Union Jack Oil (UJO) Shares Rallied 10.1% After Making $3M From Wressle. Is It a Buy?

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Simon Mugo
Updated: 22 Feb 2022

Key points:

  • Union Jack Oil shares rallied 10.1% after revealing that it made $3 million.
  • UJO shares have risen 48% in 2022, buoyed by rising crude oil prices.
  • The company looks attractive, and I would buy it on a pullback.

The Union Jack Oil PLC (LON: UJO) share price rallied 10.1% after revealing that it had generated revenues worth US$3,000,000 from its Wressle hydrocarbon project located in North Lincolnshire.

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Union Jack has a 40% stake in the project, and the monies were generated after oil production at the project was restarted on 19 August 2022. The well’s current production ranges between 600 to over 700 crude oil barrels daily.

Also, Read Best Oil Stocks to Buy Right Now.

The crude oil is generated from the Ashover Grit reservoir under natural flow via a restricted choke with zero water cut. The company is currently upgrading the site in stages, with the work progressing well.

Union Jack remains cash flow positive and had a cash balance of £6,163,795 on 21 February 2022, with outstanding receivables of £2,071,375.

The company intends to settle its £2,080,000 debt from Calmar LP early on 1 March 2022 due to its rising revenues and its improving financial position. The payments are due from the 25% acquisition of the PEDL180 and PEDL182 license areas that contain the Wressle project.

The payment will eliminate all of UJO’s significant trade payables. The firm revealed that it expects to generate £1,890,000 from crude oil sales in the year ended 31 December 2021. 

David Bramhill, Union Jack’s Executive Chairman, commented: “The revenues of in excess of US$3,000,000 to Union Jack from Wressle, whilst under test production, are highly positive for the company, which remains in robust financial health as the above figures illustrate.

“We believe that Wressle holds significant further upside, which will be demonstrated over the foreseeable future. We look forward to reporting on progress in respect of site upgrades and achieving optimum production rates in due course.

“In addition to Wressle, the Company has three other cash-generating projects and under current oil prices, remains cashflow positive covering corporate, administrative and project operating costs.”

UJO shares have risen 48% in 2022, driven by rising crude oil prices and could be headed higher as oil prices continue surging higher. Usually, I would love to buy such stock on a pullback, but we have not been getting significant pullbacks this year.

Therefore, investors may find potential entries on any sideways trading if oil prices rise. Still, nothing is guaranteed in the markets, and we could get a deeper pullback if oil prices fall.

*This is not investment advice. Always do your due diligence before making investment decisions.

Union Jack Oil share price.

IG chart of Union Jack Oil share price 22-02-2022
Source: IG

The Union Jack Oil share price surged 10.12% to trade at 22.30p, rising from Monday’s closing price of 20.25p.

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