An appraisal well is planned to be drilled in the first quarter of next year. Credit: Imahornfan.

Union Jack Oil has closed the farm-in deal with Rathlin Energy (UK) to acquire a 16.665% licence interest in petroleum exploration and development licence PEDL183 in the UK.

The development comes after the company received an approval for the farm-in transaction from the Oil and Gas Authority. The farm-in agreement was signed last month following a heads of agreement (HOA) in October.

Located in East Yorkshire, the 176,000-acre PEDL183 licence is operated by Rathlin and comprises the West Newton A-1 UK onshore gas discovery, which is estimated to contain resources of 189Bcf of gas equivalent or 31.5 million barrels of oil equivalent (Mboe).

Drilling of a conventional appraisal well has been planned in the first quarter of next year to appraise the gas discovery. The drilling campaign will be fully funded from existing cash resources.

“The completion of the West Newton farm-in puts Union Jack in a stronger position to deliver growth in reserves, production and asset value.”

According to Rathlin, the gas discovery has a net present value (NPV) of $247m.

Union Jack Oil executive chairman David Bramhill said: “The drilling of the West Newton conventional appraisal well is currently planned for Q1 2019 and will follow the planned commencement of drilling of the conventional Biscathorpe-2 appraisal well on PEDL253 by year end 2018, in which Union Jack holds a meaningful 22% licence interest.

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“Both wells are fully permitted and success at either would deliver a material onshore gas or oil development project respectively, with either being transformational for Union Jack.

“The completion of the West Newton farm-in puts Union Jack in a stronger position to deliver growth in reserves, production and asset value while adhering to our principles of strict financial and technical disciplines.”

Union Jack also stated that the transaction offers upside potential from the lower Cadeby Reef oil exploration target underlying the gas reservoir.

The Cadeby Reef target is estimated to have prospective resources of 79.1Mboe.

Rathlin also divested a 16.665% interest in PEDL183 to Humber Oil and Gas. The company now holds a 66.67% in the licence, with Humber and Union Jack each owning 16.665%.