Union Jack this morning reported that Wressle had produced at its targeted rate of 500 barrels during testing.
SP Angel analyst Sam Wahab, in a note, described it as a “positive and welcome update”.
“Wressle will boost the company’s production profile and cash flow position once on commercial production, and today’s update reinforces the long-term potential in our view,” Wahab said.
“With oil prices now enjoying a period of relative stability, first commercial oil at Wressle has come at an opportune time for Union Jack. In-depth modelling infers a break-even oil price of c.US$17.62/bbl, highlighting the compelling project economics on offer at the project.
“In terms of cash generation, at current oil prices, annualised net revenues to Union Jack from Wressle could be in excess of US$4mln.”
In a statement, Union Jack noted that the rate was achieved in the tests which followed a ‘proppant squeeze’ operation that stimulated the Wressle-1 well. Clean-up continues and Union Jack highlighted that the well has not yet reached its optimum potential. It expects a further announcement will come once a stabilised oil flow rate is established in the coming weeks.
Union Jack is the largest stakeholder in the joint venture project, alongside operator Egdon Resources which owns 30% and Europa which has the other 30%.
David Bramhill, Union Jack executive chairman, today said: “I am, of course, delighted with the outcome of the proppant squeeze operation which has enabled the Wressle-1 discovery to deliver the expected production rate of 500 barrels of oil per day from the Ashover Grit reservoir, the lowest reservoir interval in the original discovery well.
“At a full production rate of 500 barrels of oil per day, Wressle, at current oil prices would transform the economics of the company with a materially positive impact on our revenues and operating cashflow.”
Bramhill added: “Union Jack Management are of the opinion that Wressle is still at a very early stage in its development and that considerable upside potential remains given the higher Wingfield Flags and Penistone Flags reservoirs, that are not part of this test programme, have both already demonstrated their ability to flow oil to surface during testing of the original discovery well, as well as other opportunities within the licence areas.”