HYDROCARBON PRODUCTION,
DRILLING, DEVELOPMENT AND
INVESTMENT ONSHORE UNITED
KINGDOM AND THE UNITED
STATES OF AMERICA
UNION JACK OIL plc
ANNUAL REPORT AND
FINANCIAL STATEMENTS
2023
Directors, Officers and Advisers
DIRECTORS
David Bramhill
Executive Chairman
Joseph O’Farrell
Executive
Graham Bull
Non-Executive
Raymond Godson
Non-Executive
Craig Howie
Non-Executive
COMPANY OFFICE
6 Charlotte Street,
Bath BA1 2NE,
England
Telephone: +44 (0) 1225 428139
Email: info@unionjackoil.com
Web: www.unionjackoil.com
: @unionjackoilplc
REGISTERED NUMBER
07497220
SECRETARY AND
REGISTERED OFFICE
Matthew Small
c/o Berkeley Hall Marshall Limited
6 Charlotte Street,
Bath BA1 2NE,
England
REGISTRARS
Computershare Investor Services PLC
The Pavilions,
Bridgwater Road,
Bristol BS13 8AE,
England
AUDITOR
Crowe U.K. LLP
2nd Floor,
55 Ludgate Hill,
London EC4M 7JW,
England
SOLICITORS
Keystone Law
48 Chancery Lane,
London WC2A 1JF,
England
BANKERS
Royal Bank of Scotland plc
Drummond House,
PO Box 1727,
1 Redheughs Avenue,
Edinburgh EH12 9JN,
Scotland
FINANCIAL ADVISER
Gneiss Energy Limited
5th Floor,
64 North Row, Mayfair,
London W1K 7DA,
England
NOMINATED ADVISER
AND JOINT BROKER
SP Angel Corporate Finance LLP
Prince Frederick House,
35-39 Maddox Street,
London W1S 2PP,
England
JOINT BROKER
Shore Capital Stockbrokers Limited
Cassini House,
57 St James’s Street,
London SW1A 1LD,
England
FINANCIAL PUBLIC
RELATIONS
BlytheRay
4-5 Castle Court,
London EC3V 9DL,
England
INVESTOR RELATIONS
USA
Harbor Access
107 Elm Street,
4th Floor, Stamford CT 06092,
USA
STRATEGIC PARTNERSHIPS ONSHORE
UNITED KINGDOM AND THE UNITED
STATES OF AMERICA
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 and the United States of America.
The issued share capital is traded on the AIM
Market of the London Stock Exchange (Ticker:
UJO) and the OTCQB Venture Market in the
United States of America (Ticker: UJOGF).
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.
Contents
BUSINESS AND STRATEGY
Chairman’s Statement
Strategic Report
Licence Interests
GOVERNANCE
Directors’ Report
Corporate Governance Report
Independent Auditor’s Report
on the Financial Statements
FINANCIAL STATEMENTS
Income Statement
Statement of
Comprehensive Income
Balance Sheet
Statement of Changes in Equity
Statement of Cash Flows
Principal Accounting Policies
Notes to the Financial Statements
ANNUAL GENERAL MEETING
Notice of Annual General Meeting
2
16
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29
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48
49
50
51
52
60
79
1
www.unionjackoil.com
Chairman’s
Statement
I am delighted 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 2023.
Progress continued throughout the period, thanks to
the cash flow from our flagship development, Wressle,
where revenues continued to bolster the Company’s
robust Balance Sheet and enabled Union Jack to announce
a net profit for the second consecutive year.
Union Jack remained profitable, despite lower oil prices
and weaker exchange rates compared to 2022, as well
as a near three-month shutdown at Wressle, whilst a
downhole pump was installed and other significant site
upgrades were carried out. This demonstrates the durability
and dependability of the Company’s key project and the
prudent management of our cash resources.
The ERC Equipoise Limited (“ERCE”) Competent Person’s
Report (“CPR”) in respect of Wressle and Broughton
North, matched our high expectations, demonstrating
a 263% increase in 2P Reserves to 2,373 mboe gross.
This adds significant additional value to what is a material
project within Union Jack’s production and development
portfolio within the UK.
We are expecting West Newton, another key onshore
project within Union Jack’s portfolio, with impressive
Contingent Resources reported within the RPS Group
Limited (“RPS”) CPR, to see activity during the remainder
of 2024 and beyond.
In 2023, a decision was made to seek further growth
opportunities in other jurisdictions, where operations
can be executed unhindered and a sensible and fair tax
policy is applied. During the latter part of 2023, Union Jack
commenced discussions with Reach Oil & Gas Company
Inc (“Reach”), based in Oklahoma, United States of
America (“USA”). As a result, Union Jack began assembling
a quality Mineral Royalty portfolio providing a material
monthly income.
Union Jack has also entered into a number of agreements
with Reach in respect of drilling and seismic acquisition
in Oklahoma.
The first well drilled on the West Bowlegs Prospect in
Oklahoma, the Andrews 1-17, in which the Company
holds a 45% working interest, is a commercial discovery,
penetrating the primary objective, the Hunton Limestone,
one of the main hydrocarbon reservoirs in Oklahoma.
The well has now been put on production and in light
of this successful outcome, a further step-out drilling
programme within associated areas is now being discussed
between the joint venture partners.
A further well in Oklahoma, over and above the Hunton
drilling campaign is expected to be drilled during Q3 2024,
testing the Footwall Fold Prospect in the Wilzetta Fault
play. This well, the Diana-1, is considered to be high-impact
for Union Jack, where the rewards can be significant.
The prolific fault plays are the site of numerous oilfields
across Central Oklahoma with nearby analogous
production. The Diana-1 well is supported by recently
reprocessed 3D seismic data.
In addition, several potential drilling sites have been
identified along the Wilzetta Fault and a 3D seismic
acquisition programme is planned during 2024. Reach’s
state-of-the-art equipment, supplied by UK based Stryde
Limited, allows for cost effective and efficient seismic
acquisition.
Following the early successes of the Company’s entry into
the USA involving the Andrews 1-17 discovery well and
the financial attractions of Union Jack’s expanding Mineral
Royalties portfolio, the Board believes that the Company’s
further expansion into the USA, executed alongside a
dynamic drilling campaign, will deliver material rewards
in due course.
2ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC CHAIRMAN’S STATEMENT
To increase the Company’s corporate visibility in the USA,
in April 2024, a quote was obtained for Union Jack’s
ordinary shares on the OTCQB Venture Market (Ticker:
UJOGF). The Board believes that dual trading of the
Company’s shares on AIM and the OTCQB will provide
enhanced investor benefits, which includes easy trading
access for investors based in the USA and increased liquidity,
due to a broader geographic pool of potential investors.
Ray Godson, non-executive director since the inception of
the Company, will step down at the Company’s upcoming
Annual General Meeting. To prepare for this, the Company
appointed Craig Howie in April 2024, who will assume Ray’s
role as Chairman of the Audit Committee and member
of the Remuneration Committee. Craig is well versed in
energy, finance and the business of Union Jack.
Additional information on the Company’s leading projects
within the UK at Wressle and West Newton, and
overviews on Biscathorpe, Keddington and North Kelsey,
can be found later within this statement.
The financial results for 2023 are positive with the
Company remaining in a strong position, free of debt,
with a balanced work programme of potentially
transformational development and drilling activities
encompassing both sides of the Atlantic.
In view of the Company’s sound financial position, and
the additional income received since the year end from
the Mineral Royalties, the Board, on 14 May 2024, declared
a 0.25 pence dividend per ordinary share to be paid to
qualifying shareholders on Friday 26 July 2024.
Further information can be found on the Company’s
website www.unionjackoil.com, presenting detailed technical
information on Union Jack’s projects and designed to inform
shareholders and attract new investors to the Company.
In addition, Union Jack hosts a growing and active
X (formerly Twitter) account @unionjackoilplc..
OPERATIONAL HIGHLIGHTS
• Flagship Wressle project continues
to deliver following a workover,
installation of a down hole pump
and other significant site upgrades
• Wressle Competent Person’s
Report upgrades Reserves
by 263%
• Application submitted for the
drilling of two back-to-back
Wressle development wells
and the Penistone Flags gas
monetisation
• Positive Biscathorpe planning
appeal decision
• Sale of 2.5% interest in offshore
North Sea Claymore Area Royalty
• Commencement of acquisition
of United States Mineral Royalties
and drilling activity in Oklahoma
• Planned drilling and development
during 2024 to encompass both
sides of the Atlantic
• Post Balance Sheet date, the
Andrews 1-17 Well, in Oklahoma,
USA, has been declared a
commercial discovery
FINANCIAL HIGHLIGHTS
• Gross profit of £3,298,844
(2022: £5,100,479)
• Net profit of £859,089
(2022: £3,606,624)
• Basic earnings per share 0.79
pence (2022: 3.20 pence)
• Oil revenues £5,065,679
(2022: £8,507,050)
• The Company continues to
be debt free
• Post Balance Sheet date, a
dividend of 0.25 pence per
ordinary share was declared,
payable on 26 July 2024
3
BUSINESS AND STRATEGYwww.unionjackoil.com CHAIRMAN’S STATEMENT
WRESSLE
DEVELOPMENT
PEDL180 AND PEDL182 (40%)
Wressle is located in Lincolnshire, on the western margin
of the Humber Basin.
The Wressle-1 (“Wressle”) discovery was defined on
proprietary 3D seismic data. The structure is on trend
with the Crosby Warren oilfield and the Broughton North
Prospect, both located to the immediate northwest and
the Brigg-1 discovery to the southeast. These wells contain
hydrocarbons in several different sandstone reservoirs
within the Upper Carboniferous succession. The majority
of the Broughton North Prospect is covered by the
same 3D seismic survey to that of the Wressle field.
Since the proppant squeeze and coiled tubing operations
conducted during August 2021, Wressle has established
itself as Union Jack’s flagship project with initial production
rates far exceeding original expectations. Wressle has
generated revenues in excess of US$19,000,000 net to
Union Jack before taxes, allowing the Company to be
self-sustaining for almost three years without recourse
to external funding from the capital markets. To date,
nearly 600,000 barrels of high-quality oil have been
produced and sold from Wressle.
Production during 2023, ranged from 500 to 800 barrels
of oil per day, accompanied by a water cut which is easily
managed and disposed of at a nearby facility.
During December 2023, the joint venture partnership
received the results of a CPR compiled by ERCE for
Wressle and Broughton North Prospect.
The highlights of this report are as follows:
• 263% increase in 2P Reserves
• Reclassification of 1,883 million barrels of oil equivalent
(“mboe”) in Penistone Flags Contingent Resources to
2P Reserves
• 59% upgrade to the Ashover Grit and Wingfield Flags
Estimated Ultimate Recoverable
• 23% upgrade to Broughton North Prospective 2U
Resources
“”WRESSLE IS CURRENTLY
THE SECOND
MOST PRODUCTIVE
CONVENTIONAL
PRODUCING ONSHORE
OILFIELD IN THE UK
AND HAS GENERATED IN
EXCESS OF US$19,000,000
IN REVENUES TO
UNION JACK SINCE
RE-COMMENCEMENT
OF PRODUCTION IN
AUGUST 2021
Crosby Warren
BROUGHTON NORTH
PROPECT
PEDL182
WRESSLE 1
Scunthorpe
BROUGHTON 1
WRESSLE
PEDL180
GLANDFORD 1
BRIGG 1
Scrawby
HIBALDSTOW 1
PEDL241
NORTH KELSEY
PROSPECT
4ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC CHAIRMAN’S STATEMENT
Wressle Gross Oil and Gas Reserves (mboe)
Category
2016 CPR
Added
Produced to
30 June 2023
Revisions
Reclassified
2023 CPR
1P
303
–
(519)
258
864
906
Reserves Change
199%
Gross Reserves
2P
655
–
(519)
354
1,883
2,373
263%
3P
1,356
–
(519)
403
3,647
4,887
261%
Note: One barrel of oil equivalent (“boe”) is equal to 5,714 standard
cubic foot (“scf”) of natural gas
Broughton North Gross Oil and Gas Prospective
Resources (mboe)
Category
2016 CPR
Added
Produced to
30 June 2023
Revisions
Reclassified
2023 CPR
Gross Unrisked Prospective
Resources
1U
180
–
–
33
–
213
2U
494
–
–
114
–
608
3U
1,156
–
–
376
–
1,532
A planning application for the drilling of back-to-back
(Wressle-2 and Wressle-3) wells and an upgrade of
production facilities, including fluid storage tanks, separator
system, surface pump and associated bunds, was submitted
by the Operator on behalf of the joint venture partnership
to the North Lincolnshire Council for approval, during
February 2024.
In addition, a planning application has been submitted to
enable the production of the material gas reserve contained
within the Penistone Flags formation. Gas processing
equipment will be sourced and a 600 metre underground
gas pipeline will be installed, linking Wressle to the national
gas grid.
These applications were finalised following the compilation
of a raft of technical assessments including noise and
vibration, landscape and visual, ecological, lighting, transport,
flood and hydrogeological risk, to name some of the
aspects considered.
The Board believes that the Company holds a material
interest in Wressle that will continue to deliver significant
revenues for at least the next decade. The Board looks
forward to the remainder of 2024 and beyond with
enthusiasm, where the Company expects to crystalise
the additional value of this primary operation.
5
BUSINESS AND STRATEGYwww.unionjackoil.com CHAIRMAN’S STATEMENT
WEST NEWTON
Development
PEDL183 (16.665%)
PEDL183 is located onshore UK, north of the River
Humber, 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”) as 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 within the
Kirkham Abbey formation.
The table below notes the West Newton gross unrisked
technically recoverable sales volumes as calculated by
independent engineers RPS Group Limited (“RPS”) in
late 2022.
Category
Gross Technically Recoverable
Gas (bcf)
Liquids (mbbl)
1C
2C
3C
99.7
197.6
393.0
299.4
593.0
1,178.9
Throughout 2022 and 2023, data collected during drilling
operations and well testing, which included core, oil and gas
samples, wireline log and well test records, were analysed
by independent laboratories CoreLab, Applied Petroleum
Technology (“APT”) and RPS. The results of these analyses,
in conjunction with internal evaluations, have been
invaluable in informing the upcoming programme of work
and future drilling plans.
Laboratory reports confirm that the hydrocarbon-bearing
Kirkham Abbey reservoir is extremely sensitive to aqueous
fluids and that previous drilling of the West Newton wells
with water-based mud had created near well-bore damage
through the creation of very fine rock fragments, affecting
the natural porosity and permeability of the formation,
which in turn had a detrimental effect on its ability to flow.
Further analyses have concluded that the use of dilute
water-based acids during well testing would have also
affected the flow characteristics of the Kirkham Abbey
reservoir.
These tests indicate that by drilling the Kirkham Abbey
reservoir with an oil-based drilling fluid, damage to the
oil and gas reservoir should be minimised.
6ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC CHAIRMAN’S STATEMENT
PEDL183
ELLERBY
PROSPECT
GREAT
HATFIELD 1
A2
WEST
NEWTON
B1Z
A1
B1
CRAWBERRY HILL 1
Beverley
RISBY 1
Hull
SPRING HILL
PROSPECT
WITHERNSEA
PROPECT
WINESTEAD 1
Immingham
Easington
A feasibility study is being undertaken by independent
energy consultants CNG Services Limited on a single
well development and gas export plan. The scope of the
West Newton feasibility study is to determine the technical
and economic viability of a single well development, with
production processed from a modular plant and a 3.5
kilometre pipeline from the WNA site to the National
Transmission System at an existing above-ground
installation.
Commercial gas production could be brought to market
within months of a successful production test, resulting
in a materially reduced capital investment which provides
significant early cash flow whilst additional activity is
carried out on the further development of the West
Newton project.
GaffneyCline Associates, an international petroleum
consultancy, is currently compiling a Carbon Intensity
Study in respect of the gas resource at West Newton.
Union Jack believes that, in these environmentally aware
times, investors will only wish to commit investments in
companies and projects that support a transition to a low-
carbon economy. As part of our ongoing strategy in respect
of the environment going forward, we commit to be totally
transparent in respect of our projects and on how our
Carbon Management Practice is implemented.
The joint venture partners continue to plan the most
efficient and economic method to convert the impressive
West Newton Contingent Resource into a viable
hydrocarbon development within an acceptable time frame.
A future West Newton development will benefit from
being located in an area that provides access to substantial
local infrastructure and could deliver significant volumes of
onshore low carbon sales gas into the UK’s energy market.
“”
A FUTURE WEST NEWTON
DEVELOPMENT WILL BENEFIT
FROM BEING LOCATED IN
AN AREA THAT PROVIDES
ACCESS TO SUBSTANTIAL
LOCAL INFRASTRUCTURE AND
COULD DELIVER SIGNIFICANT
VOLUMES OF ONSHORE LOW
CARBON SALES GAS INTO
THE UK’S ENERGY MARKET
7
BUSINESS AND STRATEGYwww.unionjackoil.com CHAIRMAN’S STATEMENT
KEDDINGTON
PEDL005(R) (55%)
The 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 technical review by the Operator has confirmed that
there remains an undrained oil resource located on the
eastern side of the Keddington field. Planning consent for
further drilling is already in place, presenting an opportunity
to increase production via a development side-track from
one of the existing wells.
Modelling indicates that infill drilling is forecast to improve
recovery from the Keddington field by between 113,000
to 183,000 barrels of oil, depending on the reservoir
permeability model selected and the combination of
infill targets.
The sub-surface location of a step-out well has been
finalised and it is planned to drill the well, where planning
consent is already granted, when the Operator deems
appropriate.
To facilitate confirmation of the target definition and well
design planning, re-processing of legacy 3D seismic data
has been completed.
There are plans to upgrade the production equipment at
Keddington during 2024, the result of which is expected
to increase efficiency and production rates.
8ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC CHAIRMAN’S STATEMENT
KELSTERN 1
PEDL334
SCUPHOLME 1
SALTFLEETBY
PEDL5
PEDL253
BISCATHORPE
PROSPECT
BISCATHORPE 2
BISCATHORPE 1
KEDDINGTON
PEDL5
BISCATHORPE
NORTH KELSEY
PEDL253 (45%)
PEDL241 (50%)
PEDL253 is situated within the proven hydrocarbon
fairway of the South Humber Basin and is on-trend
with the Keddington oilfield and the Saltfleetby gasfield.
While drilling the Biscathorpe-2 well, there were
hydrocarbon shows, 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
68 metres being interpreted as being oil-bearing.
Independent consultants APT also conducted analyses,
confirming a hydrocarbon column of 33-34 API gravity
oil, comparable with the oil produced at the nearby
Keddington oilfield.
Further evaluation of the results of the Biscathorpe-2 well,
together with the reprocessing of 264 square kilometres of
3D seismic, indicate a potentially material and commercial
hydrocarbon resource that remains to be appraised.
A side-track well is planned, targeting the Dinantian
Carbonate where the Operator has assessed, in
accordance with the PRMS Standard, a gross Mean
Prospective Resource of 2.55 mmbbl. The overlying Basal
Westphalian Sandstone has the potential to add gross Mean
Prospective Resources of 3.95 mmbbl. Economic modelling
demonstrates that the Westphalian target is economically
robust, especially in the current oil price environment.
Commercial screening indicates break-even full cycle
economics to be US$18.07 per barrel.
During November 2023, the Planning Inspectorate upheld
the appeal against the refusal of planning permission
by Lincolnshire County Council for a side-track drilling
operation, associated testing and long-term oil production
at the Biscathorpe-2 wellsite.
Union Jack’s technical team believe that Biscathorpe
remains one of the largest unappraised conventional
onshore discoveries within the UK.
North Kelsey is a conventional oil exploration prospect on
trend with, and analogous to, the Wressle oilfield which
lies approximately 15 kilometres to the northwest. The
prospect has been mapped from 3D seismic data and has
the potential for oil in four stacked Upper Carboniferous
reservoir targets.
The Operator estimates that gross Prospective Resources
range from 4.66 (P90) to 8.47 (P10) mmbbl.
The Operator has submitted an appeal on behalf of the
Joint Venture, against the refusal of an extension of time
to the existing planning permission by Lincolnshire County
Council to enable the drilling and testing of a conventional
exploration well at the North Kelsey site.
OTHER LICENCE
INTERESTS
Union Jack has interests in a number of other
non-core projects, namely PEDL118 (Dukes
Wood), PEDL203 (Kirklington), PEDL201
(Widmerpool Gulf) and PEDL209 (Laughton).
These licence interests have all been fully impaired
and are at various stages of relinquishment with the
exception of Dukes Wood where the geothermal
upside potential is being investigated.
Fiskerton Airfield (EXL294) is currently shut in. Longer
term potential for the site is to manage produced
water through the existing water injection well on
site and also for potential geothermal repurposing.
During the year, PEDL181 was relinquished
at no cost to the company.
9
BUSINESS AND STRATEGYwww.unionjackoil.com CHAIRMAN’S STATEMENT
UNITED STATES OF
AMERICA STRATEGIC
GROWTH AND
EXPANSION PLAN
During December 2023, for numerous reasons, including
the punitive Energy Profit Levy of 35% imposed on profits
generated within the UK, the Board commenced the
execution of a plan to seek growth opportunities in regimes
with sympathetic views towards the hydrocarbon industry,
without compromising global environmental objectives and
the aim of achieving net zero by 2050.
To this end, Union Jack has, in just the period of a few
months, assembled an attractive and growing portfolio of
cash generating Mineral Royalties, located in the Permian
Basin and Eagle Ford Shale, Texas and Bakken Shale, North
Dakota, USA. These are operated by major producers.
The Company has entered into farm-in agreements with
Reach to drill two wells, one of which, the Andrews
1-17, has already been drilled and declared a commercial
discovery. The other well, the Diana-1, designed to test
a Wilzetta Fault play, will be drilled during Q3 2024.
A further agreement was signed to conduct a 3D
seismic survey over certain areas of the Wilzetta Fault,
in Oklahoma, one of the largest hydrocarbon producing
states in the USA.
Union Jack’s strategic partnership with Reach offers the
opportunity to access a wider inventory of drill-ready
prospects in Oklahoma.
As a result of the initial success of Andrews 1-17, a
follow-up well location is currently in the planning phase
in readiness for early drilling.
10ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC CHAIRMAN’S STATEMENT
MINERAL ROYALTIES
During late 2023 and early 2024, Union Jack acquired
six quality Mineral Royalty packages, all brokered by the
Company’s Oklahoma based agent and adviser, Reach.
The attractions of USA Mineral Royalties include:
• Exposure to active and productive basins and some
of the largest operators in the USA
• Monthly income with no development or operating
costs
• Owned in perpetuity, with no forward liabilities
or obligations
• Royalties are estimated to have a long economic
life, in some cases more than 26 years and an Internal
Rate of Return in excess of 20%
The Mineral Royalties portfolio assembled to date
is summarised below:
• Cronus Unit, containing a 25 well package in the
Permian Basin, Midland County, Texas, (effective
date December 2023); the property is comprised
of nine Chevron and 16 XTO (a subsidiary of Exxon)
operated wells
• COG Operating LLC (a subsidiary of ConocoPhillips)
operated Powell Ranch Unit, consisting of 15 wells in
the Permian Basin, Upton County, Texas (effective date
November 2023); the property is comprised of seven
horizontal and eight vertical wells
• Occidental operated Palm Springs Unit, containing
10 horizontal wells in the Permian Basin, Howard
County, Texas (effective date January 2024)
• Bakken Shale, a diversified 96 well interest package,
located in Dunn, McKenzie and Williams Counties,
North Dakota. Quality Operators include Burlington
Resources, Continental and Hess (effective date
March 2024)
• Permian Basin, an eight well producing unit, located
in Howard and Borden Counties, Texas. Operated by
Vital Energy Inc, a quoted, Permian Basin focused entity,
based in Tulsa, Oklahoma (effective date March 2024)
• Eagle Ford Shale, a nine producing horizontal well
package, located in DeWitt County, Texas, operated
by ROCC Operating (effective date March 2024)
The Mineral Royalties also provide additional upside as
new wells are completed and drilled on the properties
at no cost to Union Jack. Chevron, one of the operators,
has publicly stated their commitment to expanding activities
in the Permian Basin.
The operators associated with the Royalties are all major
producers, ranking highly in the S&P Global (formerly
Standard & Poor’s), Fitch, and Moody credit ratings.
The Company’s intent is to expand its Mineral Royalty
portfolio as and when appropriate acquisition opportunities
arise.
11
BUSINESS AND STRATEGYwww.unionjackoil.com CHAIRMAN’S STATEMENT
WEST BOWLEGS
PROSPECT AND
ANDREWS 1-17
WELL OKLAHOMA
WILZETTA
FAULT PLAY
AND DRILLING
IN OKLAHOMA
(45%)
(75%)
During February 2024, the Company signed a
farm-in agreement with Reach to acquire a 75%
interest in a high-impact well, Diana-1, planned
to be drilled in Q3 2024, to test the Footwall
Fold Prospect in the Wilzetta Fault play, a
proven oil producing location and in an area
of associated interest.
The prolific Wilzetta Fault plays are the sites
of numerous oilfields across Central Oklahoma
which include:
• North-East Shawnee field, three miles south
of the Prospect, which has produced more
than 5,800,000 barrels of oil to date
• West Bellmont field, adjacent to the Prospect,
which has produced more than 580,000 barrels
of oil to date
• Arlington Field, ten miles north-east of the
Prospect, which has produced more than
1,800,000 barrels of oil to date
Typical wells drilled in the Wilzetta Fault can
produce approximately 250 barrels of oil per
day providing pay-back within three months.
The initial Wilzetta well will be drilled to a depth
of 6,000 feet where the prospect integrity is
supported by recently reprocessed 3D seismic data.
During January 2024, the Company signed a farm-in
agreement with Reach, to acquire a 45% interest
in the West Bowlegs Prospect, located in Seminole
County, Oklahoma, where the Andrews 1-17 well
was subsequently spudded in late March 2024, and
drilled to a depth of 4,600 feet.
The primary objective for the Andrews 1-17 well
was the Hunton Limestone, a prolific, producing
hydrocarbon reservoir in Oklahoma. The Hunton
Limestone is unconformably overlain by the main
oil-prone source rock, the Woodford Shale, and
is in an excellent position for the migration of oil.
The Andrews 1-17 well confirmed the presence
of the main objective, the Hunton Limestone,
showing high porosity with elevated gas readings,
with good reservoir qualities being interpreted
on the wireline logs.
The well was completed and placed on production
and is currently cleaning up. Oil produced has been
sold and permanent oil and gas production facilities
are being assembled on site. I look forward to
commenting further on productivity in due course.
Reach and its drilling team conducted activities
with precision, below budget and, of key importance,
safely and incident free.
The West Bowlegs drilling met our criteria of
acquiring material interests in near-term drilling
projects and being capable of quickly adding
cash-flow.
The Company’s first drilling venture in the USA is a
commercial success and an excellent start for Union
Jack in its initial enterprise with Reach.
12ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC CHAIRMAN’S STATEMENT
13
BUSINESS AND STRATEGYwww.unionjackoil.com CHAIRMAN’S STATEMENT
CORPORATE
AND FINANCIAL
The 12 month period under review, even with a reduced
oil price and an adverse exchange rate has, for the second
consecutive year, seen Union Jack remain a cash generating
and profitable entity. The Company retains a strong Balance
Sheet and a clear focus on the development of its flagship
assets both in the UK and the opportunity charged USA,
where a balanced portfolio of Mineral Royalties along
with production and exploration assets has already been
assembled.
The expectation that Union Jack’s USA ventures, guided
by both Reach’s and Union Jack’s very able technical teams,
have already been confirmed by the success of the Andrews
1-17 discovery.
Ray Godson has made the decision to step down from the
Board of Union Jack at the forthcoming AGM. Ray, since
the conception of the Company, has been an exemplary
director and we all wish Ray an enjoyable retirement.
Craig Howie has joined the team at Union Jack as an
independent non-executive director. Craig, appointed
on 22 April 2024, has over 20 years of City and advisory
experience, especially within the oil industry and is well
known within his peer group in respect of his knowledge
of oil enterprises, both junior and major. The Board
of Union Jack look forward to working with Craig and
welcome him to the team.
Revenues from oil sales of £5,065,679 (2022: £8,507,050)
reported for the period continued to have had a positive
effect on the Income Statement, resulting in the Company
being able to report a gross profit of £3,298,844 (2022:
£5,100,479), and net profit of £859,089 (2022: £3,606,624).
Basic Earnings per share of 0.79 pence were reported
(2022: 3.2 pence).
Since the commencement of our dividend policy and share
buy-back programme, approximately £3,000,000 has been
returned to shareholders.
The Company retains its policy of returning cash to
shareholders when deemed appropriate, taking into
consideration its financial requirements going forward.
In view of our sound financial position and the additional
income received since the year end from the Mineral
Royalties, on 14 May 2024 the Board declared a dividend
of 0.25 pence per ordinary share to be paid to qualifying
shareholders on Friday 26 July 2024.
The Company holds 6,300,000 ordinary shares in Treasury
which increase the Earnings Per Share, hold no voting rights
and are not entitled to a dividend payment.
I take this opportunity to thank our shareholders for
their continued support, as well as my co-directors and
advisers, all of whom continue to contribute towards the
development and growth of the Company.
14ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC CHAIRMAN’S STATEMENT
OUTLOOK
The Board’s confidence has once again been supported
by the Company’s solid 2023 financial results, confirming
its resilience, both financially and operationally.
In the UK, Union Jack will remain focused on the
development of its flagship project, Wressle, where the
Operator and joint venture partners have ambitious
near-term appraisal and development programmes
planned. The Board is of the opinion that, within
the Wressle development, there remains significant
material upside which will support the Company
with revenues for at least another decade.
I also look forward to progress at West Newton.
Encouragingly, the results from this key project to
date signal a potentially highly valuable onshore
project with resources comparable to those usually
reported offshore. A significant onshore domestic
gas resource, as indicated at West Newton, has the
potential to become an important transition fuel in
helping the UK achieve its 2050 Net Zero target.
Union Jack’s initial successes in the USA, in just a
few months, highlight the ease of entry and ability
to execute business in that country, justifying the
Board’s decision to seek further growth opportunities
internationally to bolster its flagship production
and appraisal assets in the United Kingdom.
Following the Company’s USA entry, involving both the
Andrews 1-17 discovery well and the financial attractions of
Union Jack’s expanding Mineral Royalties portfolio, I believe
that the Board’s optimism and our further expansion in the
USA, executed alongside a proactive drilling campaign, will
deliver material rewards in due course.
Our appetite for additional growth opportunities has been
whetted by our recent positive experience in the USA and
discussions are at an advanced stage with Reach in respect
of materially expanding our activities over the coming
months and beyond.
I am confident that the significant increase in drilling,
appraisal and development activity now planned in the
pursuit of growth from our balanced UK and USA
portfolios has the potential for significant value creation for
shareholders. We believe our heightened activity and the
expected additional news-flow generated, combined with
effective investor engagement on both sides of the Atlantic,
will continue to attract the ongoing support of our existing
shareholders and the attention of new investors, broadening
the appeal of the Company to a wider audience.
Overall, Union Jack is in sound financial health with a robust
Balance Sheet and continues to be debt free.
The future of Union Jack remains bright.
David Bramhill
Executive Chairman
17 May 2024
15
BUSINESS AND STRATEGYwww.unionjackoil.com STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
STRATEGY
Our strategy is the appraisal and development of the licence
interests currently owned in the United Kingdom and
United States of America.
BUSINESS REVIEW
Union Jack Oil plc is a UK registered company, focused on
the exploration and future development of the hydrocarbon
project interests held by the Company within the UK and
the USA.
A review of the Company’s operations during the year
ended 31 December 2023 and subsequent to the date of
this report is contained in the Chairman’s Statement and
this Strategic Report.
The gross profit for the year amounted to £3,298,844
(2022: £5,100,479),
The net profit for the year amounted to £859,089
(2022: £3,606,624).
The profit for the year includes impairments to Property,
Plant and Equipment of which total costs are £56,829
(2022: £478,584). These impairments are in relation to
PEDL118, -£8,639 (2022: £33,718), PEDL203, -£11,160
(2022: £28,260) and EXL294, £76,628 (2022: £416,606).
The profit for the year includes no impairments to
Intangible Assets (2022: -£3,028).
Administrative expenses, excluding impairment costs,
amounted to £2,057,506 (2022: £1,665,174).
Cash and cash equivalents at year end amounted to
£5,198,303 (2022: £7,155,100).
Total Assets at year end amounted to £24,176,606
(2022: £26,361,337).
Non-current assets at year end amounted to £17,431,036
(2022: £17,157,286).
Intangible Assets totalled £10,905,630 (2022: £9,134,006).
Tangible assets totalled £5,888,456 (2022: £5,666,212).
Of the asset figures above, the net effect is a reduction
in capital due to a dividend payment and share buybacks
through the year.
The Company’s Income Statement reports revenues of
£5,065,679 (2022: £8,507,050) in respect of production
income from Wressle and the Keddington Oilfield.
Post balance sheet date on 14 May 2024, the Board declared
a dividend of 0.25 pence per ordinary share to be paid to
qualifying shareholders on Friday 26 July 2024.
In May 2023, the Company announced the disposal of its
2.5% interest in the Claymore Area Royalty Agreement.
Union Jack is pleased with the consideration price and terms
of the sale, which generated an above average return on the
Company’s original investment.
During May 2023, a dividend of 0.3 pence per ordinary share
was declared and paid in July 2023.
In August 2023, operations commenced on the Wressle-1
well to install a downhole jet pump and associated
surface facilities as part of the planning to optimise future
production.
During September 2023, the Company was informed that
the Environment Agency had issued a variation of permit
for the West Newton B wellsite which allows for the use
of oil-based fluids within the Permian formations during
drilling and testing operations.
In November 2023, the Planning Inspectorate upheld
the appeal against the refusal of planning permission by
Lincoln County Council for a side-track drilling operation,
associated testing and long-term oil production at the
Biscathorpe-2 wellsite.
Production resumed at Wressle-1 and the sale of oil
recommenced during November 2023, following the
completion of site upgrades.
During December 2023, the Company received a CPR,
prepared by ERCE in respect of Wressle, the highlights of
which were a 263% increase in the 2P Reserves compared
to the 2016 CPR, a reclassification of 1,883 mboe in
Penistone Flags Contingent Resources to 2P Reserves and
a 59% upgrade to the Ashover Grit and Wingfield Flags
Estimated Ultimate Recoverable.
At the year end, the Company had purchased, as a function
of an approved share buy-back plan, 6,300,000 ordinary
shares which are in Treasury. These shares do not hold any
voting rights, nor do they qualify for any dividend payments.
A detailed Business Review can be found within the
Chairman’s Statement of the Annual Report and Financial
Statements.
16ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
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 as soon as possible to
any changes that may be required in the operation of the
licence interests held.
KEY PERFORMANCE INDICATORS
The Financial Statements for the year end 31 December
2023 show production from Wressle and Keddington.
The Board is extremely pleased with the business
performance of the Company and note the significant
positive financial figures reported within the KPI table.
In the UK the Company holds a number of key, quality
project interests, namely, Wressle, West Newton,
Biscathorpe, Keddington and North Kelsey, where
development, appraisal and exploration plans are in place
for the future benefit of stakeholders and the Company.
The initial success as a result of the drilling of the Andrews
1-17 well is encouraging and further drilling in the USA is
planned throughout 2024.
During the year, the Company has also remained profitable,
paid a dividend and continued a share buy-back programme.
Further events which took place after the Balance Sheet
date are described in the Directors’ Report and note 23
of the Annual Report and Financial Statements.
Table of Key Performance Indicators
KEY PERFORMANCE INDICATORS
Revenues
Total Comprehensive Income
Cash and Cash Equivalents
Net Current Assets
Total Equity
FOR THE YEAR ENDING
31 DECEMBER 2023
£
FOR THE YEAR ENDING
31 DECEMBER 2022
£
5,065,679
733,687
5,198,303
6,356,047
21,896,746
8,507,050
3,777,124
7,155,100
8,425,761
23,005,231
17
BUSINESS AND STRATEGYwww.unionjackoil.com STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
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
employees, pension scheme members, customers, suppliers
and other stakeholders, as well as shareholders, the
interests of all of whom directors have a statutory duty
to consider when making a decision.
Under section 172, the 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
Likely consequence
of any decision in
the long term
Duty to promote the success
of the Company for the
benefit of its members
as a whole, having regard to:
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
18ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
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, within the UK and the USA.
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
Limited, Rathlin Energy (UK) Limited and Reach Oil &
Gas Company Inc (“Reach”) (the “JOA Partners”).
Through its financing activities and production revenues,
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, both within the UK and the USA.
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 actions 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
both in the UK and the USA 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 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.
19
BUSINESS AND STRATEGYwww.unionjackoil.com STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
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 Executive Chairman and the Company’s Nominated
Adviser and Investor 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 believes that shareholders are seeking a
return on their investment primarily through capital
appreciation as a result of exploration and appraisal
success. Therefore the Company ensures that work
programmes are fully funded and utilises the Board’s
technical expertise to reduce or mitigate the risk of
exploration
• The Board also believes, given the current stage of
the Company’s development and its cash position,
that it is appropriate to benefit shareholders through
the commencement of dividend payments and a share
buyback programme, which began in 2022.
Employees
During the period, the Company directly employed four
people all of whom are directors of the Company. As part
of its strategy, the Board recognises that the Company’s
employees are critical to the success of the Company and
takes steps to ensure that the interests of its 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 packages
• The Board determines the non-executive directors’
remuneration packages
20ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC 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, with the exception of independent non-
executive Craig Howie, all hold shares in the Company
and their interests are therefore aligned to those of the
other shareholders.
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
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.
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.
21
BUSINESS AND STRATEGYwww.unionjackoil.com STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
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 generally 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 Reach Oil & Gas Company Inc 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 within the UK and the USA.
The Board considers that the UK and USA onshore
hydrocarbon arenas offer excellent value under
regimes 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 per
barrel. Lack of control over key assets is mitigated by
the fact that our Operators of choice, Egdon Resources
U.K. Limited, Rathlin Energy (UK) Limited and Reach Oil
& Gas Company Inc 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 who
together participate in regular technical meetings.
22ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
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 could raise its funds
through the financial market by share issues, derivatives
or 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 would not
use derivative financial instruments for speculative purposes
and has had no requirement for their use to date.
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. Whilst oil revenues are paid in US dollars, currency
is exchanged at a spot price, unless allocated to US near
future expenditure.
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 expectations 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
should be placed on the forward-looking statements.
On behalf of the Board
David Bramhill
Executive Chairman
17 May 2024
23
BUSINESS AND STRATEGYwww.unionjackoil.com PEDL183
West Newton
PEDL146
PEDL183
WEST NEWTON A-1
NORTH SEA
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
PEDL180
PEDL182
Wressle
Oilfield
PEDL182
Broughton
North
PL162
PEDL241
North Kelsey
PEDL182
PEDL173
PEDL180
HATFIELD
PL162
PEDL241
PEDL043
PEDL043
PEDL209
PEDL140
ML004
ML004
BECKINGHAM
CORRINGHAM
ML004
PEDL012
PEDL200
PEDL
210
PEDL006
PEDL
210
WEST FIRSBY
PEDL006
COLD HANWORTH
EAST
GLENTWORTH
PEDL253
SOUTH LEVERTON
ML007
SCAMPTON NORTH
SCAMPTON
PEDL007
BOTHAMSALL
NEWTON-ON-TRENT
NETTLEHAM
PEDL210
PL179
FARLEYS WOOD
ML003
PEDL130
PEDL090
EGMANTON
WHISBY
BECKERING
STAINTON
WELTON
EXL294
PEDL005(R)
North
Somercotes
Prospect
PEDL005
PEDL005
PEDL005
SALTFLEETBY
PEDL005(R)
Keddington
Oilfield
PEDL005(R)
Louth
Prospect
PEDL253
Biscathorpe
EAKRING
KIRKLINGTON
PEDL
118
PEDL
203
PEDL202
PEDL118
Dukes Wood
PEDL203
Kirklington
PEDL255
PEDL208
PEDL254
PEDL204
PL220
PEDL201
REMPSTONE
PL220
PEDL201
Widmerpool
Gulf
EXL294
Fiskerton Oilfield
10km
Gas Field
Oil Field/Discovery
Prospect
PEDL021
GOODWORTH
PL116
HUMBLY GROVE
PL233
PL249
STOCKBRIDGE
PEDL070
AVINGTON
DL004
ALBURY
BROCKHAM
PL235
PALMERS WOOD
ML021
PEDL246
BLETCHINGLEY
ML018
PL182
EXL189
EXL189
PEDL137
PEDL143
PEDL246
PEDL235
PEDL243
PEDL231
PEDL234
PEDL244
PL240
HORNDEAN
PL211
PEDL126
PEDL233
SINGLETON
PL205
STORRINGTON
PL241
LIDSEY
24ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC
Union Jack’s
Current Licence
Interests
United Kingdom
Licence Interests
PEDL180
PEDL182
Wressle
Development
Broughton North
40%
PEDL183 West Newton
16.665%
PEDL253
Biscathorpe
4
PEDL005(R)
Keddington
Oilfield
Louth
North Somercotes
EXL294
Fiskerton Oilfield
PEDL241 North Kelsey
45%
55%
20%
50%
PEDL118 Dukes Wood
16.67%
1
2
3
5
6
7
8
9
PEDL203 Kirklington
16.67%
West Bowlegs
PEDL201 Widmerpool Gulf
26.25%
10 PEDL209
Laughton
10%
Wilzetta
Royalties
United States of
America Licence and
royalty INTERESTS
45%
75%
25
BUSINESS AND STRATEGYwww.unionjackoil.com DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
The directors present their report together with the
financial statements for the year ended 31 December 2023.
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 2023
and 31 December 2023, were as shown in the table below:
ORDINARY SHARES
31 December
2023
1 January
2023
416,646
2,031,314
392,058
20,000
416,646
1,897,914
392,058
20,000
D Bramhill
J O’Farrell
R Godson
G Bull
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)
Raymond Godson will be stepping down from the
Board of Directors at the forthcoming AGM.
Craig Howie was appointed as an independent Non-
executive Director on 22 April 2024 and a resolution
for his re-election is detailed within the AGM notice.
DIRECTORS’ REMUNERATION
The remuneration of the directors in office at the year end
31 December 2023 was as follows:
D Bramhill
J O’Farrell
R Godson
G Bull
D Bramhill
J O’Farrell
R Godson
G Bull
SALARIES AND FEES
2022
2023
£
£
398,333
177,500
47,500
57,500
2023
1,200,000
700,000
150,000
550,000
287,083
120,000
40,000
40,000
OPTIONS
2022
1,200,000
700,000
150,000
550,000
Directors’ remuneration is disclosed in note 3 of these
financial statements.
No options were granted to directors or officers during
2023.
Joseph O’Farrell purchased 133,400 ordinary shares
at a weighted average price of 31.25 pence each, on
16 June 2023.
Further information in respect of options can be found
in note 13(b) 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, Raymond
Godson and Craig Howie are available for inspection
at the Company’s Registered Office.
DIVIDEND
In view of our sound financial position and the additional
income received since the year end from the Mineral
Royalties, the Board has declared a dividend of 0.25 pence
per ordinary share to be paid during July 2024 to qualifying
shareholders.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC 26
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
PURCHASE OF OWN SHARES
Under section 724 of the Companies Act 2006, a company
may purchase its own shares to be held in treasury (“Treasury
Shares”). The existing authority given to the Company at the
last AGM to purchase Treasury Shares of up to 10% of its
issued share capital will expire at the conclusion of the next
AGM. The Board considers it would be appropriate to renew
this authority and intends to seek shareholder approval to
purchase Ordinary Shares of up to 10% of its issued share
capital at the forthcoming AGM in line with current investor
sentiment. Details of the resolution renewing the authority
is included in the Notice of Annual General Meeting on
page 79, within this Report. During the year, the Company
made market purchases of 5,600,000 Ordinary Shares with
a nominal value of 5 pence per share, an aggregate nominal
value of £280,000, and representing 4.96% of the Company’s
issued share capital, for an aggregate consideration of
£1,522,473. At 31 December 2023, the Company held
6,300,000 Treasury Shares with a total nominal value of
£315,000 and representing 5.58% of its issued share capital,
at an aggregate cost of £1,736,700. The shares were
purchased as part of the Company’s strategy to return
value to investors.
DIRECTORS’ RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2023
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’s financial
statements in accordance with UK adopted international
accounting standards (IFRSs). 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,
subject to any material departures disclosed and
explained in the financial statements; and
• prepare the financial statements on a 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 27 June 2024, in accordance with the Notice of Annual
General Meeting on page 79. Details of the resolutions to
be passed are included in the notice.
27
GOVERNANCEwww.unionjackoil.com DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
EVENTS AFTER THE BALANCE SHEET DATE
The following events have taken place after the year end:
During January 2024, the results of a CPR by ERCE were
published in respect of the Reserves and Resources at
the Wressle development contained within PEDL180
and PEDL182. The highlights of the CPR, include a 263%
increase in 2P Reserves, the reclassification of 1,883 mbo
in Penistone Flags Contingent Resources to 2P Reserves
and a 59% upgrade to the Ashover Grit and Wingfield
Flags Estimated Ultimate Recoverable. In addition, a
23% upgrade was attributed to the Broughton North
Prospective 2U Resources.
During January 2024, the Company announced details of
its expansion into the United States of America (“USA”),
with the purchase of three Mineral Royalty packages
(“Royalties”) all located in the Permian Basin, Texas,
brokered by its Oklahoma based, agent and adviser,
Reach Oil & Gas Company Inc (“Reach”). The Royalties
comprise the Cronus, Powell Ranch and Palm Spring
Units operated by Chevron, COG Operating LLC (a
subsidiary of ConnocoPhillips) and Occidental, respectively.
The Royalties are estimated to have an economic life
of more than 26 years and a current Internal Rate of
Return in excess of 20%. The total amount spent on
royalties to date is £813,600.
During February 2024, Union Jack announced details of a
farm-in agreement with Reach to acquire a 45% working
interest in a well planned to be drilled on the West Bowlegs
Prospect and an area of associated interest, located in
Seminole County, Oklahoma, USA. The total amount spent
on the asset to date is £714,476.
During February 2024, Union Jack announced details of two
further farm-in agreements with Reach. The first agreement
was to acquire a 75% working interest in a well planned to
be drilled to test the Footwall Fold Prospect in the Wilzetta
Fault play and in an area of associated interest. The second
agreement was to acquire a 37.5% working interest in a 2D
and 3D seismic acquisition programme to identify additional
drillable prospects along the Wilzetta Fault. The total
amount spent on the asset to date is £357,147.
During March 2024, the Company announced details of the
acquisition of a further three Mineral Royalty packages in
the United States of America. The royalties comprise the
Bakken Shale, Permian Basin and Eagle Ford Shale, located
in North Dakota and Texas, respectively, and the amount
spent is included in the total royalty spend above.
In March 2024, permission was granted to trade the
Ordinary Shares of the Company on the OTCQB Venture
Market on the New York Stock Exchange.
In April 2024, Craig Howie was appointed as an
independent non-executive director to the Board
of the Company.
In May 2024, a dividend of 0.25 pence per ordinary share
was declared by the Board, to be paid in July 2024 to
qualifying shareholders.
CAPITAL STRUCTURE
Details of the issued share capital, together with details
of the movements in the Company’s issued share capital
during the year, are shown in note 13(a).
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 Crowe U.K. LLP will be proposed
at the forthcoming Annual General Meeting.
COMPANY NAME AND REGISTERED NUMBER
The registered number of Union Jack Oil plc is 07497220.
On behalf of the Board
David Bramhill
Executive Chairman
17 May 2024
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC 28 CORPORATE
GOVERNANCE REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
CORPORATE GOVERNANCE REPORT
The Company’s securities are traded on the AIM of the
London Stock Exchange and the OTCQB Venture Market
in the USA.
The London Stock Exchange requires 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 Quoted Companies Alliance
Corporate Governance Code (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.
The Company is interested in a number of onshore UK
hydrocarbon licences which are managed and operated by
one of two joint operating agreement partners (“the JOA
Partners”), Egdon Resources plc and Rathlin Energy (UK)
Limited. Onsite operational matters in the UK are managed
by the relevant site operator, which will be either one of
the two JOA Partners, (“The Operators”). In the USA,
the company has three Joint Venture agreements with
Reach Oil & Gas Company Inc in respect of two drilling
projects and a seismic acquisition programme.
QCA Code principle and
summary explanation
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.
Application by the Company
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. In the UK, the Company undertakes
this in conjunction with the JOA Partners. In the USA, the company has three Joint
Venture agreements with Reach Oil & Gas Company Inc in respect of two drilling
projects and a seismic acquisition programme.
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 or expand licence interests and
production in the UK and the USA.
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, and so not being overly exposed to
any single asset.
The Company’s strategy is underpinned by a well-balanced and diverse onshore
UK and USA 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.
The key challenges in the execution of the Company’s business model and strategy
are referred to within the Strategic Report.
29
GOVERNANCEwww.unionjackoil.com CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
QCA Code principle and
summary explanation
Principle 2
Seek to understand and
meet shareholder needs
and expectations.
Directors must develop a
good understanding of the
needs and expectations of all
elements of the Company’s
shareholder base.
The Board must manage
shareholder expectations and
should seek to understand
the motivations behind
shareholder voting decisions.
Application by the Company
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 UK version of
the Market Abuse Regulation (“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 with
presentations at oil industry conferences and similar events.
All shareholders are encouraged to attend the Company’s Annual General Meeting,
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 and other IR entities.
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 without delay of major
developments and potential risks in respect of the Company and the industry.
Management believes that shareholders are seeking a return on their investment
primarily through capital appreciation as a result of exploration and appraisal success.
Management prudently manages the Company to ensure that work programmes are
fully funded and uses the Board’s technical expertise to reduce or mitigate the risk
of exploration.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC 30 CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
Application by the Company
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 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 Partners 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 in the UK are subject to scrutiny by the North Sea Transition
Authority, the Environment Agency and the Health and Safety Executive before
commencement. The relevant site 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 its three key JOA Partners, Egdon Resources U.K. Limited, Rathlin
Energy (UK) Limited and Reach Oil & Gas Company Inc, who manage and operate
the Company’s licence interests on its behalf, in the UK and the USA respectively.
The Company takes very seriously its relationship with its JOA Partners and its
third party professional advisers (both of whom it sees as key stakeholders) and the
Board continues to discuss in an open, direct and constructive manner any issues and
queries which the Company’s JOA Partners may have.
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.
QCA Code principle and
summary explanation
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.
Where matters relate to the
Company’s impact on society,
the communities within which
it operates or the environment
have the potential to affect
the Company’s ability to
deliver shareholder value over
the medium to long-term,
then those matters must be
integrated into the Company’s
strategy and business model.
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.
31
GOVERNANCEwww.unionjackoil.com CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
QCA Code principle and
summary explanation
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;
companies need to consider
their extended business,
including their supply chain,
from key suppliers to end-
customers.
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).
Application by the Company
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 (e.g. legal, financial or technical). The Board
formally convenes on a regular basis, either by telephone or in person, 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.
Onsite operational risks are managed by the relevant site operators, Egdon Resources
U.K. Limited, Rathlin Energy (UK) Limited and Reach Oil & Gas Company Inc, 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 within the UK and the USA and whilst the Board considers that
both countries onshore hydrocarbon arena offers political security, the USA also
provides excellent value under a regime with a very clearly spelt out protocol giving the
opportunity to develop assets unhindered.
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 holds Directors’ and Officers’ Liability Insurance cover and the Company
is covered by the relevant operators’ insurance policies during drilling and other
operational situations for specific projects both in the UK and in the USA.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC 32 CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
QCA Code principle and
summary explanation
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.
Application by the Company
The Board consists of two executive directors, David Bramhill and Joseph O’Farrell,
and three non-executive directors, Graham Bull, Raymond Godson and Craig Howie,
who are responsible for the management of the Company. Craig joined the Board on
22 April 2024. Ray Godson will be stepping down from the Board at the conclusion
of the forthcoming AGM.
All three non-executive directors are considered by the Board to be independent.
Although Ray Godson and Graham Bull hold options in the Company, these are
considered by the Board not to affect their independence 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 regularly in person and by telephone throughout the year. The
Board also holds frequent informal project appraisal and strategy discussions, and
meets every quarter, 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 no
one individual opinion ever 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.
During 2023, six Board meetings and two Audit and Remuneration Committee
meetings were held, 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
5
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.
33
GOVERNANCEwww.unionjackoil.com CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
QCA Code principle and
summary explanation
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.
Succession planning has been
considered at Board level and
a strategy agreed upon.
The directors are committed
to promoting diversity and
equal opportunities and
consider the Company to
be a supportive employer.
Application by the Company
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. The Company believes that
the current Board of Directors collectively hold the relevant experience, skills and
personal qualities and capabilities to deliver the strategy of the Company for the
benefit of the shareholders over the medium to long-term. An overview
of the directors are as follows:
The majority of the directors have experience of working in the USA and an
understanding of the assets and control.
David Bramhill, Executive Chairman, 73
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, 72
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, 78
Mr Bull is a geologist with 53 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 OilQuest Resources plc (subsequently acquired
by EnCore plc), Premier Oil plc, Cirque Energy and DSM Energy.
Mr Bull is a member of the Petroleum Exploration Society of Great Britain, the
American Association of Petroleum Geologists and a Fellow of the Geological Society
of London.
Mr Bull is the Chairman of the Remuneration Committee and a member of the Audit
Committee.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC 34 CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
QCA Code principle and
summary explanation
Principle 6 (continued)
Application by the Company
Raymond Godson, Non-Executive Director, 80
Mr Godson is a chartered accountant with 44 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 currently the Chairman of the Audit Committee and a member
of the Remuneration Committee.
Mr Godson will be stepping down from the Board of the Company at the conclusion
of the forthcoming AGM to be held on 27 June 2024 and will be replaced on the
Audit and Remuneration Committees by Craig Howie.
Craig Howie, Non-Executive Director, 48
Mr Howie is an Extel-ranked financial oil and gas analyst with wide-ranging
financial markets experience and skills. Mr Howie holds several securities industry
qualifications and is a Society of Petroleum Engineers (SPE) member. Mr Howie has
held roles with Murray Johnstone Limited, Williams de Broe Plc, KPMG Corporate
Finance and Blue Oar Securities. For the past 10 years, Mr Howie had responsibility
for E&P sector research at Shore Capital, regularly producing detailed financial models
on production-led companies. In addition, Mr Howie’s proactive engagement with
corporate and institutional clients have assisted in building the business development
skills required to establish the ongoing growth of several companies.
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:
JL Geophysics Ltd, Calderdale Geoscience Limited and Oil & Gas Advisers Limited.
35
GOVERNANCEwww.unionjackoil.com CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
Application by the Company
JL Geophysics 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 Advisors Limited provides a financial overview in respect of due diligence
on potential project acquisitions and ongoing economics of our project interests.
Matthew Small is Company Secretary and, via Berkeley Hall Marshall Limited,
represents the Company as de facto Financial Controller, working closely with
the Executive Chairman and the Audit and Remuneration Committees.
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.
The Company has adopted and discussed succession planning and the processes by
which it approaches board and other senior management appointments.
QCA Code principle and
summary explanation
Principle 6 (continued)
Principle 7
Evaluate Board
performance based
on clear and relevant
objectives, seeking
continuous improvement.
The Board should regularly
review the effectiveness of its
performance as a unit, as well
as that of its committees and
the individual directors.
The Board performance
review may be carried out
internally or, ideally, externally
facilitated from time to time.
The review should identify
development or mentoring
needs of individual directors
or the wider senior
management team.
It is healthy for membership
of the Board to be periodically
refreshed. Succession planning
is a vital task for the Board.
No member of the Board
should become indispensable.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC 36 CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
Application 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 and 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.
The Board ensures the Company has the means to determine that ethical values
and behaviours are recognised and respected.
QCA Code principle and
summary explanation
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.
37
GOVERNANCEwww.unionjackoil.com CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
QCA Code principle and
summary explanation
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.
Application by the Company
As disclosed throughout this statement, the Company maintains and employs robust
corporate governance practices to support an effective and collaborative Board, always
working in the best interests of its shareholders.
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 currently chairs
the Audit Committee. Mr Godson will be retiring as a director at the conclusion of
the forthcoming AGM.
• The Non-Executive Director, Craig Howie is an experienced financial
profiler. Mr Howie will chair the Audit Committee and become a member of the
Remuneration Committee with effect from the conclusion of the forthcoming AGM.
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 currently 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.
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.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC 38 CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
QCA Code principle and
summary explanation
Principle 9 (continued)
Application by the Company
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.
On Raymond Godson’s retirement at the forthcoming AGM, Craig Howie will assume
appointments to the Audit and Remuneration Committees.
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.
Principle 10
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 Report is delivered to each registered shareholder, and also made
available on the Company’s website
a Half Yearly Report is 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
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. The outcome of all shareholders votes are disclosed
in a clear and transparent manner via a RNS.
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/
39
GOVERNANCEwww.unionjackoil.com CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
THE BOARD
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, seven times during the year. In addition,
the Board held numerous project appraisal and strategy
discussions during the year.
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:
REMUNERATION COMMITTEE
The Remuneration Committee comprises Graham Bull,
who acts as its Chairman, and until he retires as a director
at the forthcoming AGM, Raymond Godson. Craig Howie
will become a member of the Remuneration Committee
at the conclusion of the forthcoming AGM.
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 62.
•
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 remuneration of non-executive directors is determined
by the Board.
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
AUDIT COMMITTEE
The Audit Committee comprises Raymond Godson, who
currently acts as its Chairman, and Graham Bull. Craig
Howie will become Chairman of the Audit Committee
at the conclusion of the forthcoming AGM. 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.
During 2023, the Board appointed a new auditor, following
the Company’s decision to end its relationship with BDO
LLP for commercial reasons. After a rigorous process it
was decided by the Board that Crowe U.K. LLP would be
best suited to this important role, and they accepted the
position. Shareholder approval to confirm Crowe U.K. LLP’s
appointment will be sought at the Company’s upcoming
Annual General Meeting on 27 June 2024.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC 40
CLIMATE CHANGE POLICY
The Company does not operate the projects in which it
has invested.
The Company’s policy is to work with site operators whose
vision is to provide locally derived, secure and affordable
energy to meet the UK’s evolving needs. In addition, and in
line with the international treaty on climate change known
as the Paris Agreement, the companies that we align with
must be committed to attaining Net Zero emissions no
later than 2050, with at least a 25% reduction in emissions
by 2025. This commitment by the Operator’s include their
share of Scope 1 (direct emissions) and Scope 2 (purchase of
indirect power) emissions from operated and non-operated
assets. This forms part of Union Jack’s commitment to
safety, environmental and social responsibility.
To achieve the above, our site operators have:
• Established time bound targets that support the
ambitions of the Paris Agreement
•
Identified and pursued opportunities to minimise their
carbon footprint and greenhouse gas emissions within
their operations
• Participated with industry and academic partners to
evaluate, identify and invest in technology and studies
that can help mitigate or offset their emissions
• Communicated with internal and external stakeholders
in a transparent manner on their climate related
performance and their associated governance, risk
management and target setting
• Considered carbon emissions as part of their decision-
making process across our asset portfolio to test the
robustness of investments against net zero strategy
•
Incentivised emission reduction opportunities identified
by their staff and contractors with an emphasis on
operational plant efficiency
The management of the Company has been assured that
the policies highlighted above will be continually reviewed
and updated as understanding of climate related risks, new
technologies and associated regulations evolve.
41
GOVERNANCEwww.unionjackoil.com INDEPENDENT AUDITOR’S REPORT
ON THE FINANCIAL STATEMENTS
TO THE MEMBERS OF UNION JACK OIL PLC
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 entity’s ability to continue to adopt the Going Concern
basis of accounting included:
•
reviewing directors’ assessment of the Going Concern
assumption covering a period of not less than 12
months from the date of approval of the Financial
Statements;
• enquiring of directors as to their knowledge of
events or conditions beyond the period of directors’
assessment that may cast significant doubts on the
entity’s ability to continue as a Going Concern;
•
reviewing the cashflow projections prepared by
directors and making an assessment of the assumptions
included therein taking into consideration the timing of
costs, scope of work programmes and oil prices;
• performing a review of committed expenditure and
minimum spend amounts under licence agreements
and other contracts; and
• evaluating the adequacy of disclosures made in the
financial statements in respect of Going Concern.
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 entity’s ability to continue as
a going concern for a period of at least 12 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.
OPINION
We have audited the Financial Statements of
Union Jack Oil plc (the “Company”) for the year
ended 31 December 2023, which comprise:
the Income Statement for the year
•
ended 31 December 2023;
•
•
•
•
•
the Statement of Comprehensive Income
for the year ended 31 December 2023;
the Balance Sheet as at 31 December 2023;
the Statement of Changes in Equity for the
year then ended;
the Statement of Cash Flows for the year
then ended; and
the Notes to the Financial Statements,
including Principal Accounting Policies.
The financial reporting framework that has been applied
in the preparation of the Financial Statements is applicable
law and UK-adopted international accounting standards.
In our opinion, the Financial Statements:
•
give a true and fair view of the Company’s
affairs as at 31 December 2023 and of
its profit for the year then ended;
• have been properly prepared in accordance with
UK-adopted international accounting standards; and
• have been prepared in accordance with the
requirements of the Companies Act 2006.
BASIS FOR OPINION
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit of
the financial statements section of our report. We are
independent of the Company in accordance with the ethical
requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard
as applied to listed entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC 42 INDEPENDENT AUDITOR’S REPORT
ON THE FINANCIAL STATEMENTS
TO THE MEMBERS OF UNION JACK OIL PLC
MATERIALITY
In planning and performing our audit we applied the concept
of materiality. An item is considered material if it could
reasonably be expected to change the economic decisions
of a user of the Financial Statements. We used the concept
of materiality to both focus our testing and to evaluate the
impact of misstatements identified.
Based on our professional judgement, we determined
overall materiality for the Company Financial Statements
as a whole to be £243,000, based on 1% of total assets.
Total assets was used because the Company has a mix of
exploration and production assets. A profit measure alone is
susceptible to fluctuation mainly due to periods of shut in or
movements in oil prices for a company which has only one
producing asset. The asset measure provides a stable basis
for the assessment of materiality.
We use a different level of materiality (“performance
materiality”) to determine the extent of our testing for the
audit of the Financial Statements. Performance materiality
is set based on the audit materiality as adjusted for the
judgements made as to the entity risk and our evaluation
of the specific risk of each audit area having regard to the
internal control environment. Performance materiality was
set at 70% of materiality for the Financial Statements as a
whole, which equates to £170,000.
Where considered appropriate performance materiality
may be reduced to a lower level, such as, for related party
transactions and directors’ remuneration.
We agreed with the Audit Committee to report to it all
identified errors in excess of £12,150. Errors below that
threshold would also be reported to it if, in our opinion
as auditor, disclosure was required on qualitative grounds.
OVERVIEW OF THE SCOPE OF OUR AUDIT
Our engagement was in respect of the audit of the Financial
Statements of the Company. Our audit approach was
developed by obtaining a thorough understanding of the
Company’s activities and is risk based.
Based on this understanding we assessed those aspects of
the Company’s transactions and balances which were most
likely to give rise to a material misstatement and were most
susceptible to irregularities including fraud or error.
Specifically, we identified what we considered to be areas
of increased risk and planned an audit approach to focus on
these areas accordingly. We undertook a combination of
analytical procedures and substantive testing on significant
transactions, balances and disclosures, the extent of which
was based on various factors such as our overall assessment
of the control environment, the effectiveness of controls
over individual systems and the management of specific risks.
KEY AUDIT MATTER
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the
financial statements of the current period and include the
most significant assessed risks of material misstatement
(whether or not due to fraud) we identified, including those
which had the greatest effect on the overall audit strategy,
the allocation of resources in the audit; and directing the
efforts of the engagement team. These matters were
addressed in the context of our audit of the Financial
Statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
In addition to Going Concern, we identified the following
Key Audit Matter. This is not a complete list of all risks
identified by our audit.
43
GOVERNANCEwww.unionjackoil.com INDEPENDENT AUDITOR’S REPORT
ON THE FINANCIAL STATEMENTS
TO THE MEMBERS OF UNION JACK OIL PLC
Key audit matter(s)
How the scope of our audit addressed the key audit matter
Carrying value of Oil and
Gas Assets
Refer to notes 7 and 8 to the
financial statements.
The Company’s oil and gas assets
amounted to £15,974,313 as of
31 December 2023. Exploration
and evaluation interests (E&E)
amounted to £10,226,088.
Property, plant and equipment
or development and producing
interests (D&P) amounted to
£5,748,225.
Given the material carrying value
of these assets, there is a risk
that the carrying value is higher
than the recoverable amount.
Therefore when an indicator of
impairment is identified and an
assessment is performed, the
assessment will involve significant
judgement.
Our work in respect of both the E&E assets and the D&P assets focused on
evaluating the directors’ impairment indicator review for both producing and
exploration licences.
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 specified procedures are included below:
Exploration and evaluation (E&E) assets - IFRS 6 Exploration and
Evaluation of Mineral Resources
• understanding of the controls operating in respect of the Company’s
impairment reviews
•
reviewing directors’ assessment of impairment under IFRS 6 and consider
whether there are any indicators of impairment
• obtaining and reviewing agreements and other information available during the
audit to identify any additional interests
• making enquiries and reviewing publicly available information as to whether the
licences are in good standing and whether the terms of the licences are being
adhered to
• obtaining the Company’s budget and ensuring that expenditure has been
planned to maintain licences and for future expenditure to be spent to develop
these licence areas
•
reviewing the available resource statements to determine if there is any evidence
of impairment including publications by the respective operators
•
reviewing board minutes for evidence of impairment; and
• assessing the adequacy of the disclosures in the Financial Statements
Development and production assets (D&P) assets - IAS 36 Impairment
of Assets
• understanding the controls operating in respect of the Company’s impairment
reviews
•
•
reviewing directors’ assessment of impairment under IAS 36 and considering
whether there are any indicators of impairment
reviewing the available resource statements to determine if there is any evidence
of impairment including publications by the respective operators
• confirming the consistency of the reserves and resources in the models with
the updated Competent Person reports
• assessing the competence and objectivity of external and internal Competent
Persons
•
•
•
reviewing public information and Board minutes for evidence of indicators of
impairment
reviewing directors’ impairment models and sensitivity analysis for those models
as well as performing additional sensitivity analysis on the impairment models
where considered necessary; and
reviewing the disclosures in the Financial Statements, including the
appropriateness of key judgements and sensitivities regarding asset carrying
values and impairment
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC 44
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
contained within the Annual Report. The other information
comprises the information included in the Annual Report,
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 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.
OPINION ON OTHER MATTER PRESCRIBED BY
THE COMPANIES ACT 2006
In our opinion based on the work undertaken in the course
of our audit
•
•
the information given in the Strategic Report and
the Directors’ Report for the financial year for
which the Financial Statements are prepared is
consistent with the Financial Statements; and
the Strategic Report and the Directors’ Report have
been prepared in accordance with applicable legal
requirements.
MATTERS ON WHICH WE ARE REQUIRED TO
REPORT BY EXCEPTION
In light of the knowledge and understanding of the
Company and its environment obtained in the course
of the audit, we have not identified material misstatements
in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following
matters where 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 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 THE DIRECTORS FOR THE
FINANCIAL STATEMENTS
As explained more fully in the Directors’ Responsibilities
Statement set out on page 27, 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.
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 on page 46.
45
GOVERNANCEwww.unionjackoil.com INDEPENDENT AUDITOR’S REPORT
ON THE FINANCIAL STATEMENTS
TO THE MEMBERS OF UNION JACK OIL PLC
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF
THE FINANCIAL STATEMENTS (CONTINUED)
We obtained an understanding of the legal and regulatory
frameworks that are applicable to the Company and the
procedures in place for ensuring compliance. Based on our
understanding of the Company and industry, discussions
with those charged with governance we identified financial
reporting standards and Companies Act 2006 as having a
direct effect on the amounts and disclosures in the Financial
Statements. Our work included direct enquiry of those
charged with governance, reviewing Board and relevant
committee minutes and inspection of correspondence.
As part of our audit planning process, we assessed the
different areas of the Financial Statements, including
disclosures, for the risk of material misstatement. This
included considering the risk of fraud where direct enquiries
were made of those charged with governance concerning
both whether they had any knowledge of actual or
suspected fraud and their assessment of the susceptibility
of fraud. We considered the risk was greater in areas
involving significant estimate or judgement. Based on this
assessment we designed audit procedures to focus on
key areas of estimate or judgement, this included specific
testing of journal transactions, both at the year end and
throughout the year.
We identified the significant laws and regulations of the UK
to be those relating to the industry including, Oil & Gas
Regulations, the financial reporting framework, tax legislation
and the AIM listing rules. The Company is subject to laws
and regulations where the consequence of non-compliance
could have a material impact on the amount or disclosures
in the financial statements, through the imposition of fines
or litigations. These laws and regulations include those
relating to health and safety, licensing and the environment.
Our audit procedures included:
• enquiry of directors about the Company’s policies,
procedures and related controls regarding compliance
with laws and regulations and if there are any known
instances of non-compliance including fraud
• discussions with directors to consider any known or
suspected instances of non-compliance with laws and
regulations identified by them
•
•
reviewing minutes of meetings of those charges with
governance for any instances of non-compliance with
laws and regulations
reviewing correspondences with regulatory and tax
authorities including HMRC and Environmental Agency
for any instances of non-compliance with laws and
regulations
• engaging tax specialists in the audit to assess compliance
with relevant tax laws and regulations
•
testing the appropriateness of journal entries recorded
in the general ledger and other adjustments made in the
preparation of the Financial Statements; and
• Reviewing accounting estimates for biases and financial
statement disclosures and agreeing to surround
information.
Owing to the inherent limitations of an audit, there is an
unavoidable risk that some material misstatements of the
Financial Statements may not be detected, even though
the audit is properly planned and performed in accordance
with the ISAs (UK). We are not responsible for preventing
non-compliance and cannot be expected to detect non-
compliance with all laws and regulations.
The potential effects of inherent limitations are particularly
significant in the case of misstatement resulting from fraud
because fraud may involve sophisticated and carefully
organized schemes designed to conceal it, including
deliberate failure to record transactions, collusion or
intentional misrepresentations being made to us.
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.
Matthew Stallabrass (Senior Statutory Auditor)
For and on behalf of Crowe U.K. LLP,
Statutory Auditor
London EC4M 7JW
17 May 2024
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC 46 Income statement
FOR THE YEAR ENDED 31 DECEMBER 2023
Notes
31.12.23
£
31.12.22
£
Revenue
Cost of sales - operating costs
Cost of sales - depreciation
Cost of sales - Net Profit Interest payment
Gross profit
Administrative expenses (excluding impairment charge)
Impairment
Total administrative expenses
Operating profit
Finance income
Royalty income
Profit before taxation
Taxation
Profit for the financial year
Attributable to:
Equity shareholders of the Company
Earnings per share
Basic (pence)
Diluted (pence)
2
4
4
5
6
6
5,065,679
8,507,050
(1,118,794)
(463,782)
(184,259)
(1,143,967)
(2,125,425)
(137,179)
3,298,844
5,100,479
(2,057,506)
(1,665,174)
(56,829)
(475,556)
(2,114,335)
(2,140,730)
1,184,509
2,959,749
141,672
35,142
86,586
42,444
1,361,323
(502,234)
3,088,779
517,845
859,089
3,606,624
859,089
3,606,624
0.79
0.79
3.20
3.16
The accompanying accounting policies and notes on pages 52 to 78 form an integral part of these financial statements.
47
FINANCIAL STATEMENTSwww.unionjackoil.com
Statement of
Comprehensive Income
FOR THE YEAR ENDED 31 DECEMBER 2023
Notes
31.12.23
£
31.12.22
£
Profit for the financial year
859,089
3,606,624
Items which will not be reclassified
subsequently to profit
Other comprehensive income
Profit on investment revaluation
Taxation
10
44,984
(170,386)
170,500
–
Total comprehensive profit for the financial year
733,687
3,777,124
The accompanying accounting policies and notes on pages 52 to 78 form an integral part of these financial statements.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC 48
balance Sheet
AS AT 31 DECEMBER 2023
Assets
Non-current assets
Exploration and evaluation assets
Property, plant and equipment
Investments
Deferred tax asset
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Trade and other payables
Non-current liabilities
Provisions
Deferred tax liability
Total liabilities
Net assets
Notes
31.12.23
£
31.12.22
£
7
8
10
5
11
12
19
20
5
10,905,630
5,888,456
530,112
106,838
9,134,006
5,666,212
552,043
1,805,025
17,431,036
17,157,286
21,313
1,525,954
5,198,303
6,745,570
28,038
2,020,913
7,155,100
9,204,051
24,176,606
26,361,337
389,523
778,290
1,890,337
–
1,700,069
877,747
1,890,337
2,577,816
2,279,860
3,356,106
21,896,746
23,005,231
7,514,576
712,634
(1,736,700)
15,406,236
7,514,576
712,634
(214,227)
14,992,248
21,896,746
23,005,231
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
49
Capital and reserves attributable to the
Company’s equity shareholders
Share capital
Share-based payments reserve
Treasury reserve
Accumulated profit
13(a)
14
14
14
Total equity
The financial statements of Union Jack Oil plc, registered number 07497220, were approved and authorised for issue
by the Board of Directors on 17 May 2024 and were signed on its behalf by:
David Bramhill
Director
The accompanying accounting policies and notes on pages 52 to 78 form an integral part of these financial statements.
www.unionjackoil.com
Statement of
Changes in equity
FOR THE YEAR ENDED 31 DECEMBER 2023
Share-based
Share
capital
£
Share
premium
£
payment Treasury Accumulated
profit
reserve
£
£
reserve
£
Total
£
Balance at 1 January 2023
7,514,576
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
712,634
(214,227)
14,992,248
23,005,231
–
–
–
–
–
–
–
–
859,089
859,089
44,984
(170,386)
44,984
(170,386)
733,687
733,687
–
–
–
(1,522,473)
(319,699)
–
(319,699)
(1,522,473)
– (1,522,473)
(319,699) (1,842,172)
Balance at 1 January 2022
7,507,076
21,528,077
638,586
7,514,576
–
712,634 (1,736,700) 15,406,236 21,896,746
–
–
–
–
–
–
–
–
–
–
–
–
(9,468,392)
20,205,347
3,606,624
3,606,624
170,500
170,500
3,777,124
3,777,124
Profit for the financial year
Other comprehensive profit
Taxation
Total comprehensive
profit for the year
Contributions by and
distributions to owners
Dividends
Treasury shares
Total contributions by
and distributions to owners
Balance at
31 December 2023
Profit for the financial year
Other comprehensive profit
Total comprehensive
profit for the year
Contributions by and
distributions to owners
Exercise of share options
Capital reduction
Dividends
Expiry of warrants
Treasury shares
Share-based payments
Total contributions by
and distributions to owners
Balance at
31 December 2022
7,500
–
–
–
–
–
25,500
(21,553,577)
–
–
–
–
(19,368)
–
–
(11,098)
–
104,514
–
–
–
–
(214,227)
–
19,368
21,553,577
(900,527)
11,098
–
–
33,000
–
(900,527)
–
(214,227)
104,514
7,500 (21,528,077)
74,048
(214,227) 20,683,516
(977,240)
7,514,576
–
712,634
(214,227) 14,992,248 23,005,231
The accompanying accounting policies and notes on pages 52 to 78 form an integral part of these financial statements.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC 50
Statement of cash flows
FOR THE YEAR ENDED 31 DECEMBER 2023
Notes
31.12.23
£
31.12.22
£
Cash flow from operating activities
15
1,984,019
5,811,734
Cash flow from investing activities
Purchase of intangible assets
Purchase of property, plant and equipment
Disposal of assets
Fixed term deposit
Loan advanced
Loan repaid
Purchase of investments
Sale of investments
Interest received
(1,814,716)
(766,424)
227,272
–
–
–
(770,173)
883,725
141,672
(712,935)
(2,852,254)
–
(1,000,000)
(1,000,000)
2,000,000
(100,000)
6,772
105,996
10
10
Net cash used in investing activities
(2,098,644)
(3,552,421)
Cash flow from financing activities
Proceeds on issue of new shares
Dividends paid
Treasury shares
–
(319,699)
(1,522,473)
33,000
(900,527)
(214,227)
Net cash used in financing activities
(1,842,172)
(1,081,754)
Net (decrease) / increase in cash and cash equivalents
(1,956,797)
1,177,559
Cash and cash equivalents at beginning of financial year
7,155,100
5,977,541
Cash and cash equivalents at end of financial year
12
5,198,303
7,155,100
The accompanying accounting policies and notes on pages 52 to 78 form an integral part of these financial statements.
51
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 primarily derived from selling
hydrocarbons, 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 relevant 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 2023 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 through to 31 December 2025.
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; (ii) 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.”
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC 52 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 16. 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.
Impairment of 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.
Any loss allowances measured in accordance with the above
are recognised as a deduction from trade receivables in the
balance sheet and movements in the loss allowance are
recognised as an expense / (or gain) within administrative
expenses in the income statement.
53
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 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
Company 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.
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 2023UNION JACK OIL PLC 54 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.
NET PROFIT INTEREST
A Net Profit Interest (“NPI”) agreement exists between
Egdon Resources U.K. Limited, Union Jack Oil plc and Valhalla
Oil & Gas AS (“Valhalla”), which was activated in September
2022. Under this agreement Union Jack Oil plc, pay Valhalla a
maximum of 2.75% NPI of PEDL180 income, less deductible
expenditure. Expenditure regarding this contract is recognised
in the Income Statement in the period it arises, as calculated
based on the income produced by the licence in that
period, less deductible expenditure, as set out in the original
agreement. Due to the nature of this expenditure, arising
directly from the revenue stream, it is recognised as a direct
cost in the Income Statement.
55
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.
ENERGY PROFITS LEVY
On 26 May 2022, the government introduced an Energy
Profit Levy (“EPL”) of 25% on profits.
The EPL for the year 2023, was increased to 35% and
the CAPEX relief decreased from 180% to 129%. OPEX
allowance remained at 100%.
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, with the exception of transactions that give
rise to equal taxable and deductible temporary differences.
The carrying amount of deferred tax assets is reviewed at
each Balance Sheet date and reduced to the extent that it
is no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected
to apply in the period when the liability is settled or the
asset is realised based on tax laws and rates that have been
enacted or substantively enacted at the Balance Sheet date.
Deferred tax is charged or credited in the Income Statement,
except when it relates to items charged or credited in other
comprehensive income, in which case the deferred tax is also
dealt with in other comprehensive income.
Deferred tax assets and liabilities are offset when there
is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income
taxes levied by the same taxation authority and the Company
intends to settle its current tax assets and liabilities on a
net basis.
EQUITY INSTRUMENTS
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Company are
recognised at the proceeds received, net of direct issue costs.
The equity instrument in respect of the Company is in
relation to the issue of ordinary shares.
SHARE-BASED PAYMENTS
Equity-settled share-based payments in respect of options
issued by the Company are measured at the fair value of the
equity instruments at the grant date.
Details regarding the determination of the fair value of equity-
settled share-based transactions are set out in note 13(b).
The fair value determined at the grant date of the equity-
settled share-based payments is expensed over the vesting
period, based on the Company’s estimate of the number of
equity instruments that will eventually vest.
At each Balance Sheet date, the Company revises its estimate
of the number of equity instruments expected to vest as a
result of the effect of non-market-based vesting conditions.
The impact of the revision of the original estimates, if any, is
recognised in the Income Statement such that the cumulative
expense reflects the revised estimate, with a corresponding
adjustment to equity reserves.
When a share-based payment expires, the cumulative
expense recognised in the share based payment reserve
is reclassified to the relevant component of equity
in line with the original recognition of the expense.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC 56
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
IIAS 1
IAS 8
IAS 12
Amendments to IAS 1: Disclosure of Accounting
policies
Amendments to IAS 8: Definition of Accounting
Estimates
1 January 2023
Amendments to IAS 12: Deferred Tax relating
to Assets and Liabilities arising from a Single
Transaction
1 January 2023
Effective Date:
Annual periods
beginning on or
after:
1 January 2023
UKEB
adopted
Impact on the
Company
Yes
Yes
Yes
No material
impact
No material
impact
No material
impact
At the date of authorisation of the consolidated financial statements, the IASB and IFRS Interpretations Committee have issued
standards, interpretations and amendments which are applicable to the Company. For the next reporting period, applicable
International Financial Reporting Standards will be those endorsed by the UK Endorsement Board (UKEB).
Whilst these standards and interpretations are not effective for, and have not been applied in the preparation of, these
consolidated financial statements, the following could potentially have a material impact on the Company’s financial statements
going forward:
New and revised International Financial Reporting Standards Effective Date:
Annual periods
beginning on or after:
UKEB adopted
IAS 1
Amendments to IAS 1: Classification of Liabilities as Current
or Non-current
1 January 2024
IAS 7 &
IFRS 7
Amendments to IAS 7 and IFRS 7: Supplier Finance
Arrangements
1 January 2024
Yes
Yes
New and revised International Financial Reporting Standards which are not considered to potentially have a material impact on
the Company’s financial statements going forwards have been excluded from the above.
Management anticipates that all relevant pronouncements will be adopted in the Company’s accounting policies for the first
period beginning after the effective date of the pronouncement.
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.
57
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
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 3.814%
and inflation rates of 2.125% 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.
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.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC 58 PRINCIPAL ACCOUNTING POLICIES
Reserve Estimates
Reserves are estimates of the amount of product that can
be economically and legally extracted from the Company’s
properties. In order to calculate the reserves, estimates
and assumptions are required about a range of geological,
technical and economic factors, including quantities,
production techniques, recovery rates, production costs,
transport costs, commodity demand, commodity prices
and exchange rates.
Estimating the quantity and/or grade of reserves requires the
size, shape and depth of fields to be determined by analysing
geological data such as drilling samples. This process may
require complex and difficult geological judgements and
calculations to interpret the data.
Given that the economic assumptions used to estimate
reserves change from year to year, and because additional
geological data is generated during the course of operations,
estimates of reserves may change from year to year. Changes
in reported reserves may affect the Company’s financial
results and financial position in a number of ways, including
the following:
• Asset carrying values may be affected by possible
impairment due to adverse changes in estimated future
cash flows;
• Depreciation, depletion and amortisation charged in the
Income Statement may change where such charges are
determined by the units of production basis, or where
the useful economic lives of assets change.
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 Cash Generating Unit 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.
With regard to the impairment review for Keddington,
management have applied the 2P reserves estimate as the
representation of the forward programme for the asset.
Further improvement is scheduled for later in the year, which
will see a potential increase on the current daily production
numbers. Management do not consider that the 1P reserves
estimate is a realistic outcome and therefore have not based
their impairment assessment on those figures.
Investments
The Company’s investments in equity instruments are held
for 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.
Deferred tax
In determining the deferred tax asset to recognise, the
directors have considered the likelihood of generating taxable
profits in the foreseeable future against which losses and
other timing differences can be offset. The directors have used
assumptions consistent with those adopted in preparing the
going concern assessment and have not anticipated profits that
may arise following future exploration activity. Foreseeable
future has been considered to be 24 months. The deferred
tax asset recognised is disclosed in note 5 and amounted to
£106,838 at the year end.
59
FINANCIAL STATEMENTSwww.unionjackoil.com Notes to the
Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2023
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 2023
Exploration
and Evaluation
£
Development
and Production
£
Corporate
£
Total
£
Revenue
Operating expenses
Depreciation
Impairment
Other administrative expenses
Profit from continuing operations before tax
Finance income
Royalty income
Profit before taxation
For the year ending 31 December 2022
–
–
–
–
–
–
–
–
–
5,065,679
(1,303,053)
(463,782)
(56,829)
–
3,242,015
–
–
3,242,015
–
–
–
–
(2,057,506)
(2,057,506)
141,672
35,142
(1,880,692)
5,065,679
(1,303,053)
(463,782)
(56,829)
(2,057,506)
1,184,509
141,672
35,142
1,361,323
Exploration
and Evaluation
£
Development
and Production
£
Corporate
£
Total
£
Revenue
Operating expenses
Depreciation
(Impairment) / reversal
Other administrative expenses
Profit from continuing operations before tax
Finance income
Royalty income
Profit before taxation
For the year ending 31 December 2023
–
–
–
3,028
–
3,028
–
–
3,028
8,507,050
(1,281,146)
(2,125,425)
(478,584)
–
4,621,895
–
–
4,621,895
–
–
–
–
(1,665,174)
(1,665,174)
86,586
42,444
(1,536,144)
8,507,050
(1,281,146)
(2,125,425)
(475,556)
(1,665,174)
2,959,749
86,586
42,444
3,088,779
Exploration
and Evaluation
£
Development
and Production
£
Corporate
£
Total
£
Non-current assets
Current assets
Non-current liabilities
Current liabilities
10,905,630
54,379
(606,169)
(44,284)
5,888,456
440,005
(753,611)
(224,539)
636,950
6,251,186
(530,557)
(120,700)
17,431,036
6,745,570
(1,890,337)
(389,523)
Net assets
10,309,556
5,350,311
6,236,879
21,896,746
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC 60
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
1
BUSINESS AND OPERATING SEGMENTS (CONTINUED)
For the year ending 31 December 2022
Exploration Development
and Evaluation and Production
£
£
Corporate
£
Total
£
Non-current assets
Current assets
Non-current liabilities
Current liabilities
9,134,006
203,511
(484,177)
(73,450)
5,559,420
761,223
(766,847)
(594,307)
2,463,860
8,239,317
(1,326,792)
(110,533)
17,157,286
9,204,051
(2,577,816)
(778,290)
Net assets
8,779,890
4,959,489
9,265,852
23,005,231
2
OPERATING PROFIT
Operating profit is stated after charging:
Depletion of producing assets
Net Profit Interest payment
Staff costs (see note 3)
Fees payable to the Company’s auditor for:
– The audit of these financial statements
– Tax compliance services
31.12.23
£
31.12.22
£
463,782
184,259
767,219
57,977
–
2,125,425
137,179
638,605
68,100
10,000
A historical Net Profit Interest (“NPI”) agreement between Egdon Resources U.K. Limited, Union Jack Oil plc and Valhalla
Oil & Gas AS (“Valhalla”) was activated in September 2022.
Under this agreement Union Jack Oil plc, pay Valhalla a maximum of 2.75% NPI of PEDL180 income, less deductible
expenditure.
The fees payable to the auditor for the current year were paid to Crowe U.K. LLP and to BDO LLP for the prior year.
61
FINANCIAL STATEMENTSwww.unionjackoil.com
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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
31.12.23
£
680,833
–
86,386
31.12.22
£
487,083
95,450
56,072
767,219
638,605
The number of persons employed by the Company was 4 (2022: 4).
Details of each director’s emoluments are included in the Directors’ Report and within this note.
Executive directors David Bramhill and Joe O’Farrell were paid £75,000 and £50,000 respectively as a one-off payment to
reflect the non-payment by the Company of standard employee benefits over a several year period.
These payments were made following a recommendation and review by an independent Salary Benchmarking Consultancy.
As a result, the salaries in respect of David Bramhill and Joe O’Farrell will revert to the lower pre-2023 salaries and will be
reflected within the 2024 accounts.
The salaries, fees and share-based payments of individual directors were as follows:
Year ended December 2023
D Bramhill
J O’Farrell
R Godson
G Bull
Year ended December 2022
D Bramhill
J O’Farrell
R Godson
G Bull
Salaries
£
398,333
177,500
47,500
57,500
680,833
Salaries
£
287,083
120,000
40,000
40,000
487,083
Share-based
payment expense
£
–
–
–
–
–
Share-based
payment expense
£
36,257
25,958
9,064
24,171
Total
£
398,333
177,500
47,500
57,500
680,833
Total
£
323,340
145,958
49,064
64,171
95,450
582,533
The emoluments of the highest paid director were £398,333 (2022: £287,083).
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 2022 or 2023.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC 62
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
3
EMPLOYEE INFORMATION AND REMUNERATION OF DIRECTORS (CONTINUED)
Directors’ share options outstanding at 31 December 2023 and at 31 December 2022:
D Bramhill
J O’Farrell
R Godson
G Bull
4
OTHER INCOME
Finance Income
Bank interest
Loan interest receivable
Royalty Income
UK Royalties
US Royalties
5
TAXATION
2023
2022
1,200,000
700,000
150,000
550,000
1,200,000
700,000
150,000
550,000
31.12.23
£
141,672
–
141,672
31.12.22
£
30,330
56,256
86,586
31.12.23
31.12.22
£
–
35,142
£
42,444
–
The major components of income tax for the years ended 31 December 2023 and 2022 are:
Current tax expense
Current income tax (credit)/charge
Total current tax
Deferred tax
Origination of temporary differences
Recognition of deferred tax asset previously unrecognised
Change in amount recognised
Adjustment in respect of prior years
Energy Profits Levy
Total deferred tax
Total tax charge/(credit)
2023
£
2022
£
(318,206)
(318,206)
409,433
409,433
46,096
–
3,736,870
(1,977,942)
(984,584)
820,440
502,234
877,747
(1,805,025)
–
–
–
(927,278)
(517,845)
63
FINANCIAL STATEMENTSwww.unionjackoil.com
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
5
TAXATION (CONTINUED)
A reconciliation between tax charge/(credit) and the product of the accounting profit and the standard rate
of tax in the UK for the years ended 31 December 2023 and 2022 is as follows:
Accounting profit before tax from continuing operations
Profit multiplied by the standard rate of tax of 40% (2022: 40%)
Expenses not permitted for tax
Other adjustments in respect of prior years
Change in amount recognised
Recognition of deferred tax asset not previously recognised
Energy profits levy
Ring Fence Expenditure Supplement effect
Recognition of deferred tax liability not previously recognised
Losses utilised on which no deferred tax was recognised
2023
£
2022
£
1,361,323
544,529
26,701
(2,125,762)
3,736,870
–
(984,584)
(695,520)
–
–
3,088,779
1,235,512
232,028
–
–
(1,805,025)
409,433
–
877,747
(1,467,540)
Total tax charge/(credit)
502,234
(517,845)
Included in the OCI is tax amounting to £170,386 on the gain from the sale of investments in shares held by the Company.
Deferred tax
The movement on the deferred tax asset account is shown below:
At 1 January
Recognised in profit and loss
At 31 December
2023
(927,278)
2022
£
–
820,440
(927,278)
(106,838)
(927,278)
Other adjustments in respect of prior years (£2,125,762) is the aggregate of the adjustment for current corporation tax
(“CT”) and the adjustment in respect of prior years for deferred CT. The adjustment for deferred tax derives from a change
in deferred tax assets from the self assessment for 2022 and a restatement of the deferred tax liability.
Change in amount recognised £3,736,870 represents the difference between the net unrecognised amount of deferred CT
assets and liabilities at the start of the period and at the end of the period.
In determining the deferred tax to recognise, the directors have considered the likelihood of generating taxable profits in the
foreseeable future against which losses can be offset. The directors have used assumptions consistent with those adopted in
preparing the going concern assessment and have not anticipated profits that may arise following future exploration activity.
Foreseeable future has been assessed as 24 months for these purposes. No deferred tax asset for CT has been recognised
as the deferred tax asset is considered to be equal to the deferred tax liability from accelerated tax losses. A deferred tax
asset has been calculated on temporary differences based on accelerated tax relief calculations for the Energy Profits Levy.
The asset recognised amounted to £106,838 at the year end.
As at 31 December 2023, there are unrecognised deferred tax assets of £3,558,523 in respect of Corporation Tax and
£494,307 in respect of Energy Profits Levy.
Energy Profits Levy
The EPL credit to the Company during 2023, after an OPEX allowance of 100% and CAPEX relief of 129%, was £147,820
(2022: £409,433).
The planned development and drilling programme for 2024 are expected to provide a cushion in respect of EPL payments
made by the Company during the year.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC 64
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
5
TAXATION (CONTINUED)
Tax losses
In addition to the above recognised tax losses the Company also has the following tax losses for which no deferred tax
asset has been recognised:
Unrecognised tax losses
Potential tax benefit @ 40% (2022: 40%)
6
EARNINGS PER SHARE
2023
£
2022
£
7,029,687
12,505,980
2,811,875
5,002,392
The Company has issued options over ordinary shares which could potentially dilute the basic earnings per share in the
future. Further details are given in note 13(b).
Basic earning per share is calculated by dividing the profit attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the year.
These options have been taken into account when calculating the diluted earnings per share.
Earnings per share
Profit per share from continuing operations
– Basic
– Diluted
2023
Pence
2022
Pence
0.79
0.79
3.20
3.16
The profit and weighted average number of ordinary shares used in the calculation of profit per share are as follows:
2023
£
2022
£
Profit used in the calculation of total basic and diluted profit per share
859,089
3,606,624
Number of shares
2023
2022
Weighted average number of ordinary shares for the purposes of basic
and diluted profit per share
– Basic
– Diluted
108,268,772
108,531,272
112,706,307
114,132,334
As detailed in note 13(a), the Company has 831,680,400 (2022: 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 profit per share as their impact was anti-dilutive.
65
FINANCIAL STATEMENTSwww.unionjackoil.com
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
7
INTANGIBLE ASSETS
31.12.23
Exploration and evaluation
£
31.12.23
Royalties
£
31.12.23
Total
£
31.12.22
Total
£
Cost
At 1 January
Costs incurred in the year
Disposals
9,066,566
1,162,834
–
93,610
681,727
(93,610)
9,160,176
1,844,561
(93,610)
8,544,070
616,106
–
At 31 December
10,229,400
681,727
10,911,127
9,160,176
Depreciation and impairment
At 1 January
Amortisation charge for the year
Disposals
Costs impaired
At 31 December
Net book value
At 31 December
At 1 January
3,312
–
–
–
3,312
22,858
2,185
(22,858)
–
26,170
2,185
(22,858)
–
18,697
10,501
–
(3,028)
2,185
5,497
26,170
10,226,088
9,063,254
679,542
70,752
10,905,630
9,134,006
9,134,006
8,525,373
Additions to exploration and evaluation costs represent exploration and appraisal costs incurred in the year in respect
of unproven properties and provisions recognised for decommissioning and restoration liabilities.
The directors have reviewed whether there were any potential 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. There was no impairment for 2023.
Included in the above intangible asset additions during the year are amounts arising in relation to changes in decommissioning
and restoration provisions (note 20).
Intangible assets (less any impairment and provisions) comprise amounts capitalised as follows:
West Newton
Biscathorpe
North Kelsey
UK Royalties
US Royalties
PEDL183
PEDL253
PEDL241
31.12.23
£
31.12.22
£
6,137,178
3,666,898
422,012
–
679,542
5,689,647
3,045,506
328,101
70,752
–
10,905,630
9,134,006
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC 66
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
8
PROPERTY, PLANT AND EQUIPMENT
31.12.23
Development
and production
£
31.12.23
Equipment
£
31.12.23
Total
£
31.12.22
Total
£
9,295,607
709,416
–
116,539
95,038
(38,990)
9,412,146
804,454
(38,990)
8,707,703
704,443
–
Cost
At 1 January
Additions
Disposals
At 31 December
10,005,023
172,587
10,177,610
9,412,146
Depreciation and impairment
At 1 January
Depreciation charge for the year
Disposals
Costs impaired
At 31 December
Net book value
At 31 December
At 1 January
3,736,187
463,782
–
56,829
9,747
32,356
(9,747)
–
3,745,934
496,138
(9,747)
56,829
1,132,178
2,135,172
–
478,584
4,256,798
32,356
4,289,154
3,745,934
5,748,225
5,559,420
140,231
106,792
5,888,456
5,666,212
5,666,212
7,575,525
The Board has assessed the Development and Production assets as at 31 December 2023 and has identified indicators of
impairment as set out in IAS36 Impairment of assets in respect of PEDL118 Dukes Wood, PEDL203 Kirklington and EXL294
Fiskerton Airfield, respectively. This impairment amounts to a total of £56,829 (2022: £478,584). These three licences have a
carrying value of nil (2022: nil) and the impairment shown here represents a movement in the abandonment provision.
There were no indicators for impairment on any other assets.
Development and Production assets comprise amounts capitalised as follows:
Wressle
Keddington
PEDL180/182
PEDL005(R)
31.12.23
£
4,844,894
903,331
31.12.22
£
4,695,402
864,018
5,748,225
5,559,420
67
FINANCIAL STATEMENTSwww.unionjackoil.com
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
9
JOINT OPERATIONS
The Company is party to 10 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 2023 are as below:
Licence
Name
Proportion of
ownership interest
2023
Proportion of Principal place
of business
ownership interest
2022
PEDL180/182
PEDL183
PEDL201
PEDL005(R)
PEDL253
PEDL241
PEDL118
PEDL203
EXL294
PEDL181
PEDL209
Wressle/Broughton North
West Newton
Widmerpool Gulf
Keddington
Biscathorpe
North Kelsey
Dukes Wood
Kirklington
Fiskerton Airfield
Humber Basin
Laughton
40%
16.665%
26.25%
55%
45%
50%
16.67%
16.67%
20%
–
10%
During the year, PEDL181 was relinquished at no cost to the Company.
10
INVESTMENTS
Investments in equity instruments designated as at FVTOCI
Shares
40%
16.665%
26.25%
55%
45%
50%
16.67%
16.67%
20%
12.5%
10%
England
England
England
England
England
England
England
England
England
England
England
2023
£
2022
£
530,112
552,043
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 16.
At 1 January
Additions
Disposals
Changes in fair value of investments
At 31 December
31 December
2023
£
31 December
2022
£
552,043
770,173
(837,088)
44,984
291,518
100,000
(9,975)
170,500
530,112
552,043
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC 68
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
10
INVESTMENTS (CONTINUED)
Elephant Oil Corp
The Company is the beneficial holder of 56,650 (2022: 56,650) ordinary shares of Elephant Oil Corp, registered
in Nevada, United States of America (USA).
The principal activity of Elephant Oil Corp is the exploration and evaluation of hydrocarbon assets in West Africa.
Elephant Oil Corp has applied for admission on NASDAQ, a USA trading market during 2023.
The value of the unquoted Elephant Oil Corp shares are deemed to be US$2.25 per share and, on this basis, the
Company has valued its holding at £100,112 (2022: £93,043).
Egdon Resources plc
The Company was the beneficial owner of 17,000,000 (2022: 17,000,000) ordinary shares in Egdon Resources plc
(“Egdon”), a company registered in England and Wales, which represented a 3.13% (2022: 3.13%) interest in that company.
The investment in Egdon was disposed of for £765,000 when Egdon was taken into private ownership in September 2023.
BP plc
The Company was the beneficial owner of 25,000 (2022: nil) ordinary shares in BP plc, a company registered in England
and Wales, a non-representative interest in that company. The shares were purchased in June 2023 for £118,012 and
disposed on in July 2023 for £118,725. The share were purchased as a short term investment.
Beacon Energy plc
The Company is the beneficial owner of 430,000,000 (2022: nil) ordinary shares in Beacon Energy plc (“Beacon”), a
company registered in the Isle of Man, which represents a 3.22% (2022: nil) interest in that company at year end. Payment
for 333,000,000 of new shares acquired was by means of a subscription at a price of 0.15 pence per Subscription Share,
for total consideration of £499,500. The additional 97,000,000 balance of the holding was purchased for £152,660 at an
average price of 0.157 pence per share.
The principal activity of Beacon is the production and exploration of hydrocarbons internationally.
The investment in Beacon was revalued at the year end to the value of £430,000 (0.1 pence per share).
The change in valuation for the above investments are reported in the Statement of Comprehensive Income on page 48.
69
FINANCIAL STATEMENTSwww.unionjackoil.com NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
11
TRADE AND OTHER RECEIVABLES - CURRENT
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.
The Company has other receivables of £35,142 which is accrued royalty income.
There has been no change in the estimation techniques or significant assumptions made during the current reporting period.
Trade receivables
Term deposit
Other receivables
VAT
Prepayments
31.12.23
£
357,706
1,000,000
35,142
103,114
29,992
31.12.22
£
649,439
1,000,000
200,915
135,471
35,088
1,525,954
2,020,913
The term deposit of £1,000,000 is a bank deposit, at a fixed rate of interest, for an agreed period of 12 months. Therefore
this term deposit does not meet the criteria for cash and cash equivalents defined as short term bank deposits with an
original maturity of three months or less.
12
CASH AND CASH EQUIVALENTS
Cash at bank
31.12.23
£
31.12.22
£
5,198,303
7,155,100
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.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC 70
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
13(a) SHARE CAPITAL
Allotted and issued:
Number
Class
Nominal
value
31.12.23
£
31.12.22
£
112,865,896
(31 December 2022: 112,865,896)
831,680,400
(31 December 2022: 831,680,400)
Total
Ordinary
5p
5,643,295
5,643,295
Deferred
0.225p
1,871,281
1,871,281
7,514,576
7,514,576
Ordinary shares hold voting rights and are entitled to any distributions made on winding up. Deferred shares do not hold
voting or dividend rights and are not entitled to distributions made on winding up.
Treasury shares
2023
2022
Number
£
Number
£
Ordinary shares held in treasury
by the Company
6,300,000
1,749,810
700,000
214,227
71
FINANCIAL STATEMENTSwww.unionjackoil.com
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
13(b) SHARE-BASED PAYMENTS – OPTIONS
No options were granted to directors of the Company during 2023. 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:
Outstanding at the beginning of the year
Granted during 2023
Exercised during 2023
Outstanding at the end of the year
Exercisable at the end of the year
Number of options
3,050,000
–
–
3,050,000
3,050,000
WAEP
£
0.374
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 2023
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
53p
53p
70%
6.5
0.3161%
0%
£133,497
06.08.22
06.08.29
1,300,000
53p
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
300,000
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 £nil in relation to share options accounted
for as equity-settled share-based payment transactions during the year (2022: £104,515).
Expected volatility was determined based on a historic 5-year volatility of the Company.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC 72
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
14
RESERVES
The nature and purpose of each reserve within equity is as follows:
Share capital – represents the nominal value of shares issued.
Share premium – represents the amount subscribed for share capital in excess of nominal value, less related
share issue costs.
Share-based payment reserve – represents the cumulative cost of warrants and options issued in return for
professional services.
Treasury reserve – own shares held in treasury by the Company.
Retained earnings – represents cumulative profits, and all other net gains and losses and transactions with owners
not recognised elsewhere.
15
RECONCILIATION OF PROFIT TO CASH GENERATED FROM OPERATIONS
Profit for the year
Depletion of producing assets
Accretion
Impairment of intangibles
Share-based payments
Amortisation / depreciation
Loss on disposal of assets
Finance income
Royalty income
Decrease / (increase) in inventories
Decrease in trade and other receivables
Increase in trade and other payables
31.12.23
£
31.12.22
£
1,361,323
463,782
97,751
56,829
–
34,541
18,299
(141,672)
(35,142)
3,088,779
2,111,614
13,811
475,556
104,514
20,248
3,203
(86,586)
(42,444)
1,855,711
5,688,695
6,725
373,029
10,167
(19,209)
96,043
46,205
Cash generated from operations
2,245,632
5,811,734
Income taxes paid
(261,613)
–
Net cash flows from operating activities
1,984,019
5,811,734
73
FINANCIAL STATEMENTSwww.unionjackoil.com
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
16
FINANCIAL INSTRUMENTS
Classification of measurement of financial instruments
The fair value hierarchy groups financial assets and liabilities into three levels based on the significance of inputs used
in measuring the fair value of the financial assets and liabilities.
The fair value hierarchy has the following levels:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The level within which the financial asset or liability is classified is determined based on the lowest level of significant
input to the fair value measurement.
The 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 2023
Investments: FVOCI
At 31 December 2022
Investments: FVOCI
Financial assets measured at amortised cost
At 31 December 2023
Other receivables
Trade receivables
Cash and cash equivalents
Total carrying value
At 31 December 2022
Other receivables
Trade receivables
Cash and cash equivalents
Total carrying value
Level 1
430,000
Level 3
100,112
£
Total
530,112
459,000
93,043
552,043
£
1,168,248
357,706
5,198,303
6,724,257
1,336,386
649,439
7,155,100
9,140,925
All of the above financial assets’ carrying values approximate to their fair values at 31 December 2023 and 31 December 2022
given their nature and short times to maturity.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC 74
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
16
FINANCIAL INSTRUMENTS (CONTINUED)
Financial liabilities measured at amortised cost
At 31 December 2023
Trade payables
Accruals
Total carrying value
At 31 December 2022
Trade payables
Other payables
Accruals
Total carrying value
£
285,244
104,279
389,523
223,538
409,433
145,319
778,290
All of the above financial liabilities’ carrying values approximate to their fair values at 31 December 2023 and
31 December 2022 given their nature and short times to maturity.
17
FINANCIAL INSTRUMENT RISK EXPOSURE AND MANAGEMENT
The principal financial risks to which the Company is exposed are: liquidity risk, oil price risk and credit risk. This note
describes the Company’s objectives, policies and processes for managing those risks and the methods used to measure them.
Credit risk
The Company 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 of £357,706 have been received prior to approval of the financial statements and the credit risk is believed
to be unchanged from previous years.
The Company has other receivables which are accrued royalty income of £35,142. Union Jack has a management agreement
with Reach whereby Reach obtain all the royalty payments whilst Union Jack obtains its USA bank account. Union Jack has
its internal Revenue Service number and the bank account application is being processed.
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 trade and
other receivables and term deposit, of £392,848 and £1,000,000, respectively.
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 S&P Global (formerly Standard & Poors) rating is A+.
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 £6,591,151 (2022: £9,140,925).
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 2023
and 31 December 2022, on the basis of their earliest possible contractual maturity.
75
FINANCIAL STATEMENTSwww.unionjackoil.com
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
17
FINANCIAL INSTRUMENT RISK EXPOSURE AND MANAGEMENT (CONTINUED)
At 31 December 2023
Trade payables
Accruals
At 31 December 2022
Trade payables
Other payables
Accruals
Within
2 months
£
Within Greater than
6 months
£
2-6 months
£
Total
£
285,244
104,279
285,244
104,279
389,523
389,523
–
–
–
–
–
–
223,538
409,433
145,319
223,538
–
138,719
–
–
6,600
–
409,433
–
778,290
362,257
6,600
409,433
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.
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.
18
FINANCIAL COMMITMENTS
The Company had no financial commitments as at 31 December 2023 or 31 December 2022, other than those recognised
in the Financial Statements and where Authority for Expenditure has been agreed with the Operator.
19
TRADE AND OTHER PAYABLES
Trade payables
Other payables
Accruals
31.12.23
£
31.12.22
£
285,244
–
104,279
223,538
409,433
145,319
389,523
778,290
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC 76
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
20
PROVISIONS
As at 1 January 2022
Adjustment to provision estimates
Accretion of provision
At 31 December 2022
Adjustment to provision estimates
Accretion of provision
At 31 December 2023
At 31 December 2022
Decommissioning
and reinstatement
provision
£
1,876,758
(190,500)
13,811
1,700,069
92,517
97,751
1,890,337
1,700,069
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 used between 2025 and 2044.
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.
Sensitivity to key assumption changes
Variations to the key assumptions used in the decommissioning provision estimates would cause increases/(reductions)
to the provision as follows:
Inflation rate (current assumption 2.125%)
1%
3%
Discount rate (current assumption 3.814%)
3%
5%
Further
decommissioning
provision
(151,919)
128,867
129,208
(162,948)
77
FINANCIAL STATEMENTSwww.unionjackoil.com
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
21
CONTINGENT LIABILITIES
At the year end there were no contingent liabilities.
22
RELATED PARTY TRANSACTIONS
Details of key management personnel remuneration are disclosed in note 3. Key management comprises only the directors.
Charnia Resources (UK), an entity owned by Graham Bull, non-executive director, was paid £121,962 (2022: £120,807)
in respect of consulting fees. £12,138 was outstanding at the year end (2022: £12,053).
Jayne Bramhill, spouse of David Bramhill, received the sum of £12,000 (2022: £12,000) from the Company in respect
of IT maintenance and administration costs. No amounts were outstanding at the year end (2022: £nil).
Raymond Godson, non-executive director is also a director of Montrose Industries Limited who holds an interest in
PEDL253 containing the Biscathorpe Prospect. Raymond Godson took no part in any decision making in respect of
PEDL253, due to potential conflicts of interest.
23
EVENTS AFTER THE BALANCE SHEET DATE
The following events have taken place after the year end:
During January 2024, the results of a CPR by ERCE were published in respect of the Reserves and Resources at the
Wressle development contained within PEDL180 and PEDL182. The highlights of the CPR, include a 263% increase in 2P
Reserves, the reclassification of 1,883 mbo in Penistone Flags Contingent Resources to 2P Reserves and a 59% upgrade to
the Ashover Grit and Wingfield Flags Estimated Ultimate Recoverable. In addition, a 23% upgrade was attributed to the
Broughton North Prospective 2U Resources.
During January 2024, the Company announced details of its expansion into the United States of America (“USA”), with
the purchase of three Mineral Royalty packages (“Royalties”) all located in the Permian Basin, Texas, brokered by its
Oklahoma based, agent and adviser, Reach Oil & Gas Company Inc (“Reach”). The Royalties comprise the Cronus, Powell
Ranch and Palm Spring Units operated by Chevron, COG Operating LLC (a subsidiary of ConnocoPhillips) and Occidental,
respectively. The Royalties are estimated to have an economic life of more than 26 years and a current Internal Rate of
Return in excess of 20%. The total amount spent on royalties to date is £813,600.
During February 2024, Union Jack announced details of a farm-in agreement with Reach to acquire a 45% working interest
in a well planned to be drilled on the West Bowlegs Prospect and an area of associated interest, located in Seminole
County, Oklahoma, USA. The total amount spent on the asset to date is £714,476.
During February 2024, Union Jack announced details of two further farm-in agreements with Reach. The first agreement
was to acquire a 75% working interest in a well planned to be drilled to test the Footwall Fold Prospect in the Wilzetta
Fault play and in an area of associated interest. The second agreement was to acquire a 37.5% working interest in a 2D
and 3D seismic acquisition programme to identify additional drillable prospects along the Wilzetta Fault. The total amount
spent on the asset to date is £357,147.
During March 2024, the Company announced details of the acquisition of a further three Mineral Royalty packages in the
United States of America. The royalties comprise the Bakken Shale, Permian Basin and Eagle Ford Shale, located in North
Dakota and Texas, respectively, and the amount spent is included in the total royalty spend above.
In March 2024, permission was granted to trade the Ordinary Shares of the Company on the OTCQB Venture Market
on the New York Stock Exchange.
In April 2024, Craig Howie was appointed as an independent non-executive director to the Board of the Company.
In May 2024, a dividend of 0.25 pence per ordinary share was declared by the Board, to be paid in July 2024 to qualifying
shareholders.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC 78
Notice of
annual general meeting
Notice is hereby given that the Annual General Meeting (the
“AGM”) of Union Jack Oil plc (the “Company”) will be held
in the George White Suite at The Bristol Hotel, Prince Street,
Bristol BS1 4QF on 27 June 2024 at 11.00 a.m. to consider and,
if thought fit, pass the following resolutions, of which resolutions
numbered 1 to 7 will be proposed as ordinary resolutions and
resolution numbered 8 will be proposed as a special resolution:
ORDINARY RESOLUTIONS
1 Report and accounts
To receive the audited annual accounts of the Company
for the year ended 31 December 2023, together with the
Directors’ Report and the Auditor’s Report on those annual
accounts.
2 Re-election of director
To re-elect Joseph O’Farrell as a director, who retires by
rotation in accordance with the Company’s Articles of
Association.
3 Re-election of director
To re-elect Craig Howie as a director, who, having been
appointed since last year’s AGM, is standing for re-election
in accordance with the Company’s Articles of Association.
4. Re-appointment of auditor
To re-appoint Crowe UK 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 £2,664,147 (representing
approximately 50% of the issued share capital of the
Company (excluding treasury shares) 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
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 10,656,589;
(b) the minimum price which may be paid for any such Ordinary
Share is 5 pence;
(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 RESOLUTION
8 Directors’ power to issue shares for cash
That, conditional upon the passing of resolution numbered
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 numbered 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 £2,664,147 (representing approximately 50% of the issued
share capital of the Company (excluding treasury shares) at
the date of this notice) and, unless previously revoked, varied
or extended, this power shall expire on the conclusion of the
next AGM of the Company, except that the Company may
before the expiry of this power make an offer or agreement
which would or might require equity securities to be allotted
after such expiry and the directors may allot equity securities
in pursuance of such an offer or agreement as if this power
had not expired.
By order of the Board
Matthew Small
Company Secretary
Dated: 17 May 2024
Registered Office: 6 Charlotte Street, Bath BA1 2NE
79
www.unionjackoil.com ANNUAL GENERAL MEETING
NOTICE OF ANNUAL GENERAL MEETING
EXPLANATORY NOTES RELATING TO
RESOLUTIONS
Resolution 1 - Report and accounts
All public 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 2023.
Resolution 2 - Re-election of director
This resolution concerns the re-election of Joseph
O’Farrell, who retires at the meeting by rotation in
accordance with the Company’s Articles of Association.
Resolution 3 - Re-election of director
This resolution concerns the re-election of Craig Howie,
who, having been appointed since last year’s AGM, is
standing for re-election in accordance with the Company’s
Articles of Association.
Resolutions 4 and 5 - Auditors
Resolution 4 concerns the re-appointment of Crowe UK
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 £2,664,147,
representing approximately 50% of the nominal value
of the issued ordinary share capital of the Company
(excluding treasury shares) 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 – Directors' authority to repurchase
shares
This resolution authorises the board to make market
purchases of up to 10,656,589 ordinary shares
(representing approximately 10% of the Company’s issued
ordinary shares (excluding treasury 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.
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 £2,664,147, representing
approximately 50% of the nominal value of the issued
ordinary share capital of the Company (excluding treasury
shares) 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.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC 80 NOTICE OF ANNUAL GENERAL MEETING
NOTES
1 Pursuant to Regulation 41 of the Uncertificated
Securities Regulations 2001 (as amended), only those
members registered in the register of members of
the Company at 6.00 p.m. on 25 June 2024 (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 them. 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 25 June 2024. 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.
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 25 June 2024. 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.
81
www.unionjackoil.com ANNUAL GENERAL MEETING NOTICE OF ANNUAL GENERAL MEETING
NOTES (CONTINUED)
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.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2023UNION JACK OIL PLC 82 83
www.unionjackoil.com ANNUAL GENERAL MEETING Union Jack Oil plc
6 Charlotte Street,
Bath BA1 2NE,
England
Telephone: +44 (0) 1225 428139
Email: info@unionjackoil.com
X: @unionjackoilplc
Web: www.unionjackoil.com