PRODUCTION, DRILLING, DEVELOPMENT
AND INVESTMENT IN THE UNITED KINGDOM
HYDROCARBON SECTOR
2021
UNION JACK OIL plc
ANNUAL REPORT AND
FINANCIAL STATEMENTS
Directors, Officers and Advisers
DIRECTORS
David Bramhill
Executive Chairman
Joseph O’Farrell
Executive
Graham Bull
Non-Executive
Raymond Godson
Non-Executive
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
BANKERS
Matthew Small
6 Charlotte Street,
Bath BA1 2NE,
England
REGISTRARS
Royal Bank of Scotland plc
8-9 Quiet Street,
Bath BA1 2JN,
England
NOMINATED ADVISER
AND BROKER
Computershare Investor Services PLC
The Pavilions,
Bridgwater Road,
Bristol BS13 8AE,
England
SP Angel Corporate Finance LLP
Prince Frederick House,
35-39 Maddox Street,
London W1S 2PP,
England
AUDITOR
BDO LLP
55 Baker Street,
London W1U 7EU,
England
SOLICITORS
Osborne Clarke
2 Temple Back East,
Temple Quay,
Bristol BS1 6EG,
England
Union Jack Oil plc is 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.
“Fully funded for all G&A,
OPEX and CAPEX costs
for the foreseeable future”
Contents
BUSINESS AND STRATEGY
FINANCIAL STATEMENTS
Chairman’s Statement
Strategic Report
Licence Interests
GOVERNANCE
Directors’ Report
Corporate Governance Report
Independent Auditor’s Report
on the Financial Statements
2
10
18
20
23
36
Income Statement
Statement of
Comprehensive Income
Balance Sheet
Statement of Changes in Equity
Statement of Cash Flows
Principal Accounting Policies
Notes to the Financial Statements
ANNUAL GENERAL MEETING
Notice of Annual General Meeting
41
42
43
44
45
46
54
73
1
Business and Strategywww.unionjackoil.com
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 2021.
After several years of consistent determination and
promising results, Union Jack is now witnessing a sea
change in its business and prospects, where production
from Wressle has materially transformed the financial
position of our Company.
Cash balances remain at a high level and, with expected
substantial future revenues, the Company is currently
funded for all G&A, OPEX and contracted or planned
CAPEX costs, including any budgeted drilling activities
for at least the next 12 months.
Union Jack’s focused strategy has been vindicated and,
coupled with the Board’s consistent objective to build
a sustainable UK onshore production and development
hydrocarbon company, is now well within our field of vision.
Our belief is that the upside opportunities at the Wressle
project make it an exceptional conventional development
where revenue potential is expected to help fund the
growth of Union Jack over the next decade and beyond.
During April 2022, we announced that landmark
production of net total revenues from Wressle had
reached US$5,000,000 following the successful proppant
squeeze and coiled tubing operations completed in late
August 2021.
At West Newton, our other flagship project, following
independent laboratories’ reviews and investigation
of extensive data by technical consultants, we are
greatly encouraged and look forward positively to the
commencement of further drilling operations in due course.
Our view remains buoyant on the prospect of being able
to deliver a successful development at West Newton.
Substantial progress was made during 2021 and has
continued into 2022. This progress, coupled with a robust
oil price and Wressle oil production, have generated
considerable revenues and, given the Board’s expectation
of ongoing future material cashflows, we believe it is now
appropriate to initiate plans for a Capital Reduction to allow
for the payment of a dividend or to implement a share-buy-
back programme to reward our shareholders.
Further information can be found on our informative
website www.unionjackoil.com, launched during 2021,
presenting a professional information package on our
projects, designed to inform shareholders and attract
new investors to the Company.
In addition, Union Jack hosts an active twitter account
(@unionjackoilplc).
2
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Chairman’s Statement
OPERATIONAL HIGHLIGHTS
• Successful proppant squeeze and coiled tubing
exercise at Wressle resulted in an instantaneous
flow rate of over 1,000 barrels of high-quality
oil per day ("bopd") being achieved with zero
water cut
• Wressle-1 pressure test analysis by ERCE
indicates potential flow rates of between
1,200 to 1,500 bopd are achievable
• Wressle Revised Field Development Plan
submitted to the North Sea Transition Authority
("NSTA") for approval
• Results from West Newton EWT confirm
substantial hydrocarbon discoveries within the
Kirkham Abbey formation
• Independent RPS Group (“RPS”) review predicts
initial average production rates of up to 35.6
million cubic feet of gas and 1,000 bopd from
a horizontally drilled well at West Newton
• Planning granted at West Newton for both A
and B site works and three year permit extension
• Completion of purchase of a further 15% interest
in PEDL253 containing the Biscathorpe Prospect,
bringing Union Jack’s interest to 45%
• Carbon Intensity Study on Biscathorpe Project
rated AA by Gaffney Cline
• Purchase of a 2.5% royalty interest in the North
Sea Claymore, Piper and Scapa oilfields
• Appeal against planning refusal at Biscathorpe
submitted to Planning Inspectorate
WRESSLE DEVELOPMENT PEDL180
AND PEDL182 (40%)
Wressle has quickly exceeded our pre-production
expectations of 500 bopd and continues to
outperform since the resumption of production
following the successful proppant-squeeze and
coiled-tubing operation during August 2021.
Instantaneous rates of over 1,000 bopd have been
achieved. Early restrictions on production rates
are being successfully addressed through ongoing
modifications to the site facilities, including installation
of a secondary separator and progressive upgrades
to the gas incineration system which have culminated
in the installation of a larger capacity enclosed ground
incineration unit.
FINANCIAL HIGHLIGHTS
• Oil revenues increased by over 1,000% during
2021
• Maiden gross profit on oil sales achieved
• Cash balances and near-term receivables of
£7,545,575 as at 9 May 2022
• The Company is currently funded for all
operational and contracted or planned CAPEX
costs, including any budgeted drilling activities
for at least the next 12 months
• Debt free
• Early settlement payment made to Calmar
LP in respect of deferred consideration on
acquisition of 25% interests in PEDL180 and
PEDL182, containing the Wressle development
• Company solicitors progressing legal work
on Capital Reduction to enable the Company
to execute a share-buy-back programme or
dividend payment. Appropriate resolutions
relating to this are included in the Notice of
Annual General Meeting for shareholders
to consider
Further work is planned in the near-future which is
designed to improve the site facilities, that will allow
an increase in production rates in due course.
Production from Wressle is currently averaging
over 300 bopd from the Ashover Grit reservoir
net to Union Jack based on our 40% interest.
Since production commenced at Wressle-1 in early
2021, the cumulative production of high-quality oil is
in-excess of 150,000 barrels with no formation water
produced to date.
3
Business and Strategywww.unionjackoil.com 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”
Gross and Net Volumes of Wressle Hydrocarbons Attributable to Union Jack
Gross Volumes
Net Volumes Attributable to Union Jack's 40% interest
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
When the planned gas monetisation project is complete,
it is expected that the overall oil and gas production rate
will be able to increase significantly. Pressure test analyses
conducted by ERCE, an independent petroleum consultant,
indicated potential flow rates for Wressle-1 of between
1,200-1,500 bopd.
The likely preferred gas monetisation approach is to
export the gas via a short pipeline of approximately 600
metres into the local gas distribution network. This will
require normal planning and Environmental Agency (“EA”)
regulatory consents and is likely to be completed in time
for winter demand. This export route will also be available
in the longer term for the development of the Penistone
Flags reservoir where detailed work is underway to develop
the material Contingent Resources of 1.86 million barrels
of oil equivalent (“boe”) gross.
During April 2022, the Operator submitted a revised Field
Development Plan (“FDP”) to the NSTA for approval.
The FDP, if and when approved by the NSTA, would be
a significant milestone for Union Jack.
During the remainder of 2022, and assuming receipt of
all regulatory approvals, ongoing major development works
at Wressle will include:
• Completion of the installation of the permanent
production facilities
•
Implementation of the gas to grid development to
monetise the gas and provide optimum oil production
• Advancement of the development plan and consenting
process to enable production from the Penistone Flags
reservoirs
Environmental monitoring throughout the Wressle
operation has shown no measurable impact on surface or
groundwater quality, no related seismicity and that noise
has been within the permitted levels.
4
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC
Chairman’s Statement
Union Jack has independently commissioned Gaffney
Cline, an international energy consultancy, to deliver an
updated Reserves and Resources Report prepared in
accordance with the Petroleum Resources Management
System (“PRMS”), a standard developed by the Society
of Petroleum Engineers.
intervals. Recoveries confirmed the presence of
good quality gas with indicated methane content of
approximately 90%, ethane of approximately 4.5% and
heavier end gases present in lesser concentrations.
Following operations at WNB-1Z, equipment was
mobilized to WNA-2 to resume well testing.
The Gaffney Cline report will:
•
Incorporate 1P/2P/3P reserve volumes for the
Ashover Grit and Wingfield Flags reservoirs
• Highlight and discuss any additional potential
reservoirs
• Generate an indicative 2C production profile
for the Penistone Flags reservoir
• Prepare a 2P+2C production profile that will
illustrate future field potential
The Board has increasing confidence that the Gaffney
Cline Report, which will be published in due course, will
highlight the material upside potential of this economically
attractive conventional hydrocarbon development.
WEST NEWTON APPRAISAL
PEDL183 (16.665%)
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.
Union Jack entered into a farm-in during 2018 with
Rathlin Energy (UK) Limited (“Rathlin”) the Operator, and
since that time the West Newton A-2 (“WNA-2”) and
West Newton B -1Z (“WNB-1Z”) drilling programmes
have yielded substantial hydrocarbon discoveries.
Throughout 2021, the focus was on operations and data
acquisition from the West Newton A and West Newton
B well sites and advancing a forward plan for the West
Newton A development.
After extensive planning in early 2021, completion and
testing operations were initiated on the WNB-1Z well.
WNB-1Z was drilled in late 2020 and reached a total
depth of 2,114 metres. Test operations commenced
in May 2021 and focused on the Kirkham Abbey
Formation and, completing and testing the lower
section, before moving onto the upper section. A
total of 44 metres was perforated in the target zone.
During testing operations, both liquid hydrocarbons
and gas were recovered to the surface from the two
The WNA-2 well was drilled and cased to a total depth
of 2,061 metres during the spring of 2019 and initial
completion operations were undertaken during the
summer of 2019. The original testing programme was
suspended when both oil and gas were encountered in
the target formation, as opposed to the predominant gas
saturation anticipated in the original testing programme.
The operations were suspended to allow the redesign
of the test programme to efficiently and safely evaluate
the potential oil column. Following approval, testing
operations commenced in September 2021. During
these operations, both gas and liquid hydrocarbons were
recovered to surface. The gas samples were similar to
those recovered from other wells, including WNB-1Z
and WNA-1, and are consistent with the initial tests
performed at WNA-2.
Following the completion of the West Newton EWT,
the Operator commissioned RPS, a highly regarded
independent consultant to produce a review that assessed
well productivity potential from the West Newton
project and the investigation of optimised drilling and
well completion methodologies.
The RPS review concluded that the Kirkham Abbey
reservoir could deliver substantially higher production
rates from horizontal wells as compared to vertical wells.
The review also concluded that, based on RPS modelling,
most of the acid stimulation carried out during the EWT
interacted with only a small section of the perforated
intervals due to the permeability contrast across the
Kirkham Abbey formation.
The highlights of the RPS review are as follows:
• Predicted initial average production rates of up to
35.6 million cubic feet of gas per day (5,900 barrels
of oil equivalent per day) from a horizontally drilled
well situated within the gas zone, based on the data
from the WNA-2 well
•
Indication of initial average potential production
rates of up to 1,000 barrels of oil per day from
a horizontally drilled well situated in the oil zone
based on data from the WNA-2 well
5
Business and Strategywww.unionjackoil.com Chairman’s Statement
Fluid analysis performed by Applied Petroleum Technology
(UK) Limited (“APT”) confirms that hydrocarbon liquids
recovered to surface are low specific gravity, low viscosity,
light oil or condensate with an API gravity ranging from
45.9 to 49 degrees and that gas recovered to surface is
good quality with a high thermal value.
During the 2021 completion operations at WNB-1Z and
WNA-2, a significant amount of reservoir data including
fluid and gas samples, pressure data, and flow data was
acquired. Following an extensive investigative programme
conducted on both sides of the Atlantic by industry leading
geological and geochemical consultancies, this information
is being utilised to determine optimum drilling, completion
and development designs for the Kirkham Abbey reservoir.
This information gathering exercise will also help determine
the next steps in the future development and exploration
programmes.
Analysis and re-evaluation of well data and seismic
information continues to support our belief that the West
Newton project represents a significant resource of high-
quality light oil and natural gas, and that the West Newton
area has the potential to be a significant hydrocarbon
producer.
In preparation for a decision on a potential development
of the West Newton discoveries, the Operator submitted
a revised planning application for the development of
the West Newton A site to the East Riding of Yorkshire
Council (“ERYC”). This was approved by the ERYC Planning
Committee by a vote of ten to one during March 2022.
The development plan that was approved includes the
drilling, completion, and associated production from an
additional four wells from the current surface location, plus
an extension of the permit period at the West Newton B
site for an additional three years.
KEDDINGTON PEDL005(R) (55%) AND
FISKERTON AIRFIELD EXL294 (20%)
The producing Keddington oilfield is located along the highly
prospective East Barkwith Ridge, an east-west structural
high on the southern margin of the Humber Basin.
A subsurface review conducted by the Operator has
highlighted a viable target to the east of the field, with
up to 180,000 barrels of incremental oil production.
With planning consent already in place, Keddington
presents an opportunity to increase oil production via a
relatively inexpensive development side-track from one
of the existing wells. In addition, near-field exploration
targets exist at Keddington South and Louth, with Mean
Prospective Resources of 635,000 and 600,000 barrels
of oil in place respectively.
Fiskerton Airfield oilfield has continued production during
the period. Focus remains on maximising production from
existing wells and cost management.
6
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Chairman’s Statement
BISCATHORPE PEDL253 (45%) AND
NORTH KELSEY PEDL241 (50%)
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.
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 of the well, 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 commissioned by the Joint
Venture participants and carried out by APT. The results of
this analysis confirm a hydrocarbon column of 33-34 API
gravity oil in the Dinantian Carbonate and a proven live
oil column, comparable with that produced at the nearby
Keddington oilfield.
Following the results of the APT exercise, a probabilistic
assessment of the Dinantian oil volumes was modelled with
volumetric assumptions as being “filled to spill” with resulting
gross Mean Stock Tank Oil in Place (“STOIIP”) calculated to
be 24.3 mmbo with an upside case of 36 mmbo.
In addition to the Dinantian, there remains the original
target within the Westphalian where evidence for a
thickened sandstone reservoir exists.
The Operator has estimated, in accordance with the PRMS
Standard, that the gross Mean Prospective Resources within
the Westphalian are 3.95 mmbo, with an upside case of
6.69 mmbo. Economic modelling demonstrates that the
Westphalian target is economically robust, especially in
the current oil price environment.
Union Jack’s technical team believe that Biscathorpe remains
one of the largest unappraised onshore discoveries within
the UK.
During November 2021, a planning application for a side-
track drilling operation, associated testing and long-term
production at the Biscathorpe site was refused by the
Lincolnshire County Council Planning Committee.
The decision on a future development at Biscathorpe will
now be decided by the Planning Inspectorate, to whom
appeal documentation was submitted in April 2022.
North Kelsey is a conventional oil exploration prospect
on trend with, and analogous to the Wressle 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 Upper
Carboniferous targets. The Operator estimates that gross
Prospective Resources range from 4.46 to 8.47 mmbo,
with a Mean Resource of 6.47 mmbo.
An application to extend the existing planning consent to
drill the North Kelsey-1 well was refused by the Lincolnshire
County Council Planning Committee in March 2022. An
appeal is expected to be made in the near-future against
this decision.
OTHER LICENCE INTERESTS
Union Jack has interests in a number of other non-core
projects, namely PEDL118 (Dukes Wood), PEDL203
(Kirklington), PEDL201 (Widmerpool Gulf ), PEDL181
(Humber Basin) and PEDL209 (Laughton).
These licence interests have all been fully impaired and are
at various stages of relinquishment with the exception of
Dukes Wood and Kirklington where the geothermal upside
potential is being investigated.
7
Business and Strategywww.unionjackoil.com Chairman’s Statement
NORTH SEA ROYALTIES
CORPORATE AND FINANCIAL
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 for a consideration of £93,610, including working
capital adjustments.
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.
Included within this transaction is the right to receive
income from the Claymore/Piper Complex for the rest of
its operating life, estimated independently to be at least the
next 15 years, at no additional capital or operating cost to
Union Jack.
Management viewed this initial purchase as an attractive,
cash generating and high yielding investment, consistent
with Union Jack’s wider strategy and objective to explore
alternative financial instruments to generate revenues,
whilst remaining within the UK hydrocarbon sector.
This transaction has generated an accrued income of
more than £170,000 to date. These monies are being held
in escrow by the Operator, Repsol Sinopac until a Royalty
Manager is appointed.
The significant revenues received from Wressle have
already transformed the financial well-being of the
Company and significantly strengthened its balance sheet.
During March 2021, the Company consolidated its ordinary
shares on a 200 for one basis and the new issued share
capital was 99,079,532, each with a nominal value, post-
consolidation of 5 pence.
During September 2021, £3,000,000 was raised before
expenses, further bolstering our cash reserves, ensuring
that Union Jack continued to retain its “going concern”
status in its accounts.
The Company remains debt free and had cash balances
and short-term receivables at 9 May 2022, of £7,545,575.
The Company is currently funded for all operational and all
contracted or planned CAPEX costs, including any budgeted
drilling activities for at least the next 12 months.
Revenues from oil sales of £1,894,875 reported in 2021,
compared to £158,004 during 2020, have had a dramatic
effect on our Income Statement, resulting in the Company
reporting a gross profit for the first time.
Net revenues of £2,877,081 registered to date during 2022
already comfortably exceed the revenues for 2021.
During the period the Company has been in direct
discussions with Repsol Sinopac and the other royalty
holders with a view to advancing the potential acquisition
of further royalty interests and accelerating the payment
of the amounts already generated.
Subsequent to the year end, in March 2022 early settlement
of £2,083,333 was made to Calmar LP in respect of the
prudent deferred consideration on acquisition of 25%
interests in PEDL180 and PEDL182 containing the Wressle
development.
During 2021, the Company agreed to a share swap in the
shares of its holding in Elephant Oil Limited, a UK registered
unquoted company in exchange for shares in a new entity,
Elephant Oil Corp., registered in Nevada, in the United
States of America. Elephant Oil Corp. has applied for its
shares to be traded on NASDAQ in the near-future.
8
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Chairman’s Statement
Post year end, and given the current stage of the
Company’s development and its improved cash position,
a decision was made by the Board to undertake a Capital
Reduction exercise to allow the payment of a cash dividend
to shareholders or enable a share-buy-back programme.
Appropriate resolutions are included in the Notice of
Annual General Meeting for shareholders to consider.
I would like to take this opportunity to thank our
shareholders for their continued support, as well
as my colleagues, co-directors and advisers who all
provide invaluable advice and continue to champion the
development of the UK onshore hydrocarbon industry
for the benefit of Union Jack, its shareholders and the
wider economy.
NET ZERO CARBON POLICY
The UK is committed by law to reach Net Zero carbon
emissions by 2050. Union Jack, by its own policy and
strategy, are not the operator of any of its projects or
assets. Therefore, the Company will only work with
operators who have a firm commitment to safety,
environmental and social responsibility in all aspects
of their operations.
Regardless of the fact that the Company has chosen not
to be an operator, we are subject to the same scrutiny as
any other hydrocarbon producer.
We remain pro-active in the quest for Net Zero and to
demonstrate this Union Jack commissioned Gaffney Cline,
an international energy consultancy to conduct Carbon
Intensity studies on Biscathorpe (PEDL253) and West
Newton (PEDL183), two of our core projects. The results
of these studies were highly encouraging with Gaffney Cline
concluding that both sites achieved an AA rating for Carbon
Intensity.
Union Jack’s focus is to minimise emissions and the
carbon footprint generated by its hydrocarbon interests
in the most efficient way possible, whilst continuing to
contribute positively to the growing demand for energy
and hydrocarbon products in the supply chain.
As the demand for energy increases post COVID-19 and
the global economy recovers, hydrocarbons will continue to
play an important part in ensuring the energy security of the
UK. Union Jack’s development interests are located close to
areas with a high demand for energy and as a consequence,
the Company believes that locally produced hydrocarbons
provide the benefit of displacing, to some extent, imported
hydrocarbons.
Union Jack supports the operators’ strategies that mitigate
the effects of climate change and will continue to align itself
with the best standards of Carbon Management Practice
wherever possible.
OUTLOOK
My confidence in Union Jack’s future remains highly positive.
During 2021 and to date, the Company has advanced a
number of its key projects, especially at Wressle which,
as stated earlier, have been transformational financially
with substantial revenues and indications that the Wressle
journey has only just commenced.
The latest results at West Newton are highly encouraging
regarding the prospects of the significant hydrocarbon
discoveries made to date and their development potential,
following an extensive testing and investigative programme
conducted on both sides of the Atlantic by industry leading
geological and geochemical consultancies.
I remain confident that future news arising from our well-
balanced portfolio containing relevant components of
production, development, appraisal and exploration will
continue to vindicate the Board’s unflinching optimism
in respect of our Company’s focused strategy.
In closing, I believe our Company is in sound financial health
with a robust balance sheet. Union Jack continues to be
debt free, with significant cash reserves and substantial
future revenues expected.
The Company is currently funded for all G&A, OPEX, and
contracted or planned CAPEX costs, including any budgeted
drilling activities, for at least the next 12 months.
The future of Union Jack remains bright.
David Bramhill
Executive Chairman
16 May 2022
9
Business and Strategywww.unionjackoil.com STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2021
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 2021 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 £853,013 (2020:
£1,865,515).
The loss for the year includes impairments to Property,
Plant and Equipment of which total costs are £156,995
(2020: £106,714). These impairments are in relation
to PEDL118, £67,598 (2020: £59,627) and PEDL203,
£83,057 (2020: £47,087).
The loss for the year includes impairments to Intangible
Assets of which total costs are £6,340 (2020: nil). These
impairments are in relation to PEDL181, £4,204 and
PEDL201, £2,136.
Administrative expenses amounted to £1,740,962
(2020: £1,590,576). The increase in this cost was due
to additional technical work in respect of Wressle, West
Newton, Biscathorpe, and Keddington, undertaken by
the Company’s external consultants.
Cash and cash equivalents at year end amounted to
£5,977,541 (2020: £7,269,014).
Total assets at year end amounted to £24,472,708
(2020: £21,340,804).
Non-current assets at year end amounted to £16,392,416
(2020: £13,725,734).
Intangible Assets totalled £8,525,373 (2020: £6,134,717).
Expenditure included £500,000 for a further 15% interest
in Biscathorpe and completion and testing operations at
West Newton.
Tangible assets totalled £7,575,525 (2020: £6,452,287).
Expenditure included the proppant squeeze and site
enhancement at Wressle.
The Company’s Income Statement reports revenues
of £1,894,875 (2020: £158,004) in respect of production
income from Wressle, Keddington oilfield and the Fiskerton
Airfield oilfield.
The directors do not recommend the payment of a dividend
(2020: £nil).
In September 2021, 13,636,364 new ordinary shares were
issued for cash at a price of 22 pence per ordinary share,
raising £3,000,000 before expenses of £312,484 by way
of a placing and subscription.
The enlarged issued share capital following the issue of
the new ordinary shares described above is 112,715,896
ordinary shares of 5 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 indicators 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.
10
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Strategic Report
FOR THE YEAR ENDED 31 DECEMBER 2021
KEY PERFORMANCE INDICATORS
The Company has made good progress during the year
ended 31 December 2021. In respect of 2021 traditional
KPIs are not deemed appropriate to the Company.
Performance is measured by monitoring exploration costs
and ensuring sufficient funds are available to meet project
commitments. The 2022 Financial Statements will show
a full year’s production from Wressle and focus will be
changed to traditional KPIs and not E&E expenditure.
The directors were successful in raising funds to ensure
the Company is adequately funded to meet all of its
current commitments.
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 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, subsequent to the proppant squeeze, Wressle is now
producing between 760 – 800 bopd.
During March 2021, the Company acquired a 2.5% cash
generating royalty in the Central North Sea Claymore, Piper
and Scapa oilfields from Cambridge Petroleum Royalties
Limited for a cash consideration of £93,610 (US$130,000).
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.
Further events which took place after the Balance Sheet
date are described in the Directors’ Report and note 24.
11
Business and Strategywww.unionjackoil.com Strategic Report
FOR THE YEAR ENDED 31 DECEMBER 2021
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 white 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.
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.
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:
Likely consequence
of any decision in
the long term
Foster business
relationships
with suppliers,
customers and others
Maintain a
reputation for
high standards of
business conduct
Impact of
operations on
the community
and the environment
12
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Strategic Report
FOR THE YEAR ENDED 31 DECEMBER 2021
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 North Sea Transition 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.
13
Business and Strategywww.unionjackoil.com Strategic Report
FOR THE YEAR ENDED 31 DECEMBER 2021
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
• 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 skill sets,
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
14
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Strategic Report
FOR THE YEAR ENDED 31 DECEMBER 2021
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.
15
Business and Strategywww.unionjackoil.com Strategic Report
FOR THE YEAR ENDED 31 DECEMBER 2021
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 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.
Union Jack has considered the potential effects of
the Russian and Ukrainian conflict on its business
and have concluded that there will not be any
near-term negative impact to the Company.
16
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Strategic Report
FOR THE YEAR ENDED 31 DECEMBER 2021
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.
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
16 May 2022
17
Business and Strategywww.unionjackoil.com UNION JACK’S CURRENT
LICENCE INTERESTS
PEDL183 West Newton
16.665%
PEDL180
PEDL182
Wressle Discovery
Broughton North
3
PEDL253
Biscathorpe
4
PEDL005(R)
Keddington Oilfield
Louth
North Somercotes
EXL294
Fiskerton Oilfield
PEDL241 North Kelsey
PEDL118 Dukes Wood
PEDL203
Kirklington
1
2
5
6
7
8
9
PEDL201 Widmerpool Gulf
26.25%
PEDL181 Humber Basin
40%
45%
55%
20%
50%
16.67%
12.5%
10%
10 PEDL209
Laughton
18
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC PEDL183
West Newton
PEDL146
PEDL183
WEST NEWTON A-1
NORTH SEA
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
19
PEDL021
GOODWORTH
PL116
HUMBLY GROVE
PL233
PL249
STOCKBRIDGE
PEDL070
AVINGTON
DL004
ALBURY
BROCKHAM
PL235
PALMERS WOOD
ML021
PEDL246
BLETCHINGLEY
ML018
PL182
EXL189
EXL189
PEDL137
PEDL143
PEDL246
PEDL235
PEDL243
PEDL231
PEDL234
PEDL244
PL240
HORNDEAN
PL211
PEDL126
PEDL233
SINGLETON
PL205
STORRINGTON
PL241
LIDSEY
Business and Strategywww.unionjackoil.com
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 DECEMBER 2021
The directors present their report together with the
financial statements for the year ended 31 December 2021.
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 2021
and 31 December 2021, were as shown in the table below:
ORDINARY SHARES
31 December
2021
1 January
2021
416,646
1,897,914
242,058
20,000
416,646
1,686,914
242,058
20,000
D Bramhill
J O’Farrell
R Godson
G Bull
In September 2021, Joseph O’Farrell purchased 211,000
new ordinary shares at a price of 23.62 pence each.
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 2021 was as follows:
D Bramhill
J O’Farrell
R Godson
G Bull
D Bramhill
J O’Farrell
R Godson
G Bull
SALARIES AND FEES
2020
£
2021
£
287,083
120,000
40,000
40,000
215,000
85,000
37,500
37,000
OPTIONS
2021
1,200,000
700,000
300,000
550,000
2020
1,200,000
700,000
300,000
550,000
Directors’ remuneration is disclosed in note 3 of these
financial statements.
No options were granted to directors or officers during
2021.
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.
20
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC
Directors’ Report
FOR THE YEAR ENDED 31 DECEMBER 2021
DIRECTORS’ RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2021
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 UK adopted international
accounting 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 UK adopted international accounting standards 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 23 June 2022, in accordance with the Notice of Annual
General Meeting on page 73. Details of the resolutions to
be passed are included in this notice.
21
Governancewww.unionjackoil.com Directors’ Report
FOR THE YEAR ENDED 31 DECEMBER 2021
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
16 May 2022
The following events have taken place after the year end:
In January 2022, the Company received a positive
independent review from RPS Group, a leading global
company offering services within the energy sector in respect
of West Newton flow rate potential. The RPS review
indicated that initial average production rates of up to 35.6
million cubic feet of gas per day from a horizontally drilled
well situated in the gas zone could be achieved, based on
the data from the West Newton A-2 well. The study also
indicated initial average production rates of up to 1,000 bopd
from a horizontally drilled well situated in the oil zone, based
on data from the West Newton A-2 well.
In January 2022, the Company announced a summary of
the results of an analysis of the bottom hole pressure data
acquired from the Wressle-1 well during December 2021.
The interpretation was completed by ERCE, an independent
energy consultancy, on behalf of the Wressle Joint Venture
partners. Results demonstrated the significant potential of
the Wressle-1 well and the production rates that could be
achieved once the surface facilities are optimised and a gas
monetisation scheme is in place.
During January 2022, the Company announced the intention
of the operator of PEDL253 to appeal against the refusal of
planning permission by Lincolnshire County Council, for a side
track drilling operation, associated testing and long-term oil
production.
During March 2022, planning for the extension for PEDL241
was refused by the Lincolnshire County Council. The Joint
Venture Partners are considering an appeal.
During March 2022, planning for the drilling of additional wells
and production at West Newton A site was approved by the
East Riding of Yorkshire Council. Separately, permission was
granted for a time extension to allow further exploratory
drilling at West Newton B site.
During March 2022, settlement of £2,083,333 for the
consideration payment of a 25% interest in PEDL180 and
PEDL182 was made to Calmar LLP.
During April 2022, the Company announced a US$5 million
net landmark reached in revenues generated from the
Ashover Grit reservoir at the Wressle-1 well.
22
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC CORPORATE
GOVERNANCE REPORT
FOR THE YEAR ENDED 31 DECEMBER 2021
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.
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Governancewww.unionjackoil.com Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2021
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.
Investor communications are managed by the Executive Chairman, in
conjunction with the Company’s Nominated Adviser.
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.
24
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2021
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
North Sea Transition 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.
25
Governancewww.unionjackoil.com Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2021
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.
26
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2021
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 2021, the Board held six meetings, either by telephone
or in person.
Board Member Board Meetings
Attended
(6 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
6
6
6
6
–
–
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.
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Governancewww.unionjackoil.com Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2021
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, 71
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, 70
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, 76
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.
28
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2021
QCA Code Recommendation Application by the Company
6.
Principle 6 (continued)
Raymond Godson, Non-Executive Director, 78
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.
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Governancewww.unionjackoil.com Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2021
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.
30
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2021
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.
31
Governancewww.unionjackoil.com Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2021
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.
32
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2021
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
executive directors.
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.
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Governancewww.unionjackoil.com Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2021
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/
34
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Corporate Governance Report
FOR THE YEAR ENDED 31 DECEMBER 2021
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
35
Governancewww.unionjackoil.com
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 2021
and of the Company’s loss for the year then ended;
•
•
the financial statements have been properly
prepared in accordance with UK adopted
international accounting standards; and
the financial statements 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 2021 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 the preparation of the Company financial statements
is applicable law and UK adopted accounting standards.
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 2023 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 2021 actual results to the
2021 forecast
• Performing sensitivity analysis on the base case scenario
prepared by the directors including 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
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
2021
✓
2020
✓
Materiality Company financial statements as a whole
£230,000 (2020: £136,000) based on
1% of total assets (2020: 1% of three-year
average total assets).
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
Our 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.
36
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC 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, 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 required to
perform an assessment of the
carrying value of the assets.
In the prior year, the directors
identified that the Duke’s
Wood and Kirklington assets
were considered to be
impaired due to the uncertainty
in respect of the future oil
production from the licences.
There were no further
impairment indicators identified
on any of the other assets.
Given the significance of the
assets on the Company’s
Balance Sheet and the
significant judgement involved
in the assessment of potential
indicators of impairment,
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
the directors' 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 obtaining
and challenging the directors’ assessment of impairment indicators
under IFRS 6 Exploration and Evaluation of Mineral Resources.
This included:
• verifying of the licence status to publicly available information in
order to confirm the legal title and validity of each of the licences.
•
•
reviewing approved budget forecasts and minutes of management
and Board meetings to confirm the Company’s intention to
continue exploration work on the licences.
reviewing available technical documentation and discussion of
results and operations with management in order to obtain an
understanding of management’s expectation of commercial
viability
Our specific audit testing for the D&P assets included:
• assessing the appropriateness of the cash generating unit
classification and the impairment considerations against the
provisions of IAS 36 Impairment of Assets.
• verifying the 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 indicators identified (i.e. obsolescence
from internal reporting such as minutes of meetings) or external
potential indicators of impairment (i.e. the market capitalisation
of the Company, economic trends in interest rates etc.)
Key observations:
Based on our procedures performed we consider the assumptions
used in the impairment indicator assessment of the oil and gas assets
to be appropriate.
37
Governancewww.unionjackoil.com 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
2021
£230,000
2020
£136,000
1% of total assets calculated based on draft figures
at the planning stage of our audit
1% of total assets averaged over the last three
reporting periods.
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. In FY20, a three-year average of total assets
was used as there was significant fund raises in the
year that inflated the FY20 asset balance. In FY21,
there were no significant fund raises that occurred
and as such, the Company’s total asset balances
is the most appropriate benchmark. This is in line
with the materiality benchmark used in 2019.
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.
£172,000
£102,000
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.
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.
Materiality
Basis for
determining
materiality
Rationale for
the benchmark
applied
Performance
materiality
Basis for
determining
performance
materiality
SPECIFIC MATERIALITY
As a result of production at Wressle commencing in the period and the Company having increased income statement
activity, we also determined that for the Income Statement, a misstatement of less than materiality for the financial
statements as a whole, specific materiality, could influence the economic decisions of users. As a result, we determined
materiality for these items based on 2% of total expenditure of £57,000 (2020: none). We further applied a performance
materiality level of 75% of specific materiality of £43,000 (2020: none) to ensure that the risk of errors exceeding specific
materiality was appropriately mitigated.
REPORTING THRESHOLD
We agreed with the Audit Committee that we would report to them all individual audit differences in excess
of £5,000 (2020: £2,700). We also agreed to report differences below this threshold that, in our view, warranted
reporting on qualitative grounds.
38
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC 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 the 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
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.
Matters on
which we
are required
to report by
exception
We have nothing to report in respect of the following matters in relation to which the Companies Act
2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the Company, or returns adequate for our audit
have not been received from branches not visited by us; or
•
the Company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit
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.
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.
39
Governancewww.unionjackoil.com Independent Auditor’s Report
on the Financial Statements
TO THE MEMBERS OF UNION JACK OIL PLC
EXTENT TO WHICH THE AUDIT WAS
CAPABLE OF DETECTING IRREGULARITIES,
INCLUDING FRAUD
– we reviewed minutes from Board meetings of those
charges with governance to identify any instances
of non-compliance with laws and regulations; and
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 framework applicable to the Company and
the industry in which it operates, through discussion
with Directors and our knowledge of the industry;
• We considered the significant laws and regulations of
the UK to be those relating to the industry including,
Oil & Gas Regulation, the financial reporting framework,
tax legislation and the AIM listing rules.
• We held discussions with Directors to consider any
known or suspected instances of non-compliance
with laws and regulations or fraud identified by them;
• 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 considered the significant fraud risk areas to be
in relation to revenue recognition and management
override of controls;
• We addressed the fraud risk in relation to revenue
recognition by, testing a sample of revenue transactions
to supporting documentation, including testing revenue
transactions in the period proceeding and preceding
year end to assess that they were recorded in the
correct period.
• 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 the Directors’ estimates (Refer to the ‘key
audit matters’ section) that represented a material
misstatement due to fraud. Specifically:
– we tested the appropriateness of journal entries
made through the year by applying specific criteria
to detect possible irregularities and fraud;
– we assessed whether the judgements made in
accounting estimates were indicative of a potential
bias (refer to key audit matters above);
– 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.
Jill MacRae (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, United Kingdom
16 May 2022
BDO LLP is a limited liability partnership registered in
England and Wales (with registered number OC305127).
40
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2021
Revenue
Cost of sales - operating costs
Cost of sales - depreciation
Notes
31.12.21
£
31.12.20
£
1,894,875
(377,153)
(735,160)
158,004
(286,892)
(57,715)
Gross profit / (loss)
782,562
(186,603)
Administrative expenses (excluding impairment charge)
Impairment
Total administrative expenses
Operating loss
Finance income
Royalty income
Loss before taxation
Taxation
Loss for the financial year
Attributable to:
Equity shareholders of the Company
Loss per share
Basic and diluted loss per share (pence)
2
2
4
4
5
6
(1,740,962)
(1,590,576)
(156,995)
(106,714)
(1,897,957)
(1,697,290)
(1,115,395)
(1,883,893)
112,611
149,771
18,378
–
(853,013)
(1,865,515)
–
–
(853,013)
(1,865,515)
(853,013)
(1,865,515)
(0.83)
(2.23)
The accompanying accounting policies and notes form an integral part of these financial statements.
41
Financial Statementswww.unionjackoil.com
STATEMENT OF
COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2021
Notes
31.12.21
£
31.12.20
£
Loss for the financial year
(853,013)
(1,865,515)
Items which will not be reclassified
subsequently to profit or loss
Other comprehensive profit / (loss)
10
54,420
(83,190)
Total comprehensive loss for the financial year
(798,593)
(1,948,705)
The accompanying accounting policies and notes form an integral part of these financial statements.
42
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC
BALANCE SHEET
AS AT 31 DECEMBER 2021
Assets
Non-current assets
Exploration and evaluation assets
Property, plant and equipment
Investments
Loan receivables
Current assets
Inventories
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
Notes
31.12.21
£
31.12.20
£
7
8
10
11
11
12
13
20
21
8,525,373
7,575,525
291,518
–
6,134,717
6,452,287
137,098
1,001,632
16,392,416
13,725,734
8,829
1,028,110
1,065,812
5,977,541
–
8,993
337,063
7,269,014
8,080,292
7,615,070
24,472,708
21,340,804
2,390,603
2,447,727
1,876,758
803,772
4,267,361
3,251,499
20,205,347
18,089,305
7,507,076
21,528,077
638,586
(9,468,392)
6,825,258
19,522,379
411,467
(8,669,799)
20,205,347
18,089,305
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 16 May 2022 and were signed on its behalf by:
David Bramhill
Director
The accompanying accounting policies and notes form an integral part of these financial statements.
43
Financial Statementswww.unionjackoil.com
STATEMENT OF
CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
Share-based
Share
capital
£
Share
premium
£
payment Accumulated
deficit
£
reserve
£
Total
£
Balance at 1 January 2021
6,825,258
19,522,379
411,467
(8,669,799)
18,089,305
Loss for the financial year
Other comprehensive profit
Total comprehensive loss
for the year
Contributions by and
distributions to owners
Issue of share capital
Share issue costs
Share-based payments
Total contributions by and
distributions to owners
–
–
–
–
–
–
–
–
–
(853,013)
(853,013)
54,420
54,420
(798,593)
(798,593)
681,818
–
–
2,318,182
(312,484)
–
–
–
227,119
–
–
–
3,000,000
(312,484)
227,119
681,818
2,005,698
227,119
(798,593)
2,116,042
Balance at 31 December 2021
7,507,076
21,528,077
638,586
(9,468,392) 20,205,347
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
for the year
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
The accompanying accounting policies and notes form an integral part of these financial statements.
44
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2021
Cash flow from operating activities
Cash flow from investing activities
Purchase of intangible assets
Purchase of property, plant and equipment
Loan advanced
Purchase of investments
Interest received
Notes
31.12.21
£
31.12.20
£
16
7
8
11
10
4
(646,726)
(1,412,801)
(2,277,224)
(1,022,055)
–
(100,000)
67,016
(2,874,060)
(389,330)
(1,000,000)
(100,000)
7,754
Net cash used in investing activities
(3,332,263)
(4,355,636)
Cash flow from financing activities
Proceeds on issue of new shares
Cost of issuing new shares
14(a)
14(a)
3,000,000
(312,484)
7,000,000
(588,871)
Net cash generated from financing activities
2,687,516
6,411,129
Net increase / (decrease) in cash and cash equivalents
(1,291,473)
642,692
Cash and cash equivalents at beginning of financial year
7,269,014
6,626,322
Cash and cash equivalents at end of financial year
13
5,977,541
7,269,014
The accompanying accounting policies and notes form an integral part of these financial statements.
45
Financial Statementswww.unionjackoil.com
PRINCIPAL
ACCOUNTING POLICIES
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.
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.
ROYALTIES
The Company does not believe the ownership of royalties
meet the definition of a revenue contract, given there are
no contracts with the customer, or performance obligations
to fulfil, and the Company has no input in the running of the
Piper, Claymore and Scapa oilfields. As a result, revenue is
recognised as other income.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash on hand and
deposits held at call with banks.
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 UK adopted international accounting 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 2021 and
subject to adoption by the UK Endorsement Board (“UKEB”).
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.”
46
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC 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.
47
Financial Statementswww.unionjackoil.com 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.
INTANGIBLE ASSETS – ROYALTIES
Royalties are classified as intangible assets by the Company.
The Company considers the substance of the royalty to
be economically similar to holding a direct interest in the
underlying asset. Existence risk (the commodity physically
existing in the quantity demonstrated), production risk
(that the operator can achieve production and operate a
commercially viable project), timing risk (commencement and
quantity produced, determined by the operator) and price
risk (returns vary depending on the future commodity price,
driven by future supply and demand) are all risks which the
Group participates in on a similar basis to an owner of the
underlying licence. Furthermore, in the royalty, there is only a
right to receive cash to the extent there is a production and
there are no interest payments, minimum payment obligations
or means to enforce production or guarantee repayment.
These are accounted for as intangible assets under IAS 38 and
accordingly are amortised over their useful economic life.
48
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 2021UNION JACK OIL PLC 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.
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.
49
Financial Statementswww.unionjackoil.com Principal Accounting Policies
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.
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.
50
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC
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
Various Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
1 January 2021
Interest Rate Benchmark Reform – Phase 2
No material
impact
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 financial
statements, the following could potentially have a material impact on the Company’s financial statements going forward:
New and revised International Financial Reporting Standards
Effective Date: Annual
periods beginning on
or after:
UKEB adopted
Various Amendments to
1 January 2022
No
•
•
•
IFRS 3 Business Combinations;
IAS 16 Property, Plant and Equipment;
IAS 37 Provisions, Contingent Liabilities and Contingent
Assets
• Annual Improvements 2018-2020
IAS 12
Amendments to IAS 12: Deferred Tax relating to Assets and
Liabilities arising from a Single Transaction
1 January 2023
IAS 1
Amendments to IAS 1: Classification of Liabilities as Current
or Non-current and Classification of Liabilities as Current or
Non-current
1 January 2024
No
No
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.
51
Financial Statementswww.unionjackoil.com
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 use independent estimates for future
decommissioning expenditure. Discount rates of 0.94%
and inflation rates of 2% are used 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.
52
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Principal Accounting Policies
Depreciation
Production assets are depreciated on a unit of production
method based on the commercial proven reserves for each
separate asset. Development assets are not depreciated
until production commences. The unit of production rate
calculation for the depreciation of costs takes into account
expenditures incurred to date.
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.
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, the royalties due, and trade
receivables. Arriving at the expected credit loss allowance
involved considering different scenarios for the recovery of
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.
53
Financial Statementswww.unionjackoil.com NOTES TO THE
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
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 2021
Exploration Development
and Evaluation and Production
£
£
Corporate
£
Total
£
–
Revenue
–
Operating expenses
–
Depreciation
(6,340)
Impairment
–
Other administrative expenses
Profit / (Loss) from continuing operations before tax (6,340)
–
Finance income
Royalty income
–
Loss for the year
(6,340)
1,894,875
(377,153)
(735,160)
(150,655)
–
631,907
–
–
631,907
–
–
–
–
(1,740,962)
(1,740,962)
112,611
149,771
(1,478,580)
1,894,875
(377,153)
(735,160)
(156,995)
(1,740,962)
(1,115,395)
112,611
149,771
(853,013)
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 2021
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
£
Non-current assets
Current assets
Non-current liabilities
Current liabilities
8,525,373
278,635
(609,448)
(35,261)
7,575,525
720,561
(1,267,310)
(2,291,014)
291,518
7,081,096
–
(64,328)
16,392,416
8,080,292
(1,876,758)
(2,390,603)
Net assets
8,159,299
4,737,762
7,308,286
20,205,347
54
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021
1
BUSINESS AND OPERATING SEGMENTS (CONTINUED)
For the year ending 31 December 2020
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
2
OPERATING LOSS
Operating loss is stated after charging:
Impairment charge on Intangible Assets
Impairment charge on Property,Plant and Equipment
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
31.12.21
£
31.12.20
£
6,340
150,655
735,160
748,471
39,500
6,437
–
106,714
57,715
636,211
37,000
6,437
The impairment charges of £156,995 (2020: £106,714) are £150,655 in respect of Property, Plant and Equipment,
PEDL118 and PEDL203 and £6,340 in respect of Intangible Assets, PEDL181 and PEDL201.
The impairment shown for 2020 in last year’s Annual Report and Financial Statements was in respect of Property,
Plant and Equipment PEDL181 and PEDL203.
55
Financial Statementswww.unionjackoil.com
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021
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
31.12.21
£
31.12.20
£
487,083
199,050
62,338
375,000
214,312
46,899
748,471
636,211
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 (2020: 4).
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 2021
D Bramhill
J O’Farrell
R Godson
G Bull
Year ended December 2020
D Bramhill
J O’Farrell
R Godson
G Bull
Salaries
£
287,083
120,000
40,000
40,000
Share-based
payment expense
£
77,267
49,664
22,114
50,005
Total
£
364,350
169,664
62,114
90,005
487,083
199,050
686,133
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
The emoluments of the highest paid director were £287,083 (2020: £215,000).
Share-based payments are non-cash remuneration by way of share options in the Company. No share options were
granted to the directors or officers in 2021.
56
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021
3
EMPLOYEE INFORMATION AND REMUNERATION OF DIRECTORS (CONTINUED)
Directors’ share options outstanding at 31 December 2021 and at 31 December 2020:
D Bramhill
J O’Farrell
R Godson
G Bull
No share options were granted during 2021
Directors’ share options granted 2020:
2021
2020
1,200,000
700,000
300,000
550,000
1,200,000
700,000
300,000
550,000
D Bramhill
J O’Farrell
R Godson
G Bull
Number
Grant date
Exercise price
Vesting date
600,000
400,000
150,000
400,000
19.07.19
06.08.19
19.07.19
19.07.19
53p
53p
53p
53p
19.07.22
06.08.22
19.07.22
19.07.22
F Lang resigned as a non-executive director in 2019. During 2018, F Lang was awarded 150,000 options at an exercise
price of 22 pence (based on post-share consolidation figures), 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). The accounting charge relating to these options in 2021 was £5,956.
57
Financial Statementswww.unionjackoil.com
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021
4
OTHER INCOME
Finance Income
Bank interest
Loan interest receivable
Royalty Income
Royalties
5
TAXATION
Current tax
UK Corporation Tax
Adjustment in respect of prior periods
Total UK Corporation Tax charge
31.12.21
£
31.12.20
£
516
112,095
112,611
7,754
10,624
18,378
31.12.21
31.12.20
£
149,771
£
–
31.12.21
£
31.12.20
£
–
–
–
–
–
–
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% (2020: 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% (2020: 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 (2020: £nil).
31.12.21
£
31.12.20
£
(853,013)
(1,865,515)
(341,205)
(746,206)
69,080
62,798
(209,327)
622
42,686
(702,898)
A deferred tax asset of £3,597,062 (2020: £3,387,735) 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 £9,468,392 (2020: £8,669,799).
58
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021
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 2021, the Company had 30,373 (2020: 30,373) warrants in issue and 3,200,000 (2020: 3,200,000)
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.
Loss per share
2021
Pence
2020
Pence
Loss per share from continuing operations
(0.83)
(2.23)
The loss and weighted average number of ordinary shares used in the calculation of loss per share are as follows:
2021
£
2020
£
Loss used in the calculation of total basic and diluted loss per share
(853,013)
(1,865,515)
Number of shares
2021
2020
Weighted average number of ordinary shares for the purposes of basic
and diluted loss per share
102,628,722
83,539,914
As detailed in note 14, the Company has 831,680,400 (2020: 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 13,636,364 new ordinary shares during the year (2020: 21,875,000).
59
Financial Statementswww.unionjackoil.com
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021
7
INTANGIBLE ASSETS
31.12.21
Exploration and evaluation
£
31.12.21
Royalty
£
31.12.21
Total
£
31.12.20
Total
£
Cost
At 1 January
Transfer to development and
production assets
Costs incurred in the year
6,134,717
–
6,134,717
6,726,743
(18,092)
2,333,835
93,610
(18,092)
2,427,445
(5,646,086)
5,054,060
At 31 December
8,450,460
93,610
8,544,070
6,134,717
Depreciation and impairment
At 1 January
Amortisation charge for the year
Costs impaired
At 31 December
Net book value
At 31 December
At 1 January
–
–
6,340
–
12,357
–
6,340
12,357
–
12,357
6,340
18,697
–
–
–
–
8,444,120
6,134,717
81,253
–
8,525,373
6,134,717
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.
Furthermore in the year, the Company acquired a 2.5% cash generating royalty interest that is part of the royalty unit over
20% of the revenues from oil and gas production from the Claymore, Piper and Scapa oilfields located in the Central North
Sea, known collectively as the Claymore and Piper Complex, for a total consideration of £93,610. The royalty purchase
included the right to accrued income of £124,316 for the years 2017 to 2020, inclusive. This income is included in the royalty
income figure for 2021 being the year that the Company became entitled to the income, and is also included as a current asset
within other receivables (see note 12).
The royalty is being amortised over its useful economic life.
The directors have reviewed whether there were any potential indicators for impairment evidence for each of the assets.
If an indicator 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. The total impairment charge for 2021 was £6,340
(2020: £nil) with regard to PEDL181, £4,204 and PEDL201, £2,136.
Included in the above intangible asset additions during the year are amounts arising in relation to changes in decommissioning
and restoration provisions (note 21).
60
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021
7
INTANGIBLE ASSETS (CONTINUED)
Intangible assets (less any impairment and provisions) comprise amounts capitalised as follows:
West Newton
Biscathorpe
North Kelsey
Louth Extension
Royalty
PEDL183
PEDL253
PEDL241
PEDL339
31.12.21
£
31.12.20
£
5,184,442
2,992,694
266,984
–
81,253
3,755,301
2,136,834
225,306
17,276
–
Licence interest in PEDL339, Louth Extension has been relinquished. Any drilling target at Louth can be reached from
PEDL005(R). Monies spent on PEDL339 have been re-allocated to PEDL005(R).
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
31.12.21
£
31.12.20
£
6,698,650
18,092
1,990,961
663,234
5,646,086
389,330
8,707,703
6,698,650
246,363
735,160
150,655
81,934
57,715
106,714
1,132,178
246,363
7,575,525
6,452,287
6,452,287
581,300
61
Financial Statementswww.unionjackoil.com
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021
8
PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Development and Production assets comprise amounts capitalised as follows:
Wressle
Fiskerton Airfield
Keddington
PEDL180
EXL294
PEDL005(R)
31.12.21
£
6,176,515
373,582
1,025,428
31.12.20
£
5,646,086
208,218
597,983
7,575,525
6,452,287
The Board has assessed the Development and Production assets as at 31 December 2021 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 £150,655 (2020: £106,714). The total impairment charge for these assets
was PEDL118, £67,598 (2020: £59,627) and PEDL203, £83,057 (2020: £47,087).
Licence interest in PEDL339, Louth Extension has been relinquished. Any drilling target at Louth can be reached from
PEDL005(R). Monies spent on PEDL339 have been reallocated to PEDL005(R).
There were no indicators for impairment on any other assets.
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 2021 are as below:
Proportion of
Proportion of
ownership interest ownership interest
2020
2021
40%
16.665%
26.25%
55%
45%
50%
35%
16.67%
16.67%
20%
12.5%
10%
40%
16.665%
26.25%
55%
30%
20%
35%
16.67%
16.67%
20%
12.5%
10%
Principal place
of business
England
England
England
England
England
England
England
England
England
England
England
England
Licence
Name
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 (relinquished)
Dukes Wood
Kirklington
Fiskerton Airfield
Humber Basin
Laughton
62
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021
10
INVESTMENTS
Investments in equity instruments designated as at FVTOCI
Shares
2021
£
2020
£
291,518
137,098
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
2021
£
31 December
2020
£
137,098
100,000
54,420
120,288
100,000
(83,190)
291,518
137,098
Elephant Oil Corp
The Company was the beneficial holder of 169,959 (2020: 169,959) ordinary shares of Elephant Oil Limited, a company
registered in England and Wales.
During 2021, shareholders in Elephant Oil Limited agreed to a share-swap in a new entity, Elephant Oil Corp, registered
in Nevada, United States of America (USA).
Union Jack Oil plc received one third of a share in the common stock of Elephant Oil Corp for each ordinary share held
in Elephant Oil Limited, resulting in the issue of 56,650 ordinary shares to the Company, representing a 0.46% interest
(2020: nil) in Elephant Oil Corp.
The principal activity of Elephant Oil Corp is the exploration and evaluation of hydrocarbon assets in West Africa.
Elephant Oil Corp intends to apply for admission on NASDAQ, a USA trading market during 2022.
The value of the Elephant Oil Corp shares in the share-swap agreement was US$2.25, and on this basis the Company
has revalued its holding to £93,043.
UK Oil & Gas plc
The Company is the beneficial owner of 9,731,834 (2020: 9,731,834) ordinary shares in UK Oil & Gas plc (“UKOG”), a
company registered in England and Wales, which represents a 0.06% (2020: 0.078%) interest in that company at year end.
The principal activity of UKOG is the exploration and evaluation of hydrocarbon assets.
The investment in UKOG was revalued at the year end to the value of £9,975 (0.1025 pence per share).
Egdon Resources plc
The Company is the beneficial owner of 13,000,000 (2020: 5,000,000) ordinary shares in Egdon Resources plc (“Egdon”),
a company registered in England and Wales, which represents a 2.52% (2020: 1.52%) interest in that company at year end.
Payment for the 8,000,000 new shares acquired was by means of a subscription at a price of 1.25 pence per Subscription
Share, for total consideration of £100,000. In addition each Subscription Share was granted a right to subscribe for 0.5
of a new Ordinary Share at a price of 2.5 pence per share, exercisable at any time until the date of the second anniversary
of their issue.
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 £188,500 (1.45 pence per share).
The change in valuation for the above investments are reported in the Statement of Comprehensive Income on page 42.
63
Financial Statementswww.unionjackoil.com
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021
11
LOAN RECEIVABLES
Amounts falling due within 1 year
Amounts falling due after 1 year
31.12.21
£
1,028,110
–
31.12.20
£
8,992
1,001,632
1,028,110
1,010,624
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 trade receivables as there has been no historical experience to
indicate that these receivables are not recoverable. All outstanding trade receivables have been received prior to the
Balance Sheet date.
The Company has other receivables of £149,771 which are accrued royalty income. The company is in advanced
negotiation to facilitate the payment through the arrangement of a manager to administer historic and then current
and future funds. Therefore through the Company’s formal process of assessment it does not consider that it would
be appropriate or necessary to make any credit loss adjustment.
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
31.12.21
£
667,329
149,771
80,782
167,930
31.12.20
£
95,293
–
187,596
54,174
1,065,812
337,063
31.12.21
£
31.12.20
£
5,977,541
7,269,014
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.
64
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021
14(a)
SHARE CAPITAL
Allotted and issued:
Number
Class
Nominal
value
31.12.21
£
31.12.20
£
112,715,896
(31 December 2020: 99,079,532)
831,680,400
(31 December 2020: 831,680,400)
Total
Ordinary
5p
5,635,795
4,953,977
Deferred
0.225p
1,871,281
1,871,281
7,507,076
6,825,258
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 2021, 13,636,364 new ordinary shares were issued for cash at 22 pence per share, raising approximately
£3,000,000 before expenses of £312,484 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 2021
Number of warrants
Outstanding and exercisable at the beginning of the year
Outstanding and exercisable at the end of the year
30,373
30,373
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
30,373
30,373
WAEP
£
0.6
0.6
WAEP
£
0.6
0.6
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 2021
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 (2020: nil).
04.12.12
30,373
60p
50p
69%
5.0
0.8464%
0%
£11,099
20.12.12
20.12.22
65
Financial Statementswww.unionjackoil.com
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021
14(c) SHARE-BASED PAYMENTS – OPTIONS
No options were granted to directors of the Company during 2021. 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 2021
Number of options
Outstanding at the beginning of the year
Granted during 2021
Outstanding at the end of the year
Exercisable at the end of the year
3,200,000
–
3,200,000
–
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
3,200,000
–
3,200,000
–
WAEP
£
0.374
–
0.374
–
WAEP
£
0.374
–
0.374
–
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 2021
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
400,000
0.53p
0.53p
70%
6.5
0.3161%
0%
£133,497
06.08.22
06.08.29
1,300,000
0.53p
0.53p
70%
6.5
0.5187%
0%
£435,086
19.07.22
19.07.29
150,000
22p
22p
63%
6.5
0.8840%
0%
£19,491
04.12.21
04.12.28
450,000
22p
22p
62%
6.5
1.1035%
0%
£58,106
07.11.21
07.11.28
900,000
18p
18p
55%
6.5
0.9427%
0%
£85,822
18.07.21
18.07.28
The Company recognised total expenses in the Income Statement of £227,119 in relation to share options accounted
for as equity-settled share-based payment transactions during the year (2020: £244,001).
Expected volatility was determined based on a historic 5-year volatility of the Company.
66
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021
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
Share-based payments
Finance income
Royalty income
(Increase) in inventories
(Increase) in trade and other receivables
Increase / (decrease) in trade and other payables
31.12.21
£
31.12.20
£
(853,013)
735,160
156,995
227,119
(112,611)
(149,771)
(1,865,515)
57,715
106,714
244,001
(18,378)
–
3,879
(1,475,463)
(8,829)
(550,868)
(90,908)
–
(156,866)
219,528
Cash used in operations
(646,726)
(1,412,801)
67
Financial Statementswww.unionjackoil.com
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021
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.
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 2021
Investments: FVOCI
At 31 December 2020
Investments: FVOCI
Financial assets measured at amortised cost
At 31 December 2021
Loan receivables
Trade receivables
Cash and cash equivalents
Within
1 Month
–
667,329
5,977,541
At 31 December 2020
Loan receivables
Trade receivables
Cash and cash equivalents
Total carrying value
Within
1 Month
–
95,293
7,269,014
7,364,307
Level 1
198,475
Level 3
93,043
£
Total
291,518
97,098
40,000
137,098
Within
2 Months to
1 Year
Within
1 to 2 years
1,028,110
–
–
–
–
–
–
Within
2 Months to
1 Year
Within
1 to 2 years
1,001,623
–
–
8,993
–
–
8,993
1,001,632
8,374,923
£
Total
1,028,110
667,329
5,977,541
7,672,980
Total
1,010,616
95,293
7,269,014
Total carrying value
6,644,870
1,028,110
All of the above financial assets’ carrying values approximate to their fair values at 31 December 2021 and
31 December 2020 given their nature and short times to maturity.
68
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021
17
FINANCIAL INSTRUMENTS (CONTINUED)
Financial liabilities measured at amortised cost
At 31 December 2021
Trade payables
Other payables
Accruals
Total carrying value
At 31 December 2020
Trade payables
Other payables
Accruals
Total carrying value
£
242,910
2,080,000
67,693
2,390,603
190,926
2,180,000
76,801
2,447,727
All of the above financial liabilities’ carrying values approximate to their fair values at 31 December 2021
and 31 December 2020 given their nature and short times to maturity.
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
The Company measures credit risk on trade receivables 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 trade
receivables as there has been no historical experience to indicate that these receivables are not recoverable. All outstanding
trade receivables have been received prior to the balance sheet date and the credit risk is believed to be unchanged from
previous years.
The Company has other receivables which are accrued royalty income. The company is in advanced negotiation to facilitate
the payment through the arrangement of a manager to administer historic and then current and future funds. The credit risk
is not considered to have changed since initial recognition.
Included within the Company’s receivables is a non-current loan with a maturity date of May 2022. The Company consider
the loan has not been subject to an increase in credit risk since initial recognition.
Under IFRS 9 the 12 month expected credit losses have been considered on all of these receivables and these assessments
resulted in no credit losses being recognised after taking into consideration the credit risk associated with the loan, trade
and other receivables.
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 £8,091,826 (2020: £8,616,702).
69
Financial Statementswww.unionjackoil.com
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021
18
FINANCIAL INSTRUMENT RISK EXPOSURE AND MANAGEMENT (CONTINUED)
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 2021
and 31 December 2020 on the basis of their earliest possible contractual maturity.
At 31 December 2021
Trade payables
Other payables
Accruals
At 31 December 2020
Trade payables
Other payables
Accruals
Oil price risk
Total
£
Within
2 months
£
Within Greater than
6 months
£
2-6 months
£
242,910
2,080,000
67,693
242,910
–
61,093
2,080,000
6,600
2,390,603
304,003
2,086,600
–
–
190,926
2,180,000
76,801
190,926
100,000
40,601
–
–
36,200
–
2,080,000
–
2,447,727
331,527
36,200
2,080,000
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.
19
FINANCIAL COMMITMENTS
The Company had no financial commitments as at 31 December 2021 or 31 December 2020, other than those recognised
in the Financial Statements and where Authority for Expenditure has been agreed with the Operator.
70
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021
20
TRADE AND OTHER PAYABLES
Trade payables
Other payables
Accruals
31.12.21
£
31.12.20
£
242,910
2,080,000
67,693
190,926
2,180,000
76,801
2,390,603
2,447,727
Other payables consist of £2,080,000 to be paid to Calmar LP on commercial production from the Wressle discovery.
Early settlement of this consideration was made to Calmar LP during March 2022.
21
PROVISIONS
As at 1 January 2020
Adjustment to provision estimates
Accretion of provision
At 31 December 2020
Adjustment to provision estimates
Accretion of provision
At 31 December 2021
At 31 December 2020
Decommissioning
and reinstatement
provision
£
620,686
171,178
11,908
803,772
1,059,010
13,976
1,876,758
803,772
A provision has been made for decommissioning costs on productive fields. A 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 an independent review, 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.
71
Financial Statementswww.unionjackoil.com
Notes to the Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2021
22
CONTINGENT LIABILITIES
In respect of PEDL253 a contingent cash payment of £500,000 is due to Humber Oil & Gas Limited following receipt
of planning consents for drilling the Biscathorpe-2Z side-track, testing and subsequent production in the event of drilling
success.
23
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 £120,721 (2020: £120,290)
in respect of consulting fees. £12,031 was outstanding at the year end (2020: £12,028).
Jayne Bramhill, spouse of David Bramhill, received the sum of £12,000 (2020: £12,000) from the Company in respect
of IT maintenance and administration costs. No amounts were outstanding at the year end (2020: £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 PEDL253. The transaction
in 2021 between the Company and Humber Oil & Gas Limited did not directly involve Montrose Industries Limited.
24
EVENTS AFTER THE BALANCE SHEET DATE
The following events have taken place after the year end:
In January 2022, the Company received a positive independent review from RPS Group, a leading global company offering
services within the energy sector in respect of West Newton flow rate potential. The RPS review indicated that initial
average production rates of up to 35.6 million cubic feet of gas per day from a horizontally drilled well situated in the
gas zone could be achieved, based on the data from the West Newton A-2 well. The study also indicated initial average
production rates of up to 1,000 bopd from a horizontally drilled well situated in the oil zone, based on data from the West
Newton A-2 well.
In January 2022, the Company announced a summary of the results of an analysis of the bottom hole pressure data
acquired from the Wressle-1 well during December 2021. The interpretation was completed by ERCE, an independent
energy consultancy, on behalf of the Wressle Joint Venture partners. Results demonstrated the significant potential of
the Wressle-1 well and the production rates that could be achieved once the surface facilities are optimised and a gas
monetisation scheme is in place.
During January 2022, the Company announced the intention of the operator of PEDL253 to appeal against the refusal
of planning permission by Lincolnshire County Council, for a side track drilling operation, associated testing and long-term
oil production.
During March 2022, planning for the extension for PEDL241 was refused by the Lincolnshire County Council. The Joint
Venture Partners are considering an appeal.
During March 2022, planning for the drilling of additional wells and production at West Newton A site was approved
by the East Riding of Yorkshire Council. Separately, permission was granted for a time extension to allow further
exploratory drilling at West Newton B site.
During March 2022, settlement of £2,083,333 for the consideration payment of a 25% interest in PEDL180 and PEDL182
was made to Calmar LLP.
During April 2022, the Company announced a US$5 million net landmark reached in revenues generated from the Ashover
Grit reservoir at the Wressle-1 well.
72
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC ANNUAL GENERAL MEETING
NOTICE OF
Notice is hereby given that the Annual General Meeting (the
“AGM”) of Union Jack Oil plc (the “Company”) will be
held at the offices of Osborne Clarke, 2 Temple Back East,
Temple Quay, Bristol BS1 6EG on 23 June 2022 at 11.00 a.m.
to consider and, if thought fit, pass the following resolutions, of
which resolutions numbered 1 to 7 will be proposed as ordinary
resolutions and resolutions numbered 8 and 9 will be proposed
as special resolutions:
ORDINARY RESOLUTIONS
1 Report and accounts
To receive the audited annual accounts of the Company
for the year ended 31 December 2021, 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 David Bramhill as a director, who retires by
rotation in accordance with the Company’s Articles of
Association.
2 Re-election of director retiring by rotation
To re-elect Graham Bull as a director, who retires by rotation
in accordance with the Company’s Articles of Association.
4 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.
5 Auditor’s remuneration
To authorise the directors to determine the remuneration
of the auditor.
6 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 £2,817,897 (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.
7 Directors' authority to repurchase shares
That the Company be and is hereby unconditionally and
(c)
the maximum price which may be paid for an Ordinary
Share shall be the higher of:
(i) 105% of the average of the middle market
quotations for an Ordinary Share derived from the
London Stock Exchange Daily Official List for the five
business days immediately prior to the day on which
the share is contracted to be purchased, and
(ii) an amount equal to the higher of the price of:
(A) the last independent trade of an Ordinary Share;
and
(B) the highest current independent bid for an
Ordinary Share, as derived from the London
Stock Exchange Trading System; and
(d) this authority shall, unless previously renewed, revoked
or varied, expire on the earlier of the date falling 15
months after the date of the passing of this resolution
and the conclusion of the next Annual General Meeting,
but the Company may enter into a contract for the
purchase of Ordinary Shares before the expiry of this
authority which would or might be completed (wholly
or partly) after its expiry.
SPECIAL RESOLUTIONS
8 Directors’ power to issue shares for cash
That, conditional upon the passing of resolution number
6, 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, and/
or by way of a sale of treasury shares (in accordance with
Section 573 of the Act), wholly for cash pursuant to the
authority of the directors under Section 551 of the Act
conferred by resolution 6 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 £2,817,897 (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.
9 Cancellation of share premium
That, subject to the confirmation of the court, the entire
amount standing to the credit of the share premium account
of the Company be and is cancelled.
generally authorised for the purposes of Section 701 of the
Act to make market purchases (within the meaning of Section
693(4) of the Act) of its ordinary shares of 5 pence each
(“Ordinary Shares”) provided that:
(a) the maximum number of Ordinary Shares authorised
to be purchased is 11,271,589;
By order of the Board
Matthew Small
Company Secretary
Dated: 16 May 2022
(b) the minimum price which may be paid for any such
Ordinary Share is 5 pence;
Registered Office: 6 Charlotte Street, Bath BA1 2NE
73
Annual General Meetingwww.unionjackoil.com
Notice of Annual General Meeting
EXPLANATORY NOTES RELATING TO
RESOLUTIONS
Resolution 1 - Report and accounts
All quoted companies are required by law to lay their
annual accounts before a general meeting of the Company,
together with the directors' reports and auditors' report
on the accounts. At the AGM, the directors will present
these documents to the shareholders for the financial year
ended 31 December 2021.
Resolutions 2 and 3 - Re-election of directors
These resolutions concern the re-election of David
Bramhill and Graham Bull who are retiring at the meeting
by rotation in accordance with the Company's articles of
association.
Resolutions 4 and 5 - Auditors
Resolution 4 concerns the re-appointment of BDO LLP as
auditors until the conclusion of the next general meeting
at which accounts are laid, that is, the next Annual General
Meeting.
Resolution 5 authorises the directors to fix the auditors'
remuneration.
Resolution 6 – Directors' authority to allot shares
This resolution grants the directors authority to allot
shares in the capital of the Company and other relevant
securities up to an aggregate nominal value of £2,817,897,
representing approximately 50% of the nominal value of
the issued ordinary share capital of the Company as at the
date of this AGM notice.
Unless revoked, varied or extended, this authority will
expire at the conclusion of the next AGM of the Company.
Resolution 7 – Authority to repurchase shares
This resolution authorises the board to make market
purchases of up to 11,271,589 ordinary shares
(representing approximately 10% of the Company's issued
ordinary shares as at the date of this AGM notice). Shares
so purchased may be cancelled or held as treasury shares.
The authority will expire at the end of the next Annual
General Meeting of the Company or 15 months from the
passing of the resolution, whichever is the earlier.
The minimum price that can be paid for an ordinary share
is 5p being the nominal value of an ordinary share. The
maximum price that can be paid is 5% over the average of
the middle market prices for an ordinary share, derived
from the Daily Official List of the London Stock Exchange,
for the five business days immediately before the day on
which the share is contracted to be purchased.
The directors have not previously sought to obtain
authority from shareholders to buy back shares, however,
given the current stage of the Company's development
and its cash position, the directors now consider that it
is appropriate to obtain such authority to make market
purchases in the future should they consider that it would
promote the success of the Company for the benefit of its
members as a whole. The directors have no current plans
to utilise this authority and there is no guarantee that the
Company will buy back shares at any time.
The Company will only be able to take advantage of the
authority granted under this resolution if Resolution 9
is passed and the cancellation of the Company's share
premium account is approved by the court.
Resolution 8 – Directors' power to issue shares
for cash
This resolution authorises the directors to allot equity
securities for cash other than in accordance with the
statutory pre-emption rights (which require a company to
offer all allotments for cash first to existing shareholders
in proportion to their holdings). The authorisation is
limited to a maximum nominal amount of £2,817,897,
representing approximately 50% of the nominal value of
the issued ordinary share capital of the Company as at
the date of this AGM notice. Unless revoked, varied or
extended, this authority will expire at the conclusion of the
next AGM of the Company.
The Company may hold any shares it buys back “in
treasury” and then sell them at a later date for cash
rather than simply cancelling them. Any such sales are
required to be made on a pre-emptive, pro-rata basis to
existing shareholders unless shareholders agree by special
resolution to disapply such pre-emption rights. Accordingly,
in addition to giving the directors power to allot unissued
ordinary shares on a non pre-emptive basis, resolution 8
will also give directors power to sell ordinary shares held in
treasury on a non- pre-emptive basis, subject always to the
limitations noted above.
The directors consider that the power proposed to be
granted by resolution 8 is necessary to retain flexibility,
although they do not have any intention at the present time
of exercising such power.
Resolution 9 – Cancellation of share premium
As at 31 December 2021, the Company had an
accumulated deficit (negative distributable reserves) of
£9,458,889. This is normal for a Company in Union Jack's
position, reflecting a number of years of investment in
exploration assets.
A company which has negative distributable reserves on
its balance sheet is not permitted under law either to pay
a dividend or to buy back its shares.
However, as at 31 December 2021, the Company had
share premium of £21,528,077 on its balance sheet.
74
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION JACK OIL PLC Notice of Annual General Meeting
EXPLANATORY NOTES RELATING TO
RESOLUTIONS (CONTINUED)
Given the Company's recent progress in its business
and operations, the directors now consider that it is
appropriate to cancel the amounts standing to the
credit of the Company's share premium account. The
consequence of this is that the balance arising upon the
proposed cancellation of the share premium account will
create positive distributable reserves which will eliminate
the accumulated deficit on the Company's profit and loss
account and create distributable reserves which may be
used in the future for the purpose of either (a) paying
dividends or (b) (subject to the passing of Resolution 7)
making market purchases of the Company's shares.
The cancellation of the Company's share premium account
requires the approval of the Court. The Company intends
to apply to the Court following the AGM.
The Court will need to be satisfied that the interests of the
Company's creditors will not be prejudiced as a result of
the proposed cancellation of share premium. The Court
may require the Company to put in place protection for
the benefit of the Company's creditors at the date of the
Court application. The board anticipates that the Company
will provide such protection as so required.
The board reserves the right to abandon or to discontinue
(in whole or in part) any application to the Court in the
event that the Board considers that the terms on which
the cancellation would be (or would be likely to be)
confirmed by the Court would not be in the best interests
of the Company and/or the shareholders as a whole. The
directors will, prior to the making of any application to
the Court for the approval of the Cancellation, undertake
a careful review of the Company’s liabilities (including
contingent liabilities) and consider the Company’s ability to
satisfy the Court that, as at the date (if any) on which the
Court Order relating to the cancellation and the statement
of capital in respect of the cancellation have both been
registered by the Registrar of Companies at Companies
House and the Cancellation therefore becomes effective,
the Company’s creditors will be sufficiently protected.
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 21 June 2022 (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 A member who is entitled to attend, speak and vote
at the AGM may appoint a proxy to attend, speak and
vote instead of him. A member may appoint more
than one proxy provided each proxy is appointed
to exercise rights attached to different shares (so a
member must have more than one share to be able
to appoint more than one proxy). A proxy need not
be a member of the Company but must attend the
AGM in order to represent you. A proxy must vote in
accordance with any instructions given by the member
by whom the proxy is appointed. Appointing a proxy
will not prevent a member from attending in person
and voting at the AGM (although voting in person at
the AGM will terminate the proxy appointment). A
proxy form is enclosed. The notes to the proxy form
include instructions on how to appoint the Chairman of
the AGM or another person as a proxy. You can only
appoint a proxy using the procedures set out in these
notes and in the notes to the proxy form.
3 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 21 June 2022. 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.
75
Annual General Meetingwww.unionjackoil.com Notice of Annual General Meeting
NOTES (CONTINUED)
4 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 21 June 2022. 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.
5 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.
6 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 4 and 5) 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.
7 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.
76
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021UNION 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