- Union Jack Oil (UJO) shares plunged 16.4% on the West Newton update.
- Investors reacted negatively to the report, as it had some bad news.
- Can UJO shares recover after the latest decline? Read on to find out.
The Union Jack Oil PLC (LON: UJO) share price plunged 16.4% after the data collected about its West Newton drilling activities indicated that it had been approaching the drilling process from the wrong angle, which was disappointing.
Today’s announcement was based on the West Newton Community and the PEDL183 update presented to the West Newton Community Liason Group by Rathlin Energy (UK) Limited. The update indicated that the use of dilute water-based acids during well testing harms the flow characteristics of the Kirkham Abbey reservoir.
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The update further suggested that drilling the Kirkham Abbey reservoir with an oil-based drilling fluid could minimise the oil and gas reservoir damage. The recommendations in the update were based on Laboratory analyses of the data collected over the past few months of drilling at the West Newton project.
Based on the above data, Rathlin has applied to the Environment Agency to use oil-based drilling fluids within the oil and gas bearing Permian section at the West Newton A and B sites. However, it is not yet clear whether the permits shall be approved.
The oil and gas samples from West Newton indicated that the Kirkham Abbey reservoir is predominately gas (primarily methane 90% + ethane 5%) with small amounts of light oil (condensate).
The analysis done by third-party engineering firm RPS Group Limited (RPS) revealed that drilling with an oil-based mud system and extending the length of the reservoir section penetrated by a well would enhance the productive capacity of each well. RPS modelled wells extending up to 1500 metres horizontally through the Kirkham Abbey reservoir.
The update had a lot of information for investors, but it was that UJO had to change its approach when drilling at West Newton. The onshore UK oil and gas company expects to start commercial gas production at the site in 2026.
Therefore, an investment in UJO should be based on its long-term prospects instead of short-term price movements. UJO shares have fallen massive since 13 September 2022, when the Gaffney, Cline & Associates report on its Wressle oil field was released.
The report was disappointing since it highlighted that the oil field was limited to producing 800 barrels daily over the next five years.
*This is not investment advice.
Union Jack Oil (UJO) share price.
The Union Jack Oil (UJO) share price plunged 16.39% to trade at 25.6p, falling from Thursday’s closing price of 30.5p.