(Sharecast News) - Union Jack Oil announced a farm-in agreement with Reach Oil & Gas Company on Tuesday, granting it a 45% working interest in the upcoming Andrews-1 well, scheduled for drilling in the second quarter.
The AIM-traded firm said the endeavour was aimed at testing the West Bowlegs Prospect, located in Seminole County, Oklahoma, as well as an area of associated interest.
It said the well boasted a geological success chance estimated at 75% by the operator, Reach.
The drilling was projected to take about ten days, reaching a depth of 5,200 feet, with completion expected to be swift, requiring around eight days, including perforating and flow-back if successful.
Union Jack said it had further strengthened its position with the recent acquisition of proprietary 3D seismic data, covering the proven producing Hunton limestone, a vital hydrocarbon reservoir in Oklahoma.
The company said it would bear 60% of the Andrews-1 well's costs to secure a 45% economic interest, with future planned wells being cost-based on the same economic interest.
It said the partnership with Reach would open doors for it to access a broader inventory of prospects and drill-ready targets in Oklahoma, with additional drill-ready prospects covered by 3D seismic identified within the interest area earned by Union Jack.
Union Jack Oil said it would cover seismic acquisition and planning costs totalling $0.35m.
The estimated net cost to Union Jack for drilling and completing the Andrews-1 was around $0.52m, all of which would be paid from existing cash resources.
Union Jack said its primary target for the venture was the Hunton Limestone, a significant hydrocarbon reservoir in Oklahoma, positioned favourably for oil migration.
The main reservoir within West Bowlegs was believed to be encountered within a basal Oolite limestone formation, based on nearby well data.
West Bowlegs was associated with a remnant of the Hunton Limestone, expected to retain its original pressure.
The seal for the reservoir would be the Woodford shale, with lateral seal provided by the underlying Sylvan shale.
Primary oil recovery was anticipated through solution gas drive, with any recovered gas being sold into the local network.
Reach Oil & Gas Company owns and operates oil and gas production facilities in Seminole and Pottawatomie counties in Oklahoma.
"As indicated in the announcement on 29 January, I am delighted to be able to announce the execution of the agreement with Reach for our initial near-term drilling operation in Seminole County, Oklahoma," said executive chairman David Bramhill.
"The Andrews-1 well has a high chance of success and if proven commercial could be in production within one month or sooner from spudding.
"Similar low-cost development wells nearby, typically produce initially at approximately 150 barrels of oil and over 200,000 cubic feet of gas per day and can provide rapid pay-back within six months."
Bramhill said the West Bowlegs transaction met the firm's criteria of acquiring material interests in projects with near-term planned drilling, and capable of adding significant cash flow, while complementing its existing profitable production and development interests onshore UK.
"Our strategic partnership with Reach offers Union Jack the opportunity to access a wider portfolio of prospects and drill-ready targets.
"I look forward to reporting to shareholders on this new phase in the growth of Union Jack, further near-term project interest acquisitions and the spudding of the Andrews-1 well early in the second quarter."
At 1625 GMT, shares in Union Jack Oil were down 1.69% at 17.45p.
Reporting by Josh White for Sharecast.com.
Union Jack (UJO)