United Oil & Gas PLC / Index: AIM / Epic: UOG / Sector: Oil & Gas

27 July 2022

United Oil & Gas Plc

("United" "the Group" or the "Company")

Half-year 2022 Trading and Operations Update

United Oil & Gas Plc (AIM: "UOG"), issues the following trading and operational update in respect of the half-year to 30 June 2022. This is in advance of the Group's half-year results which are expected to be released in  September 2022. The information contained herein has not been audited and may be subject to further review and amendment.  A shareholder call will take place this morning, details are below.

Brian Larkin, CEO commented:

"United has delivered a solid financial and operational performance in the first half of 2022 supported by the high realised oil price and good cash collections including the receipt of  portfolio management  proceeds following strategic divestments. Production in Egypt has been in-line with expectations, and the fully funded work programme continues with the AJ-14 development well currently drilling. We look forward to building on the progress made in the first-half through the completion of the 2022 drilling programme in Egypt, which includes the ASH-4 development well and an exciting exploration well targeting c.8 mmbbls gross mean recoverable resources.  In the UK, we  look forward to the completion of the independent contingent resources report on the Maria discovery and in Jamaica the farmout campaign continues supported by the higher oil price environment and improved industry sentiment towards quality exploration opportunities."

1H 2022 Operational summary

·      1H 2022 Group working interest production averaged 1,552 boepd in line with full-year guidance of 1,500-1,650 boepd with oil constituting circa 85% of average production

·      Active Egypt work programme including a five-well 2022 drilling campaign which commenced in January 2022:

-       ASD-2 development well encountered over 25 metres of net pay and started production end-March

-       ASV-1X exploration well; although no hydrocarbons flowed on test, evidence for the migration of hydrocarbons into the area of the licence has de-risked this element of the petroleum system at this location

-       Third well of the 2022 programme, AJ-14, commenced drilling on the Al Jahraa field end-June

-       Significant increase in the interpreted in-place volumes on the ASH field following improvement to the subsurface imaging from seismic reprocessing

·      Zero - Lost Time Incident Frequency rate and Fatal Accident Frequency rate. No environmental spills, Restricted Work Incidents or Medical Treatment Incidents

·      Jamaica licence extension granted; Initial Exploration Period will run to 31 January 2024

1H 2022 Financial summary 

·      Group revenue for the first half of 2022 is expected to be approx. $10m⁽¹⁾ (1H 2021:$10.2m)

·      The average realised oil price per barrel from Egypt achieved was approx. $105.5/bbl (1H 2021:$63.1/bbl), representing a discount to Brent of circa $2.37/bbl (1H 2021:$1.95)

·      Cash balances as at 30 June 2022 were approx. $3.8m (1H 2021:$2m)

·      Cash collections in the six-month period were approx. $9m (1H 2021:$8.2m)

·      Cash capital expenditure was approx.$2.9m

⁽¹⁾       22% working interest net of Government Take

1H 2022 Corporate summary

·      Appointment of Peter Dunne, as Chief Financial Officer , effective from 5 May 2022

·      United terminated the sale and purchase agreement with Quattro Energy Limited to sell its UK Central North Sea Licences; P2480 and P2519 (Maria & Zeta)

·      Agreement signed with Anasuria Hibiscus UK Ltd for $2.5m in relation to the Crown milestone payment, with $1.5 million received in 1H 2022 and the remainder due prior to year-end.

·      Completion and receipt of proceeds in relation to the sale of UOG Italia Srl to Prospex Energy for €2.2m plus €0.1m working capital adjustment

·      Directors' purchases increase total directors' shareholding to 5.32% of issued share capital (post-period)

Outlook

·      Full year 2022 production guidance remains unchanged at 1,500-1,650 boepd

·      Full year 2022 capital expenditure guidance remains unchanged at $7.2m

·      Strong balance sheet, cashflows and disciplined approach to capital allocation:

-       Production leveraged to high oil price with 1H average realised oil price per barrel of c.$105.5/bbl

-       Continued focus on G&A and operating costs

-       Portfolio positioned to continue to deliver material cash flow into the future

·      A resilient portfolio of upside opportunities including near term production increases and near field exploration targets, development opportunities in addition to potentially high impact exploration:

-       Egypt; Cash generative production and active work programme

o  Fully funded active Egypt work programme continues, with the AJ-14 development well currently drilling

o  Two further wells scheduled to be drilled in 2H:

§  ASH-4 development well, targeting 2.2 mmbbls gross recoverable resources from the prolific AEB reservoir

§  Exploration well ASF-1X with pre-drill target of c. 8 mmbbls gross recoverable resources

-       UK; Commercialisation options

o  Low-cost work programme on the Maria licence with reservoir evaluation and rock physics analysis

o  Independent contingent resources report expected Q3/Q4 2022 ahead of assessing commercialisation options

-       Jamaica; Long term upside

o  Farmout campaign continues to be supported by the higher oil price environment and improved industry sentiment towards exploration opportunities  

o  Number of companies currently conducting detailed technical evaluations of the opportunity

·      Continued evaluation of M&A opportunities with strengthened balance sheet to support growth strategy

Operations Update

Egypt, Abu Sennan licence (22% working interest)

First half (1H) 2022 Group working interest production averaged 1,552 boepd (1,290 bopd oil and 262 boepd gas). Second quarter (Q2) 2022 production averaged 1,537 boepd (1,313 bopd oil and 224 boepd gas).  1H and Q2 production was line with full-year 2022 production guidance of between 1,500-1,650 boepd, which remains unchanged. The full-year guidance includes production from the current wells and contributions from two 2022 development wells, AJ-14 (currently drilling) and ASH-4 (location optimised on recently reprocessed seismic data). No production additions have been included for 2022 exploration wells.

2022 Egypt work programme

The 2022 approved work programme consists of five firm wells (three development and two exploration wells) and eight workovers.

The drilling programme commenced in late January 2022 with the ASD-2 development well. The well encountered over 25.5 metres of net pay and was brought onstream less than six days after completion.

The second well, the ASV-1X exploration well, spud on the 14 April. The well was put on test, and although no hydrocarbons flowed, evidence for the migration of hydrocarbons observed in the ASV-1X structure has helped de-risk this element of the petroleum system in this area of the licence and will assist in optimising future well targets.

The third well, the AJ-14 development well, spud on 21 June and drilling is expected to take approx. 60 days.

Two further wells are planned for this year, including an ASH development well, and the ASF-1X exploration well.

The ASH-4 development well location has now been optimised from the recently completed reprocessing of the seismic data. This reprocessing has significantly improved the quality of the subsurface imaging over the ASH field, has increased the interpreted in-place volumes on the field  (from 17 to 22 mmboe gross according to operator estimates), and has helped to identify at least seven additional potential development well locations.

Based on the latest interpretation of this reprocessed data, the ASH-4 development well, targeting 2.2 mmbbls gross recoverable oil, has been prioritised and is planned as the fourth well in the 2022 campaign.

The ASF-1X exploration well will be the fifth and final well in the 2022 drilling campaign. This well will target un-risked mean recoverable resources estimated by United at approx.8 mmbbls gross in the Alam El Bueib and Abu Roash reservoirs to the south-west of the ASH field.

Six workovers have so far been completed on the Abu Sennan licence in 2022, including the installation of two Electrical Submersible Pumps on the ASH field.

Jamaica, Walton Morant licence (100% working interest)

The farm-out campaign continues as the Company looks for an investment partner(s) to unlock the vast potential in this opportunity. The campaign has been supported by the two-year extension to the Initial Exploration Period which was granted by the government of Jamaica in January this year, and by the higher oil price environment and improved industry sentiment that has been observed since the start of 2022. The Initial Exploration period runs to 31 January 2024 with low-cost technical studies continuing to progress and a number of parties currently conducting detailed technical evaluations.

UK Central North Sea, P2480 (Zeta) and P2519 (Maria) licences (100% working interests)

Licence P2519 includes Blocks 15/18e and 15/19c and covers an area of circa 225 km².  The licence contains the existing Maria discovery. United estimated as part of its licence application that Maria holds circa 6 mmboe mid-case recoverable resources. Good progress is being made with the low-cost technical studies commitments on the licence, and an independent contingent resources report is scheduled for Q3/Q4 2022 before commercialisation options are assessed.

The Zeta exploration prospect (Licence P2480) has now been relinquished. As an exploration target, Zeta did not offer the same near-term potential as the Maria Discovery, and the decision was taken not to progress into the next phase of the licence.

Financial Update

Revenues

Group Revenues for the six month period ending 30 June 2022 are expected to be circa. $10 million (1H 2021 $10.2 million), with increased commodity prices offsetting reduced average production. The entire revenue for the Group is generated from our 22% interest in the Abu Sennan concession in Egypt and is stated after accounting for government entitlements under the production sharing contract. The 1H 2022 average realised oil price per barrel achieved was $105.5/bbl (representing a discount to Brent of circa $2.37/bbl).

Cash

The company entered the year with cash balances of circa.$400,000. The cash balance as at 30 June 2022 was circa. $3.8 million, which reflects the strong cash collections in 1H of $8.7 million, proceeds from divestments of non-core assets and the improved working capital position. The impact of recent global macroeconomic volatility has resulted in both a devaluation of the Egyptian Pound and restrictions on outgoing US Dollar transfers by the Central Bank of Egypt, which have made it challenging to repatriate cash from Egyptian operations.

We have received USD remittances and have successfully repatriated funds as recently as mid-July. The Group continues to actively manage its working capital position to support our business operations. 

Cash Expenditure

The Group continues to engage in an active work programme across our portfolio of assets with forecast cash capital expenditure for 2022 of $7.2 million of which $2.9 million was incurred in 1H 2022, including $2.7 million on the drilling programme in Egypt and workover activity in addition to $0.2 million on Jamaica and UK assets.

Events today

Management is hosting a shareholder call at 1100 BST today.   Investors that wish to participate in the event, please click on this link to register https://bit.ly/3ROwY5x

Confirmation email with the details of the dialling in process will be sent to your email address.

A presentation will be available today on www.uogplc.com.

ENDS

This announcement contains inside information for the purposes of Article 7 of Regulation 2014/596/EU which is part of domestic UK law pursuant to the Market Abuse (Amendment) (EU Exit) regulations (SI 2019/310).

Glossary:

bopd - barrels of oil per day |  boepd - barrels of oil equivalent per day

mmbbls - million barrels of oil |

Notes to Editors

United Oil & Gas is a high growth oil and gas company with a portfolio of low-risk, cash generative production, development, appraisal and exploration assets across Egypt, UK and a high impact exploration licence in Jamaica.

The business is led by an experienced management team with a strong track record of growing full cycle businesses, partnered with established industry players and is well positioned to deliver future growth through portfolio optimisation and targeted acquisitions.

United Oil & Gas is listed on the AIM market of the London Stock Exchange. For further information on United Oil and Gas please visit www.uogplc.com