Union Jack Oil PLC (LON: UJO) have seen their shares sink despite an announcement that the firm had raised £5 million through a share placing scheme.

Union Jack Oil plc is an onshore oil and gas exploration company with a focus on drilling, development and investment opportunities in the United Kingdom hydrocarbon sector.

Shares of Union Jack Oil sunk 4.41% to 0.16p on Wednesday afternoon. 27/11/19 15:28BST.

Competitors in the industry such as Shell (LON: RDSA) and SABIC (TADAWUL: 2010) have seen third quarter profits sink following volatile oil prices.

Whilst Egdon Resources (LON: EDR) and Premier Oil (LON: PMO) have seen their shares spike following impressive trading updates.

The UK-focused oil exploration company has raised the new money via placing of 2.93 billion new shares at 0.15 pence each and subscription of 404.3 million shares at the same price.

“The proceeds will be deployed into what Union Jack believes are highly accretive projects including the drilling and testing of two further appraisal wells and the acquisition and reprocessing of new seismic data at the company’s flagship asset at West Newton,” the Bath-based company said.

David Bramhill, executive chair of Union Jack, said: “The directors are extremely confident about the future prospects for Union Jack and look forward to updating the market on developments at West Newton and our wider portfolio.”

Joseph O’Farrell, an executive director, subscribed for 33.3 million shares in the fundraising. Following the purchase, O’Farrell owns a 1.8% stake in Union Jack.

Particularly in the oil and gas industry, there has been a recent increase in firms using share placing to raise funds for capital projects.

Shareholders seem to have reacted to this with a pessimistic tone, as reflected as the stock price movements across Wednesday.

There could be long term benefits for Union Jack Oil, if the firm can exploit the benefits in expanding its’ drilling projects.

Shareholders should not be so grieved about the share placing, and although immediately shares have sunk, in the longer term rewards may be seen.

Earlier this year, the firm reported that the firm expanded its operating loss despite modest revenue growth and this has kept shareholders on edge.

Certainly, shareholders will have to be patient with the firm, however if benefits of the share placing aren’t exploited then Union Jack could see their shares hit red.