Union Jack Oil : 2022 Annual Report

PRODUCTION, DRILLING, DEVELOPMENT AND INVESTMENT IN THE UNITED KINGDOM HYDROCARBON SECTOR

2022

UNION JACK OIL plc

ANNUAL REPORT AND FINANCIAL STATEMENTS

Directors, Officers and Advisers

DIRECTORS

David Bramhill

Executive Chairman

Joseph O'Farrell

Executive

Graham Bull

Non-Executive

Raymond Godson

Non-Executive

COMPANY OFFICE

6 Charlotte Street,

Bath BA1 2NE,

England

Telephone: [phone]

Email: [e-mail]

Web: www.unionjackoil.com

Twitter: @unionjackoilplc

REGISTERED NUMBER

07497220

SECRETARY AND REGISTERED OFFICE

Matthew Small

6 Charlotte Street,

Bath BA1 2NE,

England

REGISTRARS

Computershare Investor Services PLC

The Pavilions,

Bridgwater Road,

Bristol BS13 8AE,

England

AUDITOR

BDO LLP

55 Baker Street,

London W1U 7EU,

England

SOLICITORS

Osborne Clarke

2 Temple Back East,

Temple Quay,

Bristol BS1 6EG,

England

BANKERS

Royal Bank of Scotland plc Drummond House,

PO Box 1727,

1 Redheughs Avenue, Edinburgh EH12 9JN, Scotland

NOMINATED ADVISER AND JOINT BROKER

SP Angel Corporate Finance LLP

Prince Frederick House,

35-39 Maddox Street,

London W1S 2PP,

England

JOINT BROKER

Shore Capital Stockbrokers Limited

Cassini House,

57 St James's Street,

London SW1A 1LD,

England

Union Jack Oil plc is primarily an onshore oil and gas company with a focus on production, drilling, development and investment in the United Kingdom hydrocarbon sector. The issued share capital is traded on the AIM Market of the London Stock Exchange (Ticker: UJO).

Our strategy is the appraisal and exploitation of the assets currently owned. Simultaneous with this process, the Company's management expects to continue to use its expertise to acquire further licence interests over areas where there is a short lead-time between the acquisition of the interest and either exploration drilling or initial production from any oil or gas fields that may be discovered.

"Fully funded for all G&A, OPEX and CAPEX costs for at least the next 12 months"

Contents

BUSINESS AND STRATEGY
Chairman's Statement	2
Strategic Report	10
Licence Interests	18
GOVERNANCE
Directors' Report	20
Corporate Governance Report	23
Independent Auditor's Report	36
on the Financial Statements

FINANCIAL STATEMENTS
Income Statement	41
Statement of	42
Comprehensive Income
Balance Sheet	43
Statement of Changes in Equity	44
Statement of Cash Flows	45
Principal Accounting Policies	46
Notes to the Financial Statements	54
ANNUAL GENERAL MEETING
Notice of Annual General Meeting	73

www.unionjackoil.com

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CHAIRMAN'S

STATEMENT

I am delighted to present to the shareholders of Union Jack Oil plc ("Union Jack" or the "Company"), the Annual Report and Financial Statements for the year ended 31 December 2022.

Growth and progress continued throughout 2022, mainly due to the elevated cash flow from our flagship development Wressle, where revenues increased significantly from £1,894,875 in 2021, to £8,507,050 in 2022, enabling Union Jack to announce a maiden net profit of £3,606,624 post tax compared to a loss of £853,013 in 2021.

Post Balance Sheet cash balances and near-term receivables, stand in excess of £9,750,000 as at 12 May 2023.

The Company is funded for all G&A, OPEX and contracted or planned CAPEX costs, including any budgeted drilling activities for at least the next 12 months, without recourse to the Capital Markets.

The material increase in cash flow during 2022, coupled with a robust oil price and increased hydrocarbon production, allowed the Company to seek a Capital Reduction exercise which was granted by the High Court, during August 2022, enabling the Company to distribute a Maiden Special Dividend of 0.8 pence per share during December 2022, totalling £900,527, and also introduce a share buy-back programme, enhancing earnings per share.

In respect of a Dividend Policy, it is our intention to make payments to shareholders as and when cash balances allow. During March 2023, the Board declared an Interim Dividend of 0.3 pence per share, payable during July 2023 and it is the intention to continue dividend payments based on a proportion of the free cash available subject to our project obligations being fulfilled.

I am delighted to be able to report that since the Capital Reduction was granted in August 2022, return of capital by way of total dividends paid or announced and share buybacks has totalled £1,117,154.

Union Jack's maiden profit, the return of capital, current record-high cash balances and near-term receivables, all highlight the achievements of the Company during 2022.

Oil from our flagship project, Wressle, remains free flowing with zero water cut. Wressle continues to perform in an extremely positive way and our expectations remain high as we believe there remains scope for material expansion.

The GaffneyCline report, published during September 2022, suggested the possibility of a significantly higher reserve than originally predicted for the Ashover Grit reservoir. On current performance we find it difficult to dismiss this theory and look forward to the technical and commercial assessment by ERCE, who have recently been commissioned to review the reserve and resource potential of the Wressle field through a new CPR. The results of this report are expected during June 2023.

Positive results from independent laboratories and consultants during 2022 and from the data driven information received from the West Newton discoveries expand our confidence in the success of the horizontal well currently planned to be drilled during H2 2023.

Additional information on our leading projects at Wressle and West Newton, and overviews on Biscathorpe, Keddington and North Kelsey can be found later within this statement.

The results for 2022 are highly positive with the Company being in a strong financial position and a balanced work programme of potentially further transformational development and drilling to look forward to.

Further information can be found on our website www.unionjackoil.com, presenting detailed technical information on our projects, designed to inform shareholders and attract new investors to the Company. In addition, Union Jack hosts an active twitter account @unionjackoilplc.

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UNION JACK OIL PLC

ANNUAL REPORT AND FINANCIAL STATEMENTS 2022

Chairman's Statement

OPERATIONAL HIGHLIGHTS

• Approvals for the Wressle Field Development Plan and licences for the production phase through to 2039 received from the North Sea Transition Authority ("NSTA")
• Wressle is currently the second most productive conventional producing onshore oilfield in the UK
• ERCE commissioned to review the reserve and resource potential of the Wressle field through a new Competent Person's Report ("CPR")
• Planning for the drilling of additional wells at West Newton approved by the East Riding of Yorkshire Council ("ERYC")
• RPS delivered a positive revised CPR on West Newton, where a horizontal well is planned to be drilled during H2 2023
• Biscathorpe appeal heard - awaiting decision from the Planning Inspectorate
• North Kelsey appeal hearing set for June 2023

FINANCIAL HIGHLIGHTS

• Maiden net profit of £3,606,624 post tax
• Oil revenues increased by 340%
• Basic earnings per share increased by over 485%
• Cash balances and near-term receivables stand in excess of £9,750,000 as at 12 May 2023
• Debt free
• Funded for all operational, contracted and planned CAPEX costs, including budgeted drilling activities for at least the next 12 months
• Capital Reduction granted for share buy-back programme and the payment of a 0.8 pence Maiden Special Dividend during December 2022
• Post period end an Interim Dividend of 0.3 pence declared to be paid July 2023

Business and Strategy

WRESSLE DEVELOPMENT PEDL180 AND PEDL182 (40%)

Wressle is located in Lincolnshire, on the western margin of the Humber Basin.

The Wressle-1 ("Wressle") discovery was defined on proprietary 3D seismic data. The structure is on trend with the producing Crosby Warren oilfield and the Broughton oil discovery, both to the immediate northwest and the Brigg-1 discovery to the southeast. These wells all contain hydrocarbons in several different sandstone reservoirs within the Upper Carboniferous succession.

Since the proppant squeeze and coiled tubing operations conducted during August 2021, Wressle has established itself as Union Jack's flagship project with production rates far exceeding original expectations.

Wressle continues to produce oil under natural flow and associated gas at high rates with zero water cut from the Ashover Grit reservoir. To date, over 400,000 barrels of high-quality oil have been produced and sold from Wressle.

During the past 12 months, a programme of improvements and upgrades to Wressle site facilities has been successfully carried out. The implementation of a two-stage gas utilisation scheme is being progressed which will enable the oil production to be increased.

The Ashover Grit gas is being utilised for electricity generation on-site and will be exported at a later date. The diesel generator has been replaced by three gas microturbines which were installed and commissioned during early 2023. The second phase of the programme will see the installation of a separate gas engine to generate and export approximately 1.4 MW of electricity into a local private power network. A later stage of

the gas monetisation will focus on gas export from the undeveloped reservoirs that hold significant contingent hydrocarbon resources and are awaiting production in due course.

www.unionjackoil.com

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