(MENAFN- ProactiveInvestors) AIM quoted exploration minnow () has had something of a fortuitous year or so.
Not only has it tapped into the UK's seemingly resurgent onshore oil sector but it managed to bring in plenty of cash before the crude collapse.
And crucially its first drill programme looks like a resounding success.
UJO is a minority partner (8.3%) in the Wressle discovery drilled last year in Lincolnshire which comprises a number of oil and gas bearing intervals.
The most promising of Wressle’s reservoirs have already flowed oil unaided to surface.
The coming few weeks will now be pivotal for the Wressle project and its stakeholders UJO Europa and operator Egdon.
In early June a two month production testing phase - or extended well test (EWT) - is due to start and subsequent results will determine just how good the Wressle discovery is.
Sustainability will be key issue for the Wressle test explains David Bramhill Union Jack's chief executive.
If the well can flow continuously there is a very good chance that the project can be commercially viable he explains even in this market with weak crude prices.
"This is what shareholders are looking for commerciality" Bramhill told Proactive Investors.
"We’ve yet to use that word. We think it will be but we can’t put our hands on our heart and say ‘yep its commercial’ but that may come with the next stage of testing."
The EWT will actually comprise two separate month-long tests on two separate reservoirs. And it will subject to acceptable flow rates provide the basis of a field development plan which in turn will lead to the start of production; possibly before the end of this year.
"In two months’ time we hopefully will be able to declare Wressle is commercial" the UJO boss added.
"Assuming we can get steady state pumped production then it really will be a feather in everybody’s cap. It should make everybody money."
UJO acquired its stake in Wressle within three months of its 2013 AIM market float and what has happened since represents a fairly accurate summation of what the company is trying to achieve.
Put simply the aim is to stake into onshore UK projects that have near term drilling opportunities.
For UJO this means it can keep a fairly active programme of wells giving it catalysts for the share price which can keep investor interest high.
The operators meanwhile benefit from lower well costs as well as reduced exposure to financial risk.
Bramhill explains: "as a company we look for the low hanging fruit rather than start off from scratch.”
“Instead we come along and farm-in when the (prospecting) work has been done. And of course the other companies like Egdon are happy for us to do that because we help them with the cost of the well. Everyone wins.”
Because of this approach the success at Wressle is particularly significant for UJO because it is still a young company. A project like Wressle can set the junior oil firm off on the front foot.
The 8.5% stake by delivering revenue and cash flow has the potential to become a cost-covering cornerstone of the portfolio. And it would be a welcome backstop to what is still essentially a high risk business.
“Us explorers let’s face it we are all high risk companies" Bramhill admits. "We’re all looking for something about a mile down a hole underneath the ground. It’s the equivalent of finding a pin head.
“Any company that finds oil is lucky really. It not just down to the geologists and the hard work that goes into the drilling you need more than a modicum of luck in this game.
“Sometimes companies are lucky (and they succeed) other times they’re not lucky and it destroys them.”
With hindsight it would be easy to mistake 2014's opportune equity funding as lucky.
UJO raised around £3mln through separate cash-calls between the February IPO and June. The funding saw a high level of demand which was something of a bonus for the company which ended up with more capital than it anticipated.
"We raised money last year when really we didn’t need it. Then sure enough about a month afterwards oil prices collapsed.
"Oil companies are struggling now to raise funds. So all in all we’re in good shape. And we also now have the possibility of doing more deals which is something we’re looking at."
While new possibilities are being lined up there are still very material opportunities to add value with the drill-bit this year.
New drilling at the Biscathorpe and North Kelsey is anticipated in the later part of the year. Egdon is the operator and UJO has a 10% stake in each project.
If the well comes in at North Kelsey a familiar stacked reservoir system it has the potential to be "another Wressle" according to Bramhill.
"The jewel in the crown" of the 2015 drill programme is how Bramhill describes Biscathorpe.
Whilst it is still deemed an exploration project there is an element of appraisal about Biscathorpe as it is essentially a follow up to a well which was drilled in the late nineteen-eighties.
That well found only thin reservoir sections though the modern day plan is now to drill further 'up-dip' where they are expected to be much thicker. This new target is estimated in the range of 16mln to 40mln barrels of oil which would be comparable to many offshore prospective fields in the North Sea.
UJO has about £3mln of cash and is funded for current work plans and no current plans to raise more capital in foreseeable future.
The hope is that future cashflows from Wressle will help alleviate any future funding pressures and importantly can help move the company towards profitability. From this point of view UJO's longer term strategy is not complicated.
“The idea is as with any company at the end of the day to make a profit. We’re still an infant company we’ve still got a year to go before we establish ourselves.
"But my aim is to say we’re in the black."
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