expenses of £588,871 by
way of a placing and subscription.
The enlarged issued share capital following the issue of the
new ordinary shares described above is 19,815,906,325
ordinary shares of 0.025 pence each and 831,680,400
deferred shares of 0.225 pence each.
FUTURE DEVELOPMENTS
The directors intend to continue with the Company’s stated
strategy, reviewing the licence interests held in respect
of future viability, any potential impairment triggers that
may arise during the year and adjusting immediately to any
changes that may be required in the operation of the licence
interests held.
The Company holds a number of key, quality project
interests, namely, Wressle, West Newton and Biscathorpe,
Keddington and North Kelsey, where development,
appraisal and exploration plans are in place for the future
benefit of stakeholders and the Company.
The directors will continue to investigate further acquisition
opportunities as and when they arise.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC 11
In November 2020, Union Jack agreed to provide Egdon
Resources plc with a £1,000,000 loan facility. The main
terms were that the loan would cover an 18 month term,
interest would accrue daily at a rate of 11% and that the
loan is secured against an unencumbered 25% interest in
PEDL180 and PEDL182, including the Wressle development
project and associated infrastructure.
In December 2020, the Company announced positive
preliminary results from the West Newton B-1Z appraisal
well located within PEDL182. A substantial hydrocarbon
column with a gross 62 metre interval was encountered
in the Kirkham Abbey formation. Porosities of up to 14%
were observed on wireline logs. The West Newton B-Z1
well is located approximately 2.5 kilometres from the
West Newton A1 discovery and the A2 appraisal wells,
confirming extensive areal continuity.
Since the outbreak of Coronavirus (COVID-19) in early
2020, the priority of the Company has been on the health
and safety of its employees and technical staff. Like many
organisations, plans have been implemented and active
measures have been taken to mitigate risk, such as no
one-to-one contact and numerous telephone meetings.
The Board is also in frequent contact with the Company’s
JOA partners and our external technical team to assess
any potential impact on the assets in which the Company
has invested. We continue to follow the most up-to-date
Government advice and engage with the regulatory bodies
and stakeholders.
To date, the exploration, development and production
activities of the Company’s assets have continued in line
with plans and with minimal impact from COVID-19.
However, the Company recognises COVID-19 and
associated geo-political factors have created uncertainty
around the price and demand for oil.
Further events which took place after the Balance Sheet
date are described in the Directors’ Report and note 23.
Strategic Report
FOR THE YEAR ENDED 31 DECEMBER 2020
KEY PERFORMANCE INDICATORS
The Company has made good progress during the year
ended 31 December 2020. Traditional KPIs are not
appropriate to the Company. Performance is measured
by monitoring exploration costs and ensuring sufficient
funds are available to meet project commitments.
The directors were successful in raising funds to ensure
the Company is adequately funded to meet all of its
current commitments.
In March 2020, the Company acquired a 35% interest in
PEDL005(R) containing the producing Keddington oilfield
and a 15% interest in PEDL339 containing a portion of the
Louth Prospect, from Terrain Energy Limited for a cash
consideration of £200,000.
In April 2020, the Company purchased 5,000,000 new
ordinary shares in Egdon Resources plc via means of a
subscription at a price of 2 pence per Subscription Share
for a total subscription amount of £100,000.
In June 2020, the Company acquired a further 12.5%
interest from Humber Oil & Gas Limited (“Humber”) in
PEDLs 180 and 182 containing the Wressle development
project for an initial cash consideration of £500,000 with a
deferred cash consideration element of £1,040,000 payable
to Calmar LP, appointees of Celtique Energie Petroleum
Limited (the original vendors in the acquisition by Humber)
on commercial oil production being established. Following
this transaction the Company now holds a 40% interest in
PEDLs 180 and 182.
In June 2020, the Company published a positive report in
respect of a Carbon Intensity Study on the West Newton
hydrocarbon project, compiled by international energy
consultants GaffneyCline.
The GaffneyCline report highlighted that the West Newton
project has an AA rating for Carbon Intensity for its
potential upstream crude oil production and that the rating
is significantly lower than the UK average and compared
to other onshore analogues.
In June 2020, Union Jack were advised that a legally
binding and confidential settlement agreement between
Egdon Resources and the JOA parties in respect of
PEDL253 resolving a dispute with Humber, had been signed.
In June 2020, the Company entered into a Sale and
Purchase Agreement with Montrose Industries Limited
to purchase a further 3% interest in PEDL253 for a cash
consideration of £115,000.
www.unionjackoil.comBUSINESS AND STRATEGY 12
Strategic Report
FOR THE YEAR ENDED 31 DECEMBER 2020
SECTION 172 STATEMENT
All large companies must include a separate statement
within their Strategic Report that explains how the directors
have had regard to broader stakeholder interests when
performing their duty under section 172 of the Companies
Act 2006 to promote the success of the Company for the
benefit of its members as a whole.
The past few years have seen intense focus and debate
on UK corporate governance. A decline in public trust in
business has been caused in part by high-profile business
failures, accusations of excessive executive pay, unethical
tax avoidance by multinational businesses and deteriorating
relationships with employees over pay and contractual
terms. These factors have led to Prime Ministerial
statements, select committee inquiries, public consultations,
a Government green paper and, ultimately, to changes in
legislation, stock exchange rules and governance codes.
Many of the matters noted have resulted from decisions
made in the board room and their effects have been felt
by the employees, pension scheme members, customers,
suppliers and other stakeholders, as well as shareholders,
the interests of all of whom the directors have a statutory
duty to consider when making a decision.
It is in this context that the widest-ranging of the new
reporting requirements has been introduced for large
companies: The Section 172 Statement, which must be
included in the Annual Report of all large companies
(as defined in the Companies Act 2006).
Under section 172, directors have a duty to promote the
success of the Company for the benefit of the members
as a whole and, in doing so, they should have regard to
(amongst other matters) six specified areas that relate, by-
and-large, to wider stakeholder interests.
Likely consequence
of any decision in
the long term
Act fairly as
between members
of the Company
Interests of
employees
Duty to promote the
success of the Company
for the benefit of its
members as a whole,
having regard to:
Maintain a
reputation for
high standards of
business conduct
Foster business
relationships
with suppliers,
customers
and others
Impact of
operations on
the community
and the
environment
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC 13
Strategic Report
FOR THE YEAR ENDED 31 DECEMBER 2020
Likely consequences of any decision in the
long-term
The Company has a clear aim which is to build a
safe, sustainable and successful conventional onshore
hydrocarbon exploration, development and production
business.
The Company’s activities of investment in licence interests
to explore and/or produce oil and/or gas are in general
focused on the longer term. This is particularly the case
given that the Company itself is not an operator of any
of the oil or gas fields in which it has an interest, which
means that the Board is able to focus on longer term
strategic decisions rather than day-to-day operating
decisions. The Company undertakes its strategic
acquisitions in conjunction with three JOA partners,
Egdon Resources plc, Rathlin Energy (UK) Limited and
Europa Oil & Gas Limited (the “JOA Partners”).
Through its financing activities, the Board has ensured
that the Company is well capitalised and has cash
resources for all of its current and anticipated
capital requirements, to ensure that the Company
has a viable operating plan for the long-term.
Stakeholder identification and engagement
The Company recognises the importance of fostering
strong relationships with its stakeholders in order
to create sustainable long-term value, and the Board
encourages active dialogue and transparency with all
its stakeholder groups.
Business decisions are made with the needs of the
Company’s key stakeholders in mind, the Company has
identified external and internal stakeholder groups which
are principally relevant to the proper discharge of the
duty of the directors under section 172(1) to promote
the success of the Company.
Customers and Suppliers
The Company does not deal directly with customers
or suppliers in relation to the oil and gas fields, save for
its relationship with the JOA Partners who operate the
relevant fields.
The Company’s strategy in respect of its customers and
suppliers is to ensure a sustainable relationship with its
JOA Partners.
The Company has implemented this strategy in the
following ways:
• The Board ensures that there is a direct relationship
at Board level with the Company’s partners
• The Board is careful to select JOA and other partners
with experience, resources and similar values to the
Company
• The Board only invests in interests in licences where
the Company has a degree of influence over the manner
in which the operations of that block are operated
• The Board is mindful in its decisions of the indirect
impact that the Company’s decisions may have through
the activities of its operators and other partners on
suppliers, customers and others
• The Board maintains good relations with its suppliers
by adhering to a strict policy of settling all invoices
in a timely manner
Regulators
The Company is subject to a variety of laws and regulations
that involve matters central to the business.
In particular, site operations are also subject to scrutiny by
the Oil and Gas Authority, the Environment Agency and
the Health and Safety Executive before commencement. In
response to regulation in this area, the Board ensures that
the Company is partnered with JOA partners that adhere
diligently to all requirements for a safe working environment
via the Operators. For example, the JOA Partners ensure
that all site personnel are subject to all health and safety
measures which include induction courses before admission
to site and the mandatory wearing of safety equipment in
order to ensure the wellbeing of site staff and visitors.
As an AIM quoted company, the Company is subject to
various governance regimes. Please see “The need to act
fairly as between members of the Company” section within
this Strategic Report for further information.
www.unionjackoil.comBUSINESS AND STRATEGY 14
Strategic Report
FOR THE YEAR ENDED 31 DECEMBER 2020
Shareholders
The Company recognises the importance of active
shareholder engagement, to enable the views of the
Company’s wider shareholder base to be considered
as part of the Board’s decision making process.
The Board has implemented this strategy in the following
ways:
• The Board is 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 facilitates direct communication
with shareholders through the timely release
of regulatory news, via a regulatory information
service, which can be accessed through various
channels, including the London Stock Exchange
website www.londonstockexchange.com and
the Company’s website www.unionjackoil.com
• The Board also seeks to keep its shareholders informed
of current developments and performance via
interviews and speaking events at various conferences
• As a result of the ongoing COVID-19 pandemic,
the Board has adopted a number of changes to
the traditional running of the AGM, however, the
Company wishes to advise that in order to limit the
risk of infection and to protect the health and safety
of shareholders and employees, shareholders are
strongly recommended not to attend the AGM
• The Executive Chairman and the Company’s
Nominated Adviser and Public Relations consultants
manage investor communications. For example, there
has been recent investor speculation around junior
hydrocarbon companies and the Board recognises
the particular importance of regular, clear and timely
communications with shareholders, to ensure that they
are kept updated of major developments and potential
risks in respect of the Company and the Industry in a
timely manner
The Board also believes that shareholders are seeking
a return on their investment primarily through capital
appreciation as a result of exploration and appraisal success.
As a result, the Company ensures that work programmes
are fully funded and utilises the Board’s technical expertise
to reduce or mitigate the risk of exploration.
Employees
The Company directly employs four people. Given
the nature of the Company’s business, it has very few
employees and the majority are themselves directors.
As part of its strategy, the Board recognises that the
Company’s employees are, nevertheless, critical to the
success of the Company and takes steps to ensure that
the interests of employees are protected, for example:
• The Company ensures that the employees possess
a variety of complementary experiences and skillsets,
including experience of industry-specific technical,
financial and public capital markets sectors
• The Company has a Remuneration Committee to
review the executive directors’ remuneration package
• The Board determine the non-executive directors’
remuneration package
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC 15
Strategic Report
FOR THE YEAR ENDED 31 DECEMBER 2020
Impact on the environment and the community
Environment, communities and supply chains
The Company is committed to the highest standards
of health, safety and environmental protection. These
aspects command equal prominence with other business
considerations and the Board is committed to operating the
Company in a sustainable way. In particular, the Board is
keenly aware of the local environment and the inhabitants
in which the Company’s licence interests are situated.
The need to act fairly as between members
of the Company
As an AIM quoted company, Union Jack is subject to
governance requirements and rules (including the AIM Rules
for Companies and MAR) which are intended to ensure
that shareholders are treated fairly. The Board takes its
obligations to comply with these requirements seriously
and has regular contact with its experienced professional
advisers to ensure that these requirements are satisfied.
The directors all hold shares in the Company and their
interests are therefore aligned to those of the other
shareholders.
For example, the Company chooses to produce oil and
gas in the UK, instead of importing from overseas. This
has resulted in local employment, a stream of tax revenues
and direct investment into the surrounding communities.
The onshore oil and gas industry has an excellent record
in relation to health, safety and the protection of the
environment.
The industry is also regulated by a number of statutory
bodies including the Environment Agency in England and
is recognised as being robust. Please refer to “Regulators”
within this strategic report for further details.
The desirability of the Company maintaining a
reputation for high standards of business conduct
The Company has adopted various strategies and
governance structures. The Board believes that its
reputation for high standards of business conduct will
follow from ensuring that appropriate governance structures
are in place and from taking the right decisions, as noted
within this Strategic Report. These strategies also ensure
the continued success of the Company’s business model
and response to specific risks.
www.unionjackoil.comBUSINESS AND STRATEGY 16
Strategic Report
FOR THE YEAR ENDED 31 DECEMBER 2020
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 be adversely 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 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.
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 U.K. Limited, Rathlin Energy (UK) Limited
and Europa Oil & Gas Limited and their ability to determine
timetables and priorities which are beyond the control
of the Company.
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.
The oil price environment is always being monitored,
however, the Company’s key assets are cashflow positive
at a breakeven oil price of approximately US$18. Lack
of control over key assets is mitigated by the fact that
our Operators of choice, Egdon Resources U.K. Limited,
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 capabilities are further supported
by external consultants involved at all times and whom
together participate in regular technical meetings.
The outbreak of COVID-19 in early 2020 presented
a possible risk for delay in implementing drilling and
development. However, the Company’s projects have not
been subjected to material delays. The Company continues
to follow the most up-to-date Government advice.
The future ramifications of Brexit remain unknown,
however, the directors are of the opinion that there is no
reason to believe there will be any effect in respect of the
Company’s going concern status for the foreseeable future.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC 17
Strategic Report
FOR THE YEAR ENDED 31 DECEMBER 2020
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 project commitments.
All expenditure associated with exploration and
development 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 its cash
balances. 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 and this
Strategic Report. The directors’ forecasts demonstrate
that the Company will meet its day-to-day working
capital and share of estimated project costs over the
forecast period being at least 12 months from the sign-
off of these financial statements. 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 is 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.
The effect of COVID-19 continues to be actively assessed
by the directors. To date, the exploration, development
and production activities of the Company have continued
in line with plans and with minimal impact from COVID-19.
The directors are of the opinion that there is no reason
to believe there will be any effect in respect of the
Company’s going concern status for the foreseeable future.
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
17 May 2021
www.unionjackoil.comBUSINESS AND STRATEGY 18
Union Jack’s Current
Licence Interests
1 PEDL183 West Newton
16.665%
2
PEDL180
PEDL182
Wressle Discovery
Broughton North
3 PEDL253
Biscathorpe
PEDL005(R) Keddington Oilfield
Louth
North Somercotes
4
PEDL339
Louth Extension
5 EXL294
Fiskerton Airfield
Oilfield
6 PEDL241 North Kelsey
40%
45%
55%
35%
20%
50%
7
PEDL118 Dukes Wood
PEDL203
Kirklington
16.67%
8 PEDL201 Widmerpool Gulf
26.25%
9 PEDL181 Humber Basin
10 PEDL209
Laughton
12.5%
10%
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC PEDL183
West Newton
PEDL146
PEDL183
WEST NEWTON A-1
NORTH SEA
19
PEDL182
Broughton
North
PEDL180
PEDL182
Wressle
Oilfield
PL162
PEDL182
PEDL173
PEDL180
PEDL241
North Kelsey
PEDL181
Humber Basin
EXL288
1
6
1
L
D
E
P
8
8
2
L
X
E
TRUMFLEET
PL161
HATFIELD
PEDL209
Laughton
9
6
1
L
D
E
P
HATFIELD
PL162
PEDL181
PEDL241
PEDL043
PEDL043
PEDL209
PEDL140
ML004
ML004
BECKINGHAM
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
NEWTON-ON-TRENT
NETTLEHAM
PEDL210
PL179
FARLEYS WOOD
ML003
PEDL130
PEDL090
EGMANTON
WHISBY
BECKERING
STAINTON
WELTON
EXL294
PEDL005(R)
North
Somercotes
Prospect
PEDL005
PEDL005
PEDL005
SALTFLEETBY
PEDL005(R)
Keddington
Oilfield
PEDL005(R)
Louth
Prospect
PEDL253
Biscathorpe
EAKRING
KIRKLINGTON
PEDL
118
PEDL
203
PEDL202
PEDL118
Dukes Wood
PEDL203
Kirklington
PEDL255
PEDL208
PEDL254
PEDL204
PL220
PEDL201
REMPSTONE
PL220
PEDL201
Widmerpool
Gulf
EXL294
Fiskerton Oilfield
10km
Gas Field
Oil Field/Discovery
Prospect
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
20
Directors’ Report
FOR THE YEAR ENDED 31 DECEMBER 2020
The directors present their report together with the
financial statements for the year ended 31 December 2020.
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 2020
and 31 December 2020, were as shown in the table below:
ORDINARY SHARES
31 December
2020
1 January
2020
83,329,285
63,929,285
337,382,806
275,732,806
48,411,764
48,411,764
4,000,000
4,000,000
D Bramhill
J O’Farrell
R Godson
G Bull
In July 2020, Joseph O’Farrell purchased 11,100,000 new
ordinary shares at a price of 0.225 pence each.
In September 2020, Joseph O’Farrell purchased 31,250,000
new ordinary shares at a price of 0.16 pence each.
In November 2020, Joseph O’Farrell purchased a further
19,300,000 ordinary shares at a price of 0.13 pence each,
following which he now holds a beneficial interest in
337,382,806 ordinary shares representing approximately
1.70% of the total issued share capital of the Company.
In November 2020, David Bramhill purchased 19,400,000
ordinary shares at a price of 0.129 pence each, following
which he now holds a beneficial interest in 83,329,285
ordinary shares representing 0.42% of the total issued
share capital of the Company.
Directors who served during the year are as follows:
David Bramhill (Executive Chairman)
Joseph O’Farrell (Executive Director)
Raymond Godson (Non-executive Director)
Graham Bull (Non-executive Director)
DIRECTORS’ REMUNERATION
The remuneration of the directors in office at the year end
31 December 2020 was as follows:
SALARIES AND FEES
2019
£
2020
£
215,000
85,000
37,500
37,500
160,000
70,000
30,000
30,000
OPTIONS
2020
240,000,000
2019
240,000,000
140,000,000
140,000,000
60,000,000
60,000,000
110,000,000
110,000,000
D Bramhill
J O’Farrell
R Godson
G Bull
D Bramhill
J O’Farrell
R Godson
G Bull
Directors’ remuneration is disclosed in note 3 of these
financial statements.
No options were granted to directors or officers during
2020.
Further information in respect of options can be found
in note 14(c) within the Notes to the Financial Statements
section.
Copies of the Service Agreements in respect of David
Bramhill and Joseph O’Farrell are available for inspection
at the Company’s Registered Office. Copies of the Letters
of Appointment in respect of Graham Bull and Raymond
Godson are available for inspection at the Company’s
Registered Office.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC
21
Directors’ Report
FOR THE YEAR ENDED 31 DECEMBER 2020
DIRECTORS’ RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2020
The directors are responsible for preparing the Annual
Report and 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) in conformity with the
requirements of the Companies Act 2006. 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 in conformity with the requirements of the
Companies Act 2006, 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.
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 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.
ANNUAL GENERAL MEETING
The Annual General Meeting of the Company will be held
on 24 June 2021, in accordance with the Notice of Annual
General Meeting on page 71. Details of the resolutions to
be passed are included in this notice.
I would like to bring to the attention of shareholders
the Notice of Annual General Meeting (“AGM”) on
page 71 of this Annual Report and associated notes.
We have no statutory requirement to delay the publishing
or production of the Company’s accounts and financial
statements for the year ended 31 December 2020,
and COVID-19 arrangements have been implemented
to allow the AGM to take place as planned within
the guidelines and advice of our legal team.
GOVERNANCEwww.unionjackoil.com 22
Directors’ Report
FOR THE YEAR ENDED 31 DECEMBER 2020
EVENTS AFTER THE BALANCE SHEET DATE
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 14(a).
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
17 May 2021
The following events have taken place after the year end:
In January 2021, the Company acquired a further 15%
economic interest in PEDL253 containing the Biscathorpe
Prospect from Humber Oil & Gas Limited for a cash
consideration of £500,000. In addition, a contingent cash
payment of £500,000 will be made to Humber Oil &
Gas Limited following receipt of planning consents from
Lincolnshire County Council for drilling the Biscathorpe-2Z
side-track, testing and subsequent production in the event
of drilling success. The Company, following this transaction,
now holds a 45% interest in PEDL253.
In February 2021, the Company concluded a transaction to
acquire a further 30% interest in PEDL241 containing the
North Kelsey Prospect with Egdon Resources U.K. Limited.
The cash consideration was £100,000 and all previous
arrangements in respect of the previous farm-in for a 10%
interest from Egdon Resources U.K. Limited during March
2013, were nullified. Following this transaction the Company
and Egdon hold a 50% interest each in the licence.
In February 2021, the Company announced that following
re-perforation of the Wressle-1 conventional oil well,
communication was made with the Ashover Grit reservoir
interval and free-flow of good quality oil had commenced.
The well has been placed on continuous test production
and is awaiting a proppant squeeze.
During March 2021, the Company consolidated its ordinary
shares on a 200 for one basis and the new issued share capital
is now 99,079,532, each with a nominal value, post-
consolidation of 5 pence.
The reasoning behind this decision was that the Board
believed that the Company was in an excellent financial
and operating position given the significant progress made
in recent years on its three key projects at West Newton,
Wressle and Biscathorpe and that it was an appropriate
time to implement the share consolidation.
In order for the issued share capital to be exactly divisible
by 200, new ordinary shares totalling 75 were issued to the
Executive Chairman, David Bramhill.
At the same time the Articles of Association were amended
to allow the Company to hold in future physical, virtual or
hybrid general meetings, as appropriate.
During March 2021, the Company acquired a 2.5% cash
generating royalty in the offshore Claymore, Piper and Scapa
oilfields from Cambridge Petroleum Royalties Limited for a
cash consideration of £93,730 (US$130,000).
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC 23
Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2020
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.
The Corporate Governance Report 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 safe, 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. The Company undertakes this in conjunction with three JOA
partners, Egdon Resources plc, Rathlin Energy (UK) Limited and Europa
Oil & Gas 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.
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 Board is acutely aware of the risks associated with hydrocarbon
exploration, development and production and seeks to mitigate the risk
of exploration by having interests in a portfolio of petroleum licences
thereby not being overly exposed to any single asset.
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.
GOVERNANCEwww.unionjackoil.com 24
Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2020
QCA Code Recommendation Application by the Company
2.
Principle 2
Seek to understand and
meet shareholders’ needs
and expectations.
Directors must develop a good
understanding of the needs and
expectations of all elements of
the Company’s shareholder base.
The Board must manage
shareholders’ expectations and
should seek to understand the
motivations behind shareholder
voting decisions.
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.
Direct communication with shareholders is achieved primarily through
the timely release of regulatory news, via a regulatory information
service, which can be accessed through various channels, including the
London Stock Exchange website www.londonstockexchange.com
and the Company’s website www.unionjackoil.com.
In addition to the dissemination of regulatory news, the Company also
seeks to keep its shareholders informed of current developments and
performance via interviews and speaking events at various conferences.
All shareholders are encouraged to attend the Company’s Annual
General Meeting (“AGM”), where the directors are available to answer
questions. Investors also have access to current information on the
Company through its website and via genuine enquiries sent to:
info@unionjackoil.com.
Due to the COVID-19 pandemic, it is recommended that shareholders
do not attend in person this year’s AGM.
Investor communications are managed by the Executive Chairman, in
conjunction with the Company’s Nominated Adviser and Public Relations
consultants.
Due to investor speculation around junior hydrocarbon companies, the
Board recognises the particular importance of regular, clear and timely
communications with shareholders, to ensure that they are kept abreast
of major developments and potential risks in respect of the Company
and the industry without delay.
Management believes that shareholders are seeking a return on
their investment primarily through capital appreciation as a result of
exploration and appraisal success. Management prudently manages the
Company to ensure that work programmes are fully funded and uses the
Board’s technical expertise to reduce or mitigate the risk of exploration.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC 25
Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2020
QCA Code Recommendation Application by the Company
3.
Principle 3
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.
The Board is keenly aware of the local environment and the 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 JOA partners to ensure that
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.
The JOA partnerships act, via the Operators, to the highest standards
and operate in a safe and conscientious manner in respect of site safety
and environmental policies. Site operations are subject to scrutiny by the
Oil and Gas Authority, Environment Agency and the Health and Safety
Executive before commencement. The Operator adheres diligently to
all requirements for a safe working environment. All site personnel are
subject to all Health and Safety measures which include induction courses
before admission to site and the mandatory wearing of safety equipment
in order to ensure the wellbeing of site staff and visitors.
As set out above, due to the specific nature of the Company’s business,
the Company currently relies on three key JOA partners, Egdon
Resources U.K. Limited, Rathlin Energy (UK) Limited and Europa Oil &
Gas Limited, who manage and operate the Company’s licence interests
on its behalf.
The Company takes its relationship with its JOA partners and its third
party professional advisers (both of whom it sees as its key stakeholders)
very seriously and the Board continues to discuss any issues and
queries the Company’s JOA partners may have in an open, direct and
constructive manner.
The Company also acknowledges the importance of maintaining good
relations with its suppliers and creditors and it adheres to a strict policy
of settling all invoices in a timely manner.
GOVERNANCEwww.unionjackoil.com 26
Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2020
QCA Code Recommendation Application by the Company
4.
Principle 4
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.
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).
The management of the business and the execution of the 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). The Board convenes on
a regular basis, either by telephone or in person on a formal basis to discuss
risk management as explained in Principle 5.
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:
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
are managed by the site Operators, Egdon Resources U.K. Limited, Rathlin
Energy (UK) Limited and Europa Oil & Gas Limited, who 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. The future
ramifications of Brexit remain unknown, however, the directors are of the
opinion that there is no reason to believe there will be any effect in respect
of the Company’s going concern status for the foreseeable future.
Financial Risk: the lack of ability to meet financial obligations. The
Company has historically raised its funds through equity capital markets by
share issues and has not been involved in derivative instruments and debt
financing to meet its financial obligations.
Product Price Risk: due to the nature of the periodic fluctuation of oil
prices, any such adverse fluctuation could potentially have an impact on the
Company’s resulting return to its shareholders.
The Company also holds Directors’ and Officers’ Liability Insurance cover
and the Company is covered by the Operators’ insurance policies during
drilling and other operational situations for specific projects.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC 27
Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2020
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 members 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 chair
of the Board.
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, David Bramhill and Joseph
O’Farrell, and two non-executive directors, Graham Bull and Raymond
Godson, who are responsible for the management of the Company.
Raymond Godson and Graham Bull are classified as independent
directors. Although Ray Godson and Graham Bull hold shares and
options in the Company, these are considered to be de minimus and
are not deemed to affect their independent thought and judgement.
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. 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
throughout the year, attendance of which has always been 100% since
the Company’s incorporation. The Board also holds regular informal
project appraisal and strategy discussions, and meets every quarter, on
a formal basis, to review trading performance, budgets, ensure adequate
funding, set and monitor strategy, examine acquisition opportunities and
assess risks on an ongoing basis in respect of operational projects.
The directors encourage a collaborative Board culture to ensure that
each decision reached is always in the Company’s and its shareholders’
best interests and that any one individual opinion never dominates the
decision making process. 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 two non-executive directors hold shares and options in
the Company. The Board is satisfied that these shareholdings and options
are not "significant". Therefore, such shareholdings do not contravene the
provisions of the Code.
During 2020, the Board held eight meetings, either by telephone
or in person.
Board Member Board Meetings
Attended
(8 held in the
period)
Audit
Committee
(2 held in the
period)
Remuneration
Committee
(2 held in the
period)
D Bramhill
J O’Farrell
G Bull
R Godson
8
8
8
8
–
–
2
2
–
–
2
2
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 reviews the remuneration of the executive directors on an
annual basis. Both committees are dedicated to establish and maintain
robust internal financial control systems for the Company.
GOVERNANCEwww.unionjackoil.com 28
Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2020
QCA Code Recommendation Application by the Company
6.
Principle 6
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.
The current Board composition of the Company and each director’s
experience is set out in this report. The Board’s view is that the directors
have a variety of complementary experiences and skillsets, including
experience of industry-specific technical, financial and public capital
markets sectors. An overview of the directors are as follows:
David Bramhill, Executive Chairman, 70
Mr Bramhill has over 40 years’ experience in the natural resources
industry. Mr Bramhill has directed and managed several energy
companies and was the former managing director of OilQuest Resources
plc, subsequently acquired by EnCore Oil plc. Mr Bramhill was an
executive director at the time of Nighthawk Energy plc’s AIM flotation
in March 2007 and a non-executive Chairman of Wessex Exploration
plc when that company floated on AIM in March 2011. He resigned from
these companies in 2010 and 2012 respectively.
Mr Bramhill had previously consulted in an engineering capacity for over
20 years on projects for Shell, ExxonMobil, Petrofina, BP and numerous
other international energy companies.
Joseph O’Farrell, Executive Director, 69
Mr O’Farrell has over 30 years’ corporate experience in the hydrocarbon
and mining industry. He has managed several energy companies and is
a former director of OilQuest Resources plc and Nighthawk Energy
plc, having been a director of these two companies at the time of their
respective flotations on AIM. He has assisted a number of companies
working in conjunction with corporate advisers in pre-IPO fundraising
and project acquisition.
Graham Bull, Non-Executive Director, 75
Mr Bull is a geologist with 51 years’ of international oil and gas industry
exploration experience. Following graduation from the University of
Leicester in 1968 with a BSc Hons Geology he worked in Canada and
held positions with Chevron, Dome Petroleum, Siebens Oil and Gas and
Poco Petroleum and also provided exploration expertise to a Canadian
drilling fund. He returned to the UK in 1982 taking the position as Chief
Geologist to Sovereign Oil and Gas plc. In addition, Mr Bull has operated
as a geological adviser for EnCore Oil plc (formerly OilQuest Resources
plc), Premier Oil plc, Cirque Energy and DSM Energy. He is currently
an exploration geological consultant working on Northwest Europe
offshore and onshore United Kingdom and other international areas.
Mr Bull is a member of the Petroleum Exploration Society of Great
Britain, the American Association of Petroleum Geologists and a Fellow
of the Geological Society of London.
Mr Bull is the Chairman of the Remuneration Committee and a member
of the Audit Committee.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC 29
Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2020
QCA Code Recommendation Application by the Company
6.
Principle 6 (continued)
Raymond Godson, Non-Executive Director, 77
Mr Godson is a chartered accountant with 43 years’ experience in the
provision of oil and gas related services to energy companies. Mr Godson
joined the Rio Tinto group in 1973 where he spent 16 years rising to
become the financial and commercial director of the oil and gas subsidiary
RTZ Oil & Gas Limited. In 1988 he joined Teredo Petroleum PLC
(“Teredo”) where he became the managing director in 1992. Following the
takeover of Teredo in 1993, he became a full time accountant in general
practice, where the majority of his business has been oil and gas related.
Mr Godson acted as Company Secretary for Fusion Oil & Gas plc from
IPO to its takeover by Sterling Energy Plc. He was subsequently company
secretary for both Ophir Energy Plc and Aurelian Oil & Gas Plc. He is
currently an executive director of Montrose Industries Limited.
Mr Godson is the Chairman of the Audit Committee and a member
of the Remuneration Committee.
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
composition and skillset is sufficient to maintain and drive the long-term
success for the Company’s shareholders.
Each director takes his 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 accountants, legal counsel,
a Company Secretary and a Nominated Adviser, in accordance with the
AIM rules. On the industry specific front, it also employs three technical
consultancies: Sotwell Exploration Ltd, Calderdale Geoscience Limited
and Oil & Gas Advisers Limited.
Sotwell Exploration Ltd and Calderdale Geoscience Limited are
responsible for supplying technical advice on specific projects. Both
companies work closely with non-executive director, Graham Bull
and are responsible, on a permanent basis, for updating and reviewing
independently all technical information provided to the Company on its
key projects.
Oil & Gas Advisers Limited provides a financial overview in respect of due
diligence on potential project acquisitions and ongoing economics of our
key projects.
Matthew Small is Company Secretary and, via an established accounting
entity, Berkeley Hall Marshall Limited, represents the Company as de facto
financial controller, working closely with the Executive Chairman and the
Audit and Remuneration Committees.
GOVERNANCEwww.unionjackoil.com 30
Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2020
QCA Code Recommendation Application by the Company
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.
7.
Principle 7
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.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC 31
Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2020
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.
The Board believes that, as 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 (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 advisers 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 advisers 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.
GOVERNANCEwww.unionjackoil.com 32
Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2020
QCA Code Recommendation Application by 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:
•
size and complexity; and
• 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.
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.
The roles of the individual Board members are as follows:
• The Executive Chairman, David Bramhill, is responsible for running
the business of the Board, ensuring strategic focus and direction and for
managing investor communications
• The Executive Director, Joseph O’Farrell, is responsible for
assisting the Executive Chairman to execute the Board’s strategy and
coordinating corporate finance activities
• The Non-Executive Director, Graham Bull, is a petroleum geologist
and is responsible for identifying and evaluating potential projects and to
provide technical oversight of the Company’s existing projects. Mr Bull
chairs the Remuneration Committee
• The Non-Executive Director, Raymond Godson, is a Chartered
Accountant who has abundant experience in the oil & gas industry.
Mr Godson chairs the Audit Committee
Two Board committees are in place to ensure control over the Company’s
financial reporting processes and directors’ remuneration. Details of the
two Board committees are as follows:
The 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 Annual Reports, discussions with the Auditor, share placing
agreements and the oversight of internal controls and new accounting
standards relevant to the Company.
This Committee also provides a forum for reporting by the Company’s
auditor. The executive directors may attend meetings by invitation.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC 33
Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2020
QCA Code Recommendation Application by the Company
9.
Principle 9 (continued)
The 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 in the Company’s Annual Report.
The remuneration of non-executive directors is determined by the
Board.
Due to the size of the Company, it is not considered necessary to have a
separate Nominations Committee at this time. Instead this role is fulfilled
by the Board as a whole. The Board also reserves to itself the process by
which a new director is appointed.
Each committee has access to such resources, information and advice as
it deems necessary, at the cost of the Company, to enable the committee
to discharge its duties.
The Board intends that the Company’s governance structures will evolve
over time in parallel with its objectives, strategy and business model to
reflect the development of the Company.
GOVERNANCEwww.unionjackoil.com 34
Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2020
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:
•
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).
• 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 outcome 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.
A Remuneration or Audit Committee report is not included separately
within these financial statements. All relevant information has been
included where required.
Shareholders are 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:
• 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
• keep in constant communication and dialogue with its key
stakeholders and JOA partners through an accessible and open-door
policy, with the Executive Chairman acting as the key conduit. For
avoidance of doubt, it is important to note that any conversations
shareholders and the Executive Chairman may have are always
conducted in accordance of what is permissible under MAR
The Company’s communication practices are set out on its website at:
www.unionjackoil.com/aim-rule-26/
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC 35
Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2020
THE BOARD
AUDIT COMMITTEE
During the year the Board of Union Jack Oil plc consisted
of two executive directors and two 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, eight 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 56.
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.
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 Annual Reports, discussions with the Auditor, share
placing agreements and the oversight of internal controls
and new accounting standards relevant to the Company.
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
GOVERNANCEwww.unionjackoil.com
36
Independent Auditor’s Report
on the Financial Statements
TO THE MEMBERS OF UNION JACK OIL PLC
OPINION ON THE FINANCIAL STATEMENTS
In our opinion the financial statements:
• give a true and fair view of the state of the
Company’s affairs as at 31 December 2020 and
of the Company’s loss for the year then ended;
• have been properly prepared in accordance with
international accounting standards in conformity with
the requirements of the Companies Act 2006; and
• have been prepared in accordance with the
requirements of the Companies Act 2006
We have audited the financial statements of Union
Jack Oil plc (the ‘Company’) for the year ended
31 December 2020 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 Notes to the Financial
Statements, including a summary of significant accounting
policies. The financial reporting framework that has
been applied in their preparation is applicable law and
international accounting standards in conformity 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 believe
that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
INDEPENDENCE
We remain 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.
CONCLUSIONS RELATING TO GOING CONCERN
In auditing the financial statements, we have concluded that
the directors’ use of the going concern basis of accounting
in the preparation of the financial statements is appropriate.
Our evaluation of the directors’ assessment of the
Company’s ability to continue to adopt the going concern
basis of accounting included:
• Reviewing the Company’s cash flow forecasts for
the period to 30 June 2022 and considering the
completeness and accuracy of the future cash flows
by assessment against historical spend and known
contractual arrangements. We reviewed the Company’s
project commitments and verified that these were
included in the cash flow forecast
• Considering the reasonableness of assumptions used by
the directors in the preparation of the cash flow forecast
which included comparing the 2020 actual results to the
2020 forecast
• Performing sensitivity analysis on the base case scenario
prepared by the directors including considering oil price
sensitivities, production sensitivities and assumptions
around investing activities
• Reviewing the adequacy of disclosures made within
the financial statements on the going concern basis of
preparation and the COVID-19 impact on the Company
Based on the work we have performed, we have not
identified any material uncertainties relating to events
or conditions that, individually or collectively, may cast
significant doubt on the Company’s ability to continue as a
going concern for a period of at least twelve months from
when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
OVERVIEW
Key audit
matters
Carrying value of the oil
and gas assets
2020
✓
2019
✓
Materiality Company financial statements as a whole
£136,000 (2019: £100,000) based on
1% of three years average total assets
(2019: 1% of total assets).
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
The Company audit was scoped by obtaining an
understanding of the Company and its environment,
including the Company’s system of internal control, and
assessing the risks of material misstatement in the financial
statements. We also addressed the risk of management
override of internal controls, including assessing whether
there was evidence of bias by the directors that may have
represented a risk of material misstatement.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional
judgement, 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) that 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.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC 37
Independent Auditor’s Report
on the Financial Statements
TO THE MEMBERS OF UNION JACK OIL PLC
Key audit matter
How the scope of our audit addressed the key audit matter
Carrying
value of the
oil and gas
assets
Refer to the
Accounting
Policies and
notes 7 and 8.
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”).
In respect of both the
Company’s E&E and D&P
assets, management and
the directors are required
to assess annually for any
indicators of impairment
of the assets. If an
indicator of impairment
is identified the directors
are require to perform an
assessment of the carrying
value of the assets.
The directors identified
that the Duke’s Wood and
Kirklington assets were
considered to be impaired
in the year due to the
uncertainty in respect of
the future oil production
from the licences.
Given the significance
of the assets on the
Company’s Balance
Sheet and the significant
management judgement
involved in the assessment
of potential triggers for
impairment and any
carrying value assessment
required, we determined
that there is an increased
risk of material
misstatement, and
therefore we consider this
to be a key audit matter.
Our response to the risk
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 challenged the considerations made as to whether or not there
were any indicators of impairment identified in accordance with the
requirements of the relevant accounting standards.
Our specific audit procedures for the E&E assets included:
• verification of the licence status to publicly available information
in order to confirm legal title and validity of each of the licences
•
•
•
reviewing work on the assets in order to assess whether there was
evidence from technical work undertaken to date by management
and third parties which would indicate a potential impairment trigger
review of approved budget forecasts and minutes of management
and Board meetings to confirm the Company’s intention to continue
exploration work on the licences
review of available technical documentation and discussion of results
and operations with management in order to obtain an understanding
of management’s expectation of commercial viability
• checking management’s proposed impairment write off against
the underlying nominal ledger transactions to ensure the correct
impairment provision was made
• confirming the disclosure of the impairment in the period was
presented in the financial statements in accordance with the
requirements of the accounting standard
Our specific audit testing for the D&P assets included:
•
•
the assessment of the appropriateness of the cash generating unit
classification for impairment considerations against the provisions
of the relevant accounting standard
the verification of licence status to publicly available information
in order to confirm legal title and validity of each of the licences
• assessing available market data on oil prices and the impact on the
Company’s assets to assess whether there are indicators of impairment
• undertaking an assessment of whether there were further internal
potential impairment triggers identified (i.e. obsolescence from
internal reporting such as minutes of meetings) or external potential
triggers for impairment (i.e. the market capitalisation of the Company,
economic trends in interest rates etc.)
•
reviewing the external and internal sources of information, such as
third party reports assessing the value in use of each asset, and reports
provided by operators in order to assess whether any impairment
triggers were identified
Key observations:
Based on our procedures performed we consider the assumptions made in
determining the carrying value of the oil and gas assets to be appropriate.
GOVERNANCEwww.unionjackoil.com 38
Independent Auditor’s Report
on the Financial Statements
TO THE MEMBERS OF UNION JACK OIL PLC
OUR APPLICATION OF MATERIALITY
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.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a
lower materiality level, performance materiality, to determine the extent of testing needed. 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.
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance
materiality as follows:
Company financial statements
2020
£
136,000
2019
£
100,000
Materiality
Basis for determining
materiality
1% of total assets averaged over the last three
reporting periods
1% of total assets
Rationale for the
benchmark applied
The majority of the Company’s activities are
in the exploration and development phase and
total assets are likely to be the primary focus
for the users of the financial statements. As
the Company’s cash balance has increased
significantly as a result of a fund raising, an
average of the last three years total asset
balances is the most appropriate benchmark.
We consider total assets to be the relevant
benchmark as the Company generates
minimal revenue and total assets are likely
to be the primary focus for the users of the
financial statements given the majority of the
Company’s activities are in exploration and
development phase.
Performance
materiality
102,000
75,000
Basis for determining
performance
materiality
75% of materiality. The level of performance materiality was set after considering a number
of factors including the expected value of known and likely misstatements and management’s
attitude towards proposed misstatements.
REPORTING THRESHOLD
We agreed with the Audit Committee that we would report to them all individual audit differences in excess
of £2,700 (2019: £2,000). We also agreed to report differences below this threshold that, in our view, warranted
reporting on qualitative grounds.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC 39
Independent Auditor’s Report
on the Financial Statements
TO THE MEMBERS OF UNION JACK OIL PLC
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. 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 course of 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 this gives rise to a
material misstatement in the financial statements themselves. 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.
OTHER COMPANIES ACT 2006 REPORTING
Based on the responsibilities described below and our work performed during the course of the audit, we are required
by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.
Strategic Report and
Directors’ Report
Matters on which we
are required to report
by exception
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.
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, or returns adequate for our audit have
not been received from branches not visited by us; or
•
the 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.
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.
GOVERNANCEwww.unionjackoil.com 40
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.
EXTENT TO WHICH THE AUDIT WAS
CAPABLE OF DETECTING IRREGULARITIES,
INCLUDING FRAUD
Irregularities, including fraud, are instances of non-
compliance with laws and regulations. We design procedures
in line with our responsibilities, outlined above, to detect
material misstatements in respect of irregularities, including
fraud. The extent to which our procedures are capable of
detecting irregularities, including fraud is detailed below:
• We obtained an understanding of the legal and
regulatory frameworks that are applicable to the
Company and the industry in which it operates, and
considered the risk of acts by the Company that were
contrary to applicable laws and regulations, including
fraud. We focused on laws and regulations that could
give rise to a material misstatement in the financial
statements, including but not limited to, the Companies
Act 2006, tax legislation and Oil & Gas Regulation
• Based on our understanding we designed our audit
procedures to identify non-compliance with such
laws and regulations impacting the Company. Our
procedures involved making enquiries of management
and those charged with governance to understand
their awareness of any non-compliance of laws or
regulations, inquiring about the policies that have been
established to prevent non-compliance with laws and
regulations by officers and employees of the Company,
inquiring about the Company’s methods of enforcing
and monitoring compliance with such policies and
reviewing board minutes to identify any instances of
non-compliance
• We assessed the susceptibility of the Company’s
financial statements to material misstatement, including
how fraud might occur by obtaining an understanding
of the controls that the Company has established to
address risks identified by the entity, or that otherwise
seek to prevent, deter or detect fraud
• We addressed the risk of management override of
internal controls, including testing a risk based selections
of journals and evaluating whether there was evidence
of bias in management’s estimates that represented a
material misstatement due to fraud
• We also communicated relevant identified laws and
regulations and potential fraud risks to all engagement
team members and remained alert to any indications
of fraud or non-compliance with laws and regulations
throughout the audit
Our audit procedures were designed to respond to risks
of material misstatement in the financial statements,
recognising that the risk of not detecting a material
misstatement due to fraud is higher than the risk of
not detecting one resulting from error, as fraud may
involve deliberate concealment by, for example, forgery,
misrepresentations or through collusion. There are inherent
limitations in the audit procedures performed and the
further removed non-compliance with laws and regulations
is from the events and transactions reflected in the financial
statements, the less likely we are to become aware of it.
A further description of our responsibilities is available
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
17 May 2021
BDO LLP is a limited liability partnership registered in
England and Wales (with registered number OC305127).
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC 41
Income Statement
FOR THE YEAR ENDED 31 DECEMBER 2020
Revenue
Cost of sales - operating costs
Cost of sales - depreciation
Gross loss
Administrative expenses (excluding impairment charge)
Impairment
Exploration write-back
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)
Notes
31.12.20
£
31.12.19
£
158,004
(286,892)
(57,715)
136,959
(185,169)
(32,429)
(186,603)
(80,639)
(1,590,576)
(1,343,362)
(106,714)
(393,697)
–
112,500
(1,697,290)
(1,624,559)
(1,883,893)
(1,705,198)
18,378
12,815
(1,865,515)
(1,692,383)
–
–
(1,865,515)
(1,692,383)
(1,865,515)
(1,692,383)
(2.23)
(3.04)
2
2
2
4
5
6
The accompanying accounting policies and notes form an integral part of these financial statements.
FINANCIAL STATEMENTSwww.unionjackoil.com
42
Statement of Comprehensive Income
FOR THE YEAR ENDED 31 DECEMBER 2020
Notes
31.12.20
£
31.12.19
£
Loss for the financial year
(1,865,515)
(1,692,383)
Items which will not be reclassified
subsequently to profit or loss
Other comprehensive loss
10
(83,190)
(32,212)
Total comprehensive loss for the financial year
(1,948,705)
(1,724,595)
The accompanying accounting policies and notes form an integral part of these financial statements.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC
Balance Sheet
AS AT 31 DECEMBER 2020
Assets
Non-current assets
Exploration and evaluation assets
Property, plant and equipment
Investments
Loan receivables
Current assets
Loan receivables
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
43
Notes
31.12.20
£
31.12.19
£
7
8
10
11
11
12
13
20
21
6,134,717
6,452,287
137,098
1,001,632
6,726,743
581,300
120,288
–
13,725,734
7,428,331
8,993
337,063
7,269,014
–
180,197
6,626,322
7,615,070
6,806,519
21,340,804
14,234,850
2,447,727
231,284
803,772
620,686
3,251,499
851,970
18,089,305
13,382,880
6,825,258
19,522,379
411,467
(8,669,799)
5,731,508
14,205,000
167,466
(6,721,094)
18,089,305
13,382,880
Capital and reserves attributable to the
Company’s equity shareholders
Share capital
Share premium
Share-based payments reserve
Accumulated deficit
Total equity
14(a)
15
15
15
The financial statements of Union Jack Oil plc, registered number 07497220, were approved and authorised for issue
by the Board of Directors on 17 May 2021 and were signed on its behalf by:
David Bramhill
Director
The accompanying accounting policies and notes form an integral part of these financial statements.
FINANCIAL STATEMENTSwww.unionjackoil.com
44
Statement of Changes in Equity
FOR THE YEAR ENDED 31 DECEMBER 2020
Share-based
Share
capital
£
Share
premium
£
payment Accumulated
deficit
£
reserve
£
Total
£
Balance at 1 January 2020
5,731,508
14,205,000
167,466
(6,721,094)
13,382,880
Loss for the financial year
Other comprehensive loss
Total comprehensive loss
Contributions by and
distributions to owners
Issue of share capital
Share issue costs
Share-based payments
Total contributions by and
distributions to owners
–
–
–
–
–
–
–
–
–
(1,865,515)
(1,865,515)
(83,190)
(83,190)
(1,948,705)
(1,948,705)
1,093,750
–
–
5,906,250
(588,871)
–
–
–
244,001
–
–
–
7,000,000
(588,871)
244,001
1,093,750
5,317,379
244,001
(1,948,705)
4,706,425
Balance at 31 December 2020
6,825,258
19,522,379
411,467
(8,669,799) 18,089,305
Balance at 1 January 2019
3,983,958
7,593,146
78,319
(5,046,835)
6,608,588
Loss for the financial year
Other comprehensive loss
Total comprehensive loss
Contributions by and
distributions to owners
Issue of share capital
Share issue costs
Share-based payments
Expired warrants
Total contributions by and
distributions to owners
–
–
–
–
–
–
–
–
–
(1,692,383)
(1,692,383)
(32,212)
(32,212)
(1,724,595)
(1,724,595)
1,747,550
–
–
–
7,252,450
(640,596)
–
–
–
–
139,483
(50,336)
–
–
–
50,336
9,000,000
(640,596)
139,483
–
1,747,550
6,611,854
89,147
(1,674,259)
6,774,292
Balance at 31 December 2019
5,731,508
14,205,000
167,466
(6,721,094) 13,382,880
The accompanying accounting policies and notes form an integral part of these financial statements.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC
45
Statement of Cash Flows
FOR THE YEAR ENDED 31 DECEMBER 2020
Cash flow from operating activities
Cash flow from investing activities
Purchase of intangible assets
Purchase of property, plant and equipment
Sale of licence interest
Loan advanced
Purchase of investments
Interest received
Notes
31.12.20
£
31.12.19
£
16
7
8
2
11
10
4
(1,412,801)
(1,473,164)
(2,874,060)
(389,330)
–
(1,000,000)
(100,000)
7,754
(3,319,108)
(5,947)
112,500
–
(112,500)
6,850
Net cash used in investing activities
(4,355,636)
(3,318,205)
Cash flow from financing activities
Proceeds on issue of new shares
Cost of issuing new shares
14(a)
14(a)
7,000,000
(588,871)
8,935,000
(640,596)
Net cash generated from financing activities
6,411,129
8,294,404
Net increase in cash and cash equivalents
642,692
3,503,035
Cash and cash equivalents at beginning of financial year
6,626,322
3,123,287
Cash and cash equivalents at end of financial year
13
7,269,014
6,626,322
The accompanying accounting policies and notes form an integral part of these financial statements.
FINANCIAL STATEMENTSwww.unionjackoil.com
46
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 Chairman’s Statement,
Strategic Report and the Directors’ Report. 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”)
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. These accounting
policies comply with each IFRS that is mandatory for
accounting periods ending on 31 December 2020.
The financial statements have been prepared under the
historical cost convention except for the valuation of
investments that have been measured at fair value through
other comprehensive income. 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 and
this Strategic Report. The directors’ forecasts demonstrate
that the Company will meet its day-to-day working capital
and share of estimated project costs over the forecast
period being at least 12 months from the sign-off of these
financial statements.
There are a number of risks to the Company’s working
capital position, which have been identified by the directors
and its independent advisor, OGA, namely: (i) timing of
incurred costs; (iii) scope of work programmes undertaken;
and (iii) realised oil price.
The impact of those risks on the Company’s working
capital position has been assessed under a range of differing
scenarios, with the most adverse, given the current operating
environment and stage of development that the Company’s
assets are at, being identified as being the basis for evaluating
the impact for the Going Concern assessment using the worst
case “stress test.”
The Company has sufficient funding to meet planned
expenditures and a level of contingency. Taking account
of the risks, the stress test shows that the Company is
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.
The effect of COVID-19 continues to be actively monitored
by the directors. To date, the exploration, development and
production activities of the Company have continued in line
with plans and with minimal impact from COVID-19. The
directors are of the opinion that there is no reason to believe
there will be any effect in respect of the Company’s going
concern status for the foreseeable future.
REVENUES
The Company’s revenue is derived from selling goods,
and revenue is recognised at the point in time when the
performance obligation to supply oil has been satisfied, i.e.
when control of goods has passed to the customer. This is
when oil sold is delivered to a third-party storage on behalf
of the customer.
Transaction prices are agreed in writing in advance of sales
and do not include any variable elements, including the oil
price. As the product sold is clearly identifiable, there is
a single performance obligation in each case to which the
transaction price is allocated. There are no volume rebates
offered and nor are there any payments in the nature of
financing arrangements.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash on hand and
deposits held at call with banks.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC 47
Principal Accounting Policies
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 9, 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”)
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
•
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 investments are classified as financial assets
at FVOCI based on the fair value hierarchy groups listed
in note 17. The fair value of quoted securities are based
on published market prices (Level 1 inputs). The fair value
of the unquoted securities are based on Level 3 inputs.
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.
FINANCIAL STATEMENTSwww.unionjackoil.com 48
Principal Accounting Policies
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 unit 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 Exploration and Evaluation
(“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.
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.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC 49
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.
Management has 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.
Where the percentage ownership in joint arrangements
changes during a reporting period, the arrangement is
reassessed to ensure it is still appropriately classified, and
the Company’s share of income and expenses is adjusted
prospectively from the date of change.
Principal Accounting Policies
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, under IAS 36 for Production and Development
assets and IFRS 6 for Exploration and Evaluation assets, 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
industry-specific 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, and
more general triggers would include external sources such
as significant changes in the industry or internal evidence such
as changes in expectation of an asset’s economic performance.
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 Income Statement 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.
FINANCIAL STATEMENTSwww.unionjackoil.com 50
Principal Accounting Policies
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 AND WARRANTS
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
14(b) and 14(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 or warrant 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.
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 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.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC
51
Principal Accounting Policies
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:
Impact on the
Company
IAS 1
Amendments to IAS 1 and IAS 8: Definition of Material
IFRS 3
Amendment to IFRS 3 Business Combinations
IFRS 9
Amendments to IFRS 9, IAS 39 and IFRS17: Interest Rate
Benchmark Reform
Yes
Yes
Yes
No material
impact
Not currently
applicable to
the Company
No material
impact
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. For the next reporting period,
applicable International Financial Reporting Standards will be those endorsed by the UK Endorsement Board (UKEB).
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
IAS 1
Amendments to IAS 1: Classification of Liabilities as Current
or Non-current and Classification of Liabilities as Current or
Non-current
Effective Date: Annual
periods beginning on
or after:
1 January 2023
Various Amendments to
1 January 2022
• IFRS 3 Business Combinations;
• IAS 16 Property, Plant and Equipment;
• IAS 37 Provisions, Contingent Liabilities and Contingent
Assets
• Annual Improvements 2018-2020
UKEB adopted
No
No
Various Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
1 January 2021
Yes
Interest Rate Benchmark Reform – Phase 2
New and revised International Financial Reporting Standards which are not considered to potentially have a material impact
on the Company’s financial statements going forward 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.
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.
FINANCIAL STATEMENTSwww.unionjackoil.com
52
Principal Accounting Policies
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:
CRITICAL ESTIMATES
Share-based Payments and Warrants
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 14(b) and 14(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 and Reinstatement Provisions
Management uses estimates for future decommissioning
expenditure, discount rates (1.63%) and inflation rates
(1%) 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.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC Principal Accounting Policies
Reserve Estimates
Reserves are estimates of the amount of product that can
be economically and legally extracted from the Company’s
properties. In order to calculate the reserves, estimates
and assumptions are required about a range of geological,
technical and economic factors, including quantities,
production techniques, recovery rates, production costs,
transport costs, commodity demand, commodity prices
and exchange rates.
Estimating the quantity and/or grade of reserves requires
the size, shape and depth of fields to be determined by
analysing geological data such as drilling samples. This process
may require complex and difficult geological judgements and
calculations to interpret the data.
Given that the economic assumptions used to estimate
reserves change from year to year, and because additional
geological data is generated during the course of operations,
estimates of reserves may change from year to year. Changes
in reported reserves may affect the Company’s financial
results and financial position in a number of ways, including
the following:
• Asset carrying values may be affected by possible
impairment due to adverse changes in estimated future
cash flows;
• Depreciation, depletion and amortisation charged in the
Income Statement may change where such charges are
determined by the units of production basis, or where
the useful economic lives of assets change.
53
Judgements in Applying Accounting Policies and Key
Sources of Estimation Uncertainty – Impairment
Management is required to assess the Exploration and
Evaluation assets and the Development and Production
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 and Development and Production assets the Board
makes assumptions about the future progress and likely
successful outcome of exploration and drilling activities as
well as the estimated level of reserves and resources and the
discount rate. 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.
Judgements in Applying Accounting Policies and Key
Sources of Estimation Uncertainty – Investments
The Company’s investments in equity instruments are not
held for trading. Instead they are for medium to long-term
strategic purposes and as such these investments are held
at Fair Value Through Other Comprehensive Income
(“FVTOCI”). Management assesses these assets for any
indication of change in their fair value by reviewing the
market value of the relevant companies and therefore
the value of the underlying asset.
Expected credit loss model
IFRS 9 requires the Company to make assumptions when
implementing the forward-looking expected credit loss
model. This model is required to be used to assess the loan
to Egdon Resources plc for impairment. Arriving at the
expected credit loss allowance involved considering different
scenarios for the recovery of loan receivables, the possible
credit losses that could arise and the probabilities for these
scenarios. The risks considered included exploration project
risk, country risk, expected future oil prices, and the value
of the potential reserves.
FINANCIAL STATEMENTSwww.unionjackoil.com 54
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2020
1
BUSINESS AND OPERATING SEGMENTS
The Company is considered to have two operating segments, being the exploration and evaluation of, and the development
and production of hydrocarbon discoveries onshore United Kingdom.
For the year ending 31 December 2020
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 2019
Revenue
Operating expenses
Depreciation
Impairment
Other administrative expenses
Exploration write-back
Loss from continuing operations before tax
Finance income
Loss for the year
For the year ending 31 December 2020
Exploration Development
and Evaluation and Production
£
£
Corporate
£
Total
£
–
–
–
–
–
–
–
–
158,004
(286,892)
(57,715)
(106,714)
–
(293,317)
–
(293,317)
–
–
–
–
(1,590,576)
(1,590,576)
18,378
(1,572,198)
158,004
(286,892)
(57,715)
(106,714)
(1,590,576)
(1,883,393)
18,378
(1,865,515)
Exploration Development
and Evaluation and Production
£
£
Corporate
£
Total
£
–
–
–
(393,697)
–
112,500
(281,197)
–
(281,197)
136,959
(185,169)
(32,429)
–
–
–
(80,639)
–
(80,639)
–
–
–
–
(1,343,362)
–
(1,343,362)
12,815
(1,330,547)
136,959
(185,169)
(32,429)
(393,697)
(1,343,362)
112,500
(1,705,198)
12,815
(1,692,383)
Exploration Development
and Evaluation and Production
£
£
Corporate
£
Total
£
Non-current assets
Current assets
Non-current liabilities
Current liabilities
6,134,717
11,856
(382,331)
(142,606)
6,452,287
95,293
(421,441)
(2,149,885)
1,138,730
7,507,921
–
(155,236)
13,725,734
7,615,070
(803,772)
(2,447,727)
Net assets
5,621,636
3,976,254
8,491,415
18,089,305
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC
55
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2020
1
BUSINESS AND OPERATING SEGMENTS (CONTINUED)
For the year ending 31 December 2019
Exploration Development
and Evaluation and Production
£
£
Corporate
£
Total
£
Non-current assets
Current assets
Non-current liabilities
Current liabilities
6,726,743
–
(457,815)
(144,493)
581,300
84,716
(162,871)
(28,216)
120,288
6,721,803
–
(58,575)
7,428,331
6,806,519
(620,686)
(231,284)
Net assets
6,124,435
474,929
6,783,516
13,382,880
2
OPERATING LOSS
Operating loss is stated after charging:
Impairment charge on Intangible Assets
Impairment charge on Property,Plant and Equipment
Exploration write-back
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
31.12.20
£
31.12.19
£
–
393,697
106,714
–
–
(112,500)
57,715
636,211
37,000
6,437
32,429
456,482
29,600
6,600
The impairment charges of £106,714 (2019: £nil) are in respect of Property, Plant and Equipment, PEDL118 and PEDL203.
The impairment shown for 2019 in last year’s Annual Report and Financial Statements was in respect of Intangible Assets
PEDL201, PEDL181 and PEDL209.
In May 2019, the Company sold its interest in PEDL143 Weald Basin to UK Oil & Gas Plc ("UKOG"). This transaction
was for accounting purposes considered to be an exploration write-back.
FINANCIAL STATEMENTSwww.unionjackoil.com
56
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2020
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
Share-based payment expense
Social security costs
31.12.20
£
31.12.19
£
375,000
214,312
46,899
302,500
121,727
32,255
636,211
456,482
During 2020, the Remuneration Committee met to discuss and review the salaries of the Executive Directors and
remuneration structure. A number of surveys published by established accounting companies relating to Executive
Director salaries and benefits were reviewed by the Remumeration Committee and as a result it was established that
the base salaries of both David Bramhill and Joe O’Farrell were significantly below those indicated in the Lower Quartile
of AIM salaries as published within the AIM Remuneration documents reviewed. The remuneration Committee also
took into consideration that there was no end of year bonus payments, pension, Company vehicle or health insurance
provisions. The Remuneration Committee recommended that the Executive Directors salaries were to be brought
in line with those in their peer group.
The number of persons employed by the Company was 4 (2019: 5).
Details of each director’s emoluments are included in the Directors’ Report and within this note.
The salaries, fees and share-based payments of individual directors were as follows:
Year ended December 2020
D Bramhill
J O’Farrell
R Godson
G Bull
Year ended December 2019
D Bramhill
J O’Farrell
R Godson
G Bull
Salaries
£
215,000
85,000
37,500
37,500
375,000
Share-based
payment expense
£
86,007
54,035
23,190
51,080
Total
£
301,007
139,035
60,690
88,580
214,312
589,312
Salaries
£
Share-based
payment expense
£
160,000
70,000
30,000
30,000
49,750
28,077
14,125
26,909
Total
£
209,750
98,077
44,125
56,909
290,000
118,861
408,861
The emoluments of the highest paid director were £215,000 (2019: £160,000).
Share-based payments are non-cash remuneration by way of share options in the Company.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC
57
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2020
3
EMPLOYEE INFORMATION AND REMUNERATION OF DIRECTORS (CONTINUED)
No share options were granted to the directors or officers in 2020.
Directors’ share options outstanding at 31 December 2020 and at 31 December 2019:
D Bramhill
J O’Farrell
R Godson
G Bull
Directors’ share options granted 2019:
D Bramhill
J O’Farrell
R Godson
G Bull
Directors’ share options granted 2018:
D Bramhill
J O’Farrell
R Godson
G Bull
2020
2019
240,000,000
140,000,000
60,000,000
110,000,000
240,000,000
140,000,000
60,000,000
110,000,000
Number
Grant date
Exercise price
Vesting date
120,000,000
80,000,000
30,000,000
80,000,000
19.07.19
06.08.19
19.07.19
19.07.19
0.265p
0.265p
0.265p
0.265p
19.07.22
06.08.22
19.07.22
19.07.22
Number
Grant date
Exercise price
Vesting date
120,000,000
60,000,000
30,000,000
30,000,000
18.07.18
18.07.18
07.11.18
07.11.18
0.09p
0.09p
0.11p
0.11p
18.07.21
18.07.21
07.11.21
07.11.21
F Lang resigned as a non-executive director, on 10 June 2019. In 2019, F Lang received a salary of £12,500 and the
accounting charge in relation to his share options was £2,866. During 2018, F Lang was awarded 30,000,000 options
at an exercise price of 0.11 pence, with a vesting date of 04.12.21. F Lang has been allowed to retain his options which
are exercisable under the same terms as outlined in the option agreement and as disclosed within note 14(c).
FINANCIAL STATEMENTSwww.unionjackoil.com
58
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2020
4
FINANCE INCOME
HMRC interest
Bank interest
Loan interest receivable
5
TAXATION
Current tax
UK Corporation Tax
Adjustment in respect of prior periods
Total UK Corporation Tax charge
31.12.20
£
31.12.19
£
–
7,754
10,624
18,378
5,965
6,850
–
12,815
31.12.20
£
31.12.19
£
–
–
–
–
–
–
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% (2019: 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% (2019: 40%)
Effects of:
Expenses not deductible for tax purposes
Impairment of intangible assets not deductible for tax purposes
Losses carried forward
Current tax charge for year is £nil (2019: £nil)
31.12.20
£
31.12.19
£
(1,865,515)
(1,692,383)
(746,206)
(676,953)
622
42,686
(702,898)
3,663
157,479
(515,811)
A deferred tax asset of £3,387,735 (2019: £2,684,837) 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 £8,669,799 (2019: £6,721,094).
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC
59
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2020
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 14(b) and 14(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 14(b) and 14(c).
At 31 December 2020, the Company had 6,074,510 (2019: 6,074,510) warrants in issue and 640,000,000
(2019: 640,000,000) 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.
For the purposes of the loss per share calculation, the post-consolidation factor of 200 shares for one has been applied.
Loss per share
2020
Pence
2019
Pence
Loss per share from continuing operations
(2.23)
(3.04)
The loss and weighted average number of ordinary shares used in the calculation of loss per share are as follows:
2020
£
2019
£
Loss used in the calculation of total basic and diluted loss per share
(1,865,515)
(1,692,383)
Number of shares
2020
2019
Weighted average number of ordinary shares for the purposes of basic
and diluted loss per share
83,539,914
55,594,405
As detailed in note 14, the Company has 831,680,400 (2019: 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 4,375,000,000 new ordinary shares during the year (2019: 6,990,196,071).
FINANCIAL STATEMENTSwww.unionjackoil.com
60
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2020
7
INTANGIBLE ASSETS
At 1 January
Costs incurred during the year
Transfer to development and production assets
Costs impaired
At 31 December
31.12.20
£
31.12.19
£
6,726,743
5,054,060
(5,646,086)
–
3,485,961
3,634,479
–
(393,697)
6,134,717
6,726,743
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.
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. No Intangible Assets have been impaired in 2020.
The total impairment charge for 2019 was £393,697 with regard to PEDL201, £375,892, PEDL181, £15,042 and PEDL209,
£2,763.
Included in the above intangible asset additions during the year are amounts arising in relation to changes in decommissioning
and restoration provisions (note 21).
Intangible assets (less any impairment) comprise amounts capitalised as follows:
Wressle
West Newton
Biscathorpe
North Kelsey
Louth Extension
Broughton North
PEDL180
PEDL183
PEDL253
PEDL241
PEDL339
PEDL182
31.12.20
£
31.12.19
£
–
3,755,301
2,136,834
225,306
17,276
–
2,429,830
2,346,915
1,821,371
104,168
16,426
8,033
The Board has reclassified PEDL180 Wressle as a development and production asset. With its transfer from Intangible Assets,
Wressle is now presented as Property, Plant and Equipment within these Financial Statements.
During the year, settlement between the Operator, Egdon Resources U.K. Limited, was reached with Humber Oil & Gas
Limited (“Humber”), regarding monies due on PEDL253. At the time of the agreement a 27.5% interest in PEDL253 was held
by Union Jack. On settlement 5.5% of PEDL253 was returned to Humber. In lieu of financial payment to Union Jack, a 5%
interest in PEDL253 was acquired from Humber, bringing Union Jack’s interest to 27%. The Company also received a sum of
£43,059 for monies outstanding in respect of 0.5%. Simultaneously, Union Jack also acquired a further 3% interest in PEDL253
from Montrose Industries Limited, bringing the Company’s interest to 30%.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2020
8
PROPERTY, PLANT AND EQUIPMENT
Cost
At 1 January
Transfer from exploration and evaluation assets
Additions
At 31 December
Depreciation and impairment
At 1 January
Depreciation charge for the year
Costs impaired
At 31 December
Net book value
At 31 December
At 1 January
Development and Production assets comprise amounts capitalised as follows:
Wressle
Fiskerton Airfield
Keddington
Dukes Wood
Kirklington
PEDL180
EXL294
PEDL005(R)
PEDL118
PEDL203
61
31.12.20
£
31.12.19
£
663,234
5,646,086
389,330
660,647
–
2,587
6,698,650
663,234
81,934
57,715
106,714
246,363
49,508
32,426
–
81,934
6,452,287
581,300
581,300
611,139
31.12.20
£
5,646,086
208,218
597,983
–
–
31.12.19
£
–
208,742
266,418
59,542
46,598
6,452,287
581,300
The Board has reclassified PEDL180, Wressle, as a development and production asset. With its transfer from Intangible
Assets, Wressle is now presented as Property, Plant and Equipment within these Financial Statements.
The Board has assessed the Development and Production assets as at 31 December 2020 and has identified indicators
of impairment as set out in IAS36 Impairment of assets in respect of PEDL118 Dukes Wood and PEDL203 Kirklington,
respectively. This impairment amounts to a total of £106,714 (2019: £nil). The total impairment charge for these assets
was PEDL118, £59,627 and PEDL203, £47,087.
There were no triggers for impairment on any other assets.
FINANCIAL STATEMENTSwww.unionjackoil.com
62
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2020
JOINT OPERATIONS
9
The Company is party to 12 joint arrangements which carry out exploration and development of hydrocarbons
in the United Kingdom. The joint operations in which the Company held an interest as at 31 December 2020 are as below:
Licence
Name
Proportion of
ownership interest
2020
Proportion of
ownership interest
2019
Principal place
of business
PEDL180/182
PEDL183
PEDL201
PEDL005(R)
PEDL253
PEDL241
PEDL339
PEDL118
PEDL203
EXL294
PEDL181
PEDL209
Wressle/Broughton North
West Newton
Widmerpool Gulf
Keddington
Biscathorpe
North Kelsey
Louth Extension
Dukes Wood
Kirklington
Fiskerton Airfield
Humber Basin
Laughton
10
INVESTMENTS
40%
16.665%
26.25%
55%
30%
20%
35%
16.67%
16.67%
20%
12.5%
10%
Investments in equity instruments designated as at FVTOCI
Shares
27.5%
16.665%
26.25%
20%
27.5%
20%
20%
16.67%
16.67%
20%
12.5%
10%
England
England
England
England
England
England
England
England
England
England
England
England
2020
£
2019
£
137,098
120,288
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. Measurement criteria for investments are given in note 17.
At 1 January
Additions
Changes in fair value of investments
At 31 December
31 December
2020
£
31 December
2019
£
120,288
100,000
(83,190)
40,000
112,500
(32,212)
137,098
120,288
The Company is the beneficial owner of 169,959 (2019: 169,959) ordinary shares in Elephant Oil Limited, a company
registered in England and Wales, which represents a 0.73% (2019: 0.73%) interest in that company. The principal activity
of Elephant Oil Limited is the exploration and evaluation of hydrocarbon assets.
The Company is the beneficial owner of 9,731,834 (2019: 9,731,834) ordinary shares in UK Oil & Gas plc (“UKOG”),
a company registered in England and Wales, which represents a 0.078% (2019: 0.133%) interest in that company at
year end. The principal activity of UKOG is the exploration and evaluation of hydrocarbon assets. The shares in UKOG
were received as consideration from the sale of the Company’s 7.5% interest in PEDL143 Weald Basin to the value
of £112,500 during 2019. At the time of the sale the UKOG shares were valued at 1.156p each.
The investment in UKOG was revalued at the year end to the value of £14,598 (0.15 pence per share) with the loss
being recorded in the Statement of Comprehensive Income on page 42.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC
63
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2020
10
INVESTMENTS (CONTINUED)
The Company is the beneficial owner of 5,000,000 (2019: nil) ordinary shares in Egdon Resources plc (“Egdon”) which
represents a 1.52% (2019: nil) interest in that company at year end. Payment for the new shares acquired was by means
of a subscription at a price of 2 pence per Subscription Share for a total consideration of £100,000. The principal activity
of Egdon is the production and exploration of hydrocarbons onshore UK.
The investment in Egdon was revalued at the year end to the value of £82,500 (1.65 pence per share) with the loss being
recorded in the Statement of Comprehensive Income on page 42.
11
LOAN RECEIVABLES
Amounts falling due within 1 year
Amounts falling due after 1 year
31.12.20
£
8,992
1,001,632
1,010,624
31.12.19
£
–
–
–
Summary of loan arrangements:
During 2020, a loan was issued to Egdon Resources plc with an 18 month term. The loan accrues interest at 11% per
annum with repayments of interest commencing during 2021. The loan is secured against an unencumbered 25% interest
in PEDL180 and PEDL182, including the Wressle development project and associated infrastructure. The expected credit
losses on the loan have been assessed as disclosed in note 18.
12
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 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 for the receivables as there has been no historical experience to indicate
that these receivables are not recoverable. All outstanding receivables have been received prior to the balance sheet date.
There has been no change in the estimation techniques or significant assumptions made during the current reporting period.
Trade receivables
Other debtors
VAT
Prepayments
13
CASH AND CASH EQUIVALENTS
Cash at bank
31.12.20
£
31.12.19
£
95,293
–
187,596
54,174
6,408
65,000
78,308
30,481
337,063
180,197
31.12.20
£
31.12.19
£
7,269,014
6,626,322
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.
FINANCIAL STATEMENTSwww.unionjackoil.com
64
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2020
14(a)
SHARE CAPITAL
Allotted and issued:
Number
Class
Nominal
value
31.12.20
£
31.12.19
£
19,815,906,325
(31 December 2019: 15,440,906,325)
831,680,400
(31 December 2019: 831,680,400)
Total
Ordinary
0.025p
4,953,977
3,860,227
Deferred
0.225p
1,871,281
1,871,281
6,825,258
5,731,508
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 September 2020, 4,375,000,000 new ordinary shares were issued for cash at 0.16 pence per share, raising approximately
£7,000,000 before expenses of £588,871 by way of a placing and subscription.
14(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 2020
Number of warrants
Outstanding and exercisable at the beginning of the year
Outstanding and exercisable at the end of the year
6,074,510
6,074,510
Year ended December 2019
Number of warrants
Outstanding and exercisable at the beginning of the year
Outstanding and exercisable at the end of the year
51,407,842
6,074,510
WAEP
£
0.003
0.003
WAEP
£
0.003
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
Number in issue at 31 December 2020
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 nil warrants expired (2019: 45,333,332).
04.12.12
6,074,510
0.3p
0.25p
69%
5.0
0.8464%
0%
£11,099
20.12.12
20.12.22
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC
65
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2020
14(c) SHARE-BASED PAYMENTS – OPTIONS
No options were granted to directors of the Company during 2020. 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 and are 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 2020
Number of options
Outstanding at the beginning of the year
Granted during 2020
Outstanding at the end of the year
Exercisable at the end of the year
640,000,000
–
640,000,000
–
Year ended December 2019
Number of options
Outstanding at the beginning of the year
Granted during 2019
Outstanding at the end of the year
Exercisable at the end of the year
300,000,000
340,000,000
640,000,000
–
WAEP
£
0.00187
–
0.00187
–
WAEP
£
0.00098
0.00265
0.00187
–
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
06.08.19
19.07.19
04.12.18
07.11.18
18.07.18
Number in issue at 31 December 2020
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
80,000,000 260,000,000
0.265p
0.265p
70%
6.5
0.5187%
0%
£435,086
19.07.22
19.07.29
0.265p
0.265p
70%
6.5
0.3161%
0%
£133,497
06.08.22
06.08.29
30,000,000
0.11p
0.11p
63%
6.5
0.8840%
0%
£19,491
04.12.21
04.12.28
90,000,000 180,000,000
0.09p
0.09p
55%
6.5
0.9427%
0%
£85,822
18.07.21
18.07.28
0.11p
0.11p
62%
6.5
1.1035%
0%
£58,106
07.11.21
07.11.28
The Company recognised total expenses in the Income Statement of £244,001 in relation to share options accounted
for as equity-settled share-based payment transactions during the year (2019: £139,483).
Expected volatility was determined based on a historic 5-year volatility of the Company.
FINANCIAL STATEMENTSwww.unionjackoil.com
66
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2020
15
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.
16
RECONCILIATION OF LOSS TO CASH GENERATED FROM OPERATIONS
Loss before taxation
Depletion of producing assets
Impairment of intangibles
Exploration write-back
Share-based payments
Finance income
(Increase) / decrease in trade and other receivables
Increase / (decrease) in trade and other payables
31.12.20
£
31.12.19
£
(1,865,515)
57,715
106,714
–
244,001
(18,378)
(1,692,383)
32,429
393,697
(112,500)
139,483
(6,850)
(1,475,463)
(1,246,124)
(156,866)
219,528
82,857
(309,897)
Cash used in operations
(1,412,801)
(1,473,164)
17
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 Company holds investments at fair value through other comprehensive income. Investments in listed shares
are a level 1 valuation. Investments in unlisted shares are a level 3 valuation as the quoted price is not available.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC
67
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2020
17
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 2020
Investments: FVOCI
At 31 December 2019
Investments: FVOCI
Financial assets measured at amortised cost
At 31 December 2020
Current
Within
1 Year
Within
1 to 2 years
£
137,098
120,288
£
Total
Loan receivables
Trade receivables
Cash and cash equivalents
Total carrying value
At 31 December 2019
Trade receivables
Cash and cash equivalents
Total carrying value
–
95,293
7,269,014
7,364,307
6,408
6,626,322
6,632,730
8,993
–
–
8,993
–
–
–
1,001,623
–
–
1,010,616
95,293
7,269,014
1,001,632
8,374,923
–
–
–
6,408
6,626,322
6,632,730
All of the above financial assets’ carrying values approximate to their fair values at 31 December 2020
and 31 December 2019 given their nature and short times to maturity.
Financial liabilities measured at amortised cost
At 31 December 2020
Trade payables
Other payables
Accruals
Total carrying value
At 31 December 2019
Trade payables
Accruals
Total carrying value
All of the above financial liabilities’ carrying values approximate to their fair values at 31 December 2020
and 31 December 2019 given their nature and short times to maturity.
£
190,926
2,180,000
76,801
2,447,727
144,394
86,890
231,284
FINANCIAL STATEMENTSwww.unionjackoil.com
68
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2020
18
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
Included within the Company’s receivables is a non-current loan with a maturity date of May 2022. The loan has not been
subject to an increase in credit risk since initial recognition, and therefore under IFRS 9 the 12 month expected credit losses
have been considered. This assessment resulted in no credit losses being recognised after taking into consideration the
credit risk associated with the loan, and the collateral in place under the agreement.
The Company’s credit risk is otherwise largely attributable to its cash balances and such risk is limited because the third
party is an international bank of which the latest Standard & Poors rating is BBB.
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 £8,616,702 (2019: £6,632,730).
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 2020
and 31 December 2019 on the basis of their earliest possible contractual maturity.
At 31 December 2020
Trade payables
Other payables
Accruals
At 31 December 2019
Trade payables
Accruals
Oil price risk
Total
£
Within
2 months
£
Within Greater than
6 months
£
2-6 months
£
190,926
2,180,000
76,801
190,926
100,000
40,601
–
2,080,000
36,200
2,447,727
331,527
2,116,200
144,394
86,890
144,394
50,690
–
36,200
231,284
195,084
36,200
–
–
–
–
–
–
–
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.
Capital management
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.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC
69
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2020
19
FINANCIAL COMMITMENTS
The Company had no financial commitments as at 31 December 2020 or 31 December 2019, other than those recognised
in the Balance Sheet and where Authority for Expenditure has been agreed with the Operator.
20
TRADE AND OTHER PAYABLES
Trade payables
Other payables
Accruals
31.12.20
£
31.12.19
£
190,926
2,180,000
76,801
144,394
–
86,890
2,447,727
231,284
Other payables include £2,080,000 to be paid to Calmar LP on commercial production from the Wressle discovery, and
£100,000 payable to Egdon Resources plc to acquire a further 30% interest in PEDL241 containing the North Kelsey prospect.
21
PROVISIONS
As at 1 January 2019
Adjustment to provision estimates
Accretion of provision
At 31 December 2019
Adjustment to provision estimates
Accretion of provision
At 31 December 2020
Decommissioning
and reinstatement
provision
£
453,165
160,134
7,387
620,686
171,178
11,908
803,772
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 2021 and 2041.
Provisions created during the year, based on information provided by the Operators, relate to obligations in respect of
Keddington, Fiskerton Airfield, Dukes Wood, Kirklington, Wressle and West Newton assets. No provisions have been
utilised during the year.
FINANCIAL STATEMENTSwww.unionjackoil.com
70
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2020
22
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 £120,000 (2019: £92,800)
in respect of consulting fees. £12,000 was outstanding at the year end (2019: £nil).
Jayne Bramhill, spouse of David Bramhill, received the sum of £12,000 (2019: £9,000) from the Company in respect
of IT maintenance and administration costs. No amounts were outstanding at the year end (2019: £nil).
Raymond Godson, non-executive director is also a director of Montrose Industries Limited whom hold an interest
in PEDL253 containing the Biscathorpe Prospect. Raymond Godson takes no part in any decision making in respect
of PEDL253 and is excluded from any board meetings relating to PEDL253 financial matters. A transaction between
Montrose Industries Limited and Union Jack took place in June 2020 in respect of a 3% acquisition on PED253.
23
EVENTS AFTER THE BALANCE SHEET DATE
The following events have taken place after the year end:
In January 2021, the Company acquired a further 15% economic interest in PEDL253 containing the Biscathorpe Prospect
from Humber Oil & Gas Limited for a cash consideration of £500,000. In addition, a contingent cash payment of £500,000
will be made to Humber Oil & Gas Limited following receipt of planning consents from Lincolnshire County Council for
drilling the Biscathorpe-2Z side-track, testing and subsequent production in the event of drilling success. The Company,
following this transaction, now holds a 45% interest in PEDL253.
In February 2021, the Company concluded a transaction to acquire a further 30% interest in PEDL241 containing the North
Kelsey Prospect with Egdon Resources U.K. Limited. The cash consideration was £100,000 and all previous arrangements
in respect of the previous farm-in for a 10% interest from Egdon Resources U.K. Limited during March 2013, were nullified.
Following this transaction the Company and Egdon hold a 50% interest each in the licence.
In February 2021, the Company announced that following re-perforation of the Wressle-1 conventional oil well,
communication was made with the Ashover Grit reservoir interval and free-flow of good quality oil had commenced.
The well has been placed on continuous test production and is awaiting a proppant squeeze.
During March 2021, the Company consolidated its ordinary shares on a 200 for one basis and the new issued share capital
is now 99,079,532, each with a nominal value, post-consolidation of 5 pence.
The reasoning behind this decision was that the Board believed that the Company was in an excellent financial and
operating position given the significant progress made in recent years on its three key projects at West Newton, Wressle
and Biscathorpe and that it was an appropriate time to implement the share consolidation.
In order for the issued share capital to be exactly divisible by 200, new ordinary shares totalling 75 were issued to the
Executive Chairman, David Bramhill.
At the same time the Articles of Association were amended to allow the Company to hold in future physical, virtual
or hybrid general meetings, as appropriate.
During March 2021, the Company acquired a 2.5% cash generating royalty in the offshore Claymore, Piper and Scapa
oilfields from Cambridge Petroleum Royalties Limited for a cash consideration of £93,730 (US$130,000).
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC 71
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Notice of Annual General Meeting
COVID-19 AGM ARRANGEMENTS
1 The Company’s AGM is currently scheduled to be held on
Thursday 24 June 2021 at The Sheridan Room, The Royal
Crescent Hotel, 16 Royal Crescent, Bath BA1 2LS at 11.00am.
2 As a result of the ongoing COVID-19 pandemic, the Board has
adopted a number of changes to the traditional running of the
Annual General Meeting. The AGM would normally provide an
opportunity for Shareholders to meet with the Directors, for
the Directors to provide an update on the Company’s business
and to answer questions from Shareholders. We would normally
therefore encourage Shareholders to attend the AGM in person.
However, in accordance with “2021 general meetings and the
impact of Covid-19 guidance”, published by the Chartered
Governance Institute on 24 February 2021, the special
arrangements described within this text will be followed for the
holding of the AGM this year, unless the Company subsequently
notifies you otherwise via its website.
The Company wishes to advise that in order to limit the risk
of infection and to protect the health and safety of shareholders
and employees, shareholders are strongly recommended not to
attend the AGM.
3 Engagement in the AGM process is welcomed. The Board
has proposed that a remote pre-AGM question and answer
event is made available. Please email your questions to
info@unionjackoil.com. All appropriate questions will be
answered before the time of the AGM via our Company
website.
4 The Company encourages shareholders to appoint the
Chairman as their proxy with their voting instructions. Forms
of Proxy must be received by no later than 48 hours before
the commencement of the meeting.
5 The Company will continue to monitor the pandemic and
if Government advice dictates that further changes to the
arrangements for the AGM are necessary, details will be
published on the website and via a Regulatory Information
Service.
Notice is hereby given that the Annual General Meeting
(the “AGM”) of Union Jack Oil plc (the “Company”) will
be held at The Sheridan Room, The Royal Crescent Hotel,
16 Royal Crescent, Bath BA1 2LS on 24 June 2021 at 11.00
a.m. to consider and, if thought fit, pass the following
resolutions, of which resolutions numbered 1 to 5 will be
proposed as ordinary resolutions and resolution number
6 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 2020, 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 Joseph O’Farrell as a director, who retires by
rotation in accordance with the Company’s Articles of
Association.
3 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.
4 Auditor’s remuneration
To authorise the directors to determine the remuneration
of the auditor.
5 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
£2,476,988.30 (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
6 Directors’ power to issue shares for cash
That, conditional upon the passing of resolution number
5, 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
5 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 £2,476,988.30 (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: 17 May 2020
Registered Office:
6 Charlotte Street,
Bath BA1 2NE
www.unionjackoil.com
72
Notice of Annual General Meeting
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
22 June 2021 (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 Since the outbreak of Coronavirus (COVID-19) in early 2020,
the priority of the Company has been on the health and safety
of its employees and technical staff. Like many organisations, plans
have been implemented and active measures have been taken
to mitigate risk, such as no one-to-one contact and numerous
telephone meetings. The Company would like to draw attention
to the COVID-19 AGM arrangements shown on page 71.
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. The
Chairman as proxy is encouraged and that shareholders will not be
encouraged to attend the AGM and vote in person. 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 22 June 2021. A proxy form which may be used to make such
appointment and give proxy instructions accompanies this notice.
If you do not have a proxy form and believe that you should
have one, or if you require additional forms, please contact
Computershare Investor Services PLC on 0370 702 0000.
5 CREST members who wish to appoint a proxy or proxies through
the CREST electronic proxy appointment service may do so for
the AGM and any adjournment by using the procedures described
in the CREST manual (euroclear.com/crest). CREST personal
members or other CREST-sponsored members and those CREST
members who have appointed a voting service provider should refer
to their CREST sponsor or voting service provider, who will be able
to take the appropriate action on their behalf. In order for a proxy
appointment or instruction made using the CREST service to be
valid, the appropriate CREST message (a CREST proxy instruction)
must be properly authenticated in accordance with Euroclear’s
specifications and must contain the information required for such
instructions, as described in the CREST manual. All messages relating
to the appointment of a proxy or an instruction to a previously
appointed proxy must be transmitted so as to be received by
Computershare (ID: 3RA50) by 11.00 a.m. on Tuesday 22 June 2021.
It is the responsibility of the CREST member concerned to take such
action as shall be necessary to ensure that a message is transmitted
by means of the CREST system by any particular time. In this
connection, CREST members and, where applicable, their CREST
sponsors or voting service providers, are referred, in particular, to
those sections of the CREST manual concerning practical limitations
of the CREST system and timings. The Company may treat a CREST
proxy instruction as invalid in the circumstances set out in Regulation
35(5)(a) of the Uncertificated Securities Regulations 2001.
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 5 and 6) 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.
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.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020UNION JACK OIL PLC 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