TIDMUKOG
RNS Number : 2806R
UK Oil & Gas Investments PLC
14 June 2018
UK Oil & Gas Investments PLC
("UKOG" or the "Company")
UK Oil and Gas Authority ("OGA") Grants Approval for Extended
Flow Test ("EWT") Programme
Horse Hill-1 Kimmeridge and Portland Oil Discovery, Weald Basin,
UK
Highlights:
-- Planned 150-day production EWT set to commence on Horse Hill oil discovery.
-- All EWT regulatory permissions now in place and EWT operations are fully funded.
-- The EWT follows the successful short-term 2016 flow tests
which achieved an aggregate stable rate of 1,688 barrels of oil per
day ("bopd") over three 30-90 hour test periods.
-- EWT comprises 3 separate long-term flow periods of the oil
productive Portland, Kimmeridge Limestone 4 ("KL4") and Kimmeridge
Limestone 3 ("KL3") zones.
-- Programme aims to confirm commerciality of Portland and
Kimmeridge Limestone oil discoveries and gear-up for first
permanent oil production targeted in 2019.
-- Targeted drilling of HH-2 appraisal well as future producer
to follow a successful EWT outcome. Planning approval and
environmental permits for drilling are in place.
UK Oil & Gas Investments PLC (London AIM: UKOG) is pleased
to announce that it has been informed by Horse Hill Developments
Ltd ("HHDL"), the operator of the Horse Hill-1 ("HH-1") KL3, KL4
and Portland oil discovery, in which the Company holds a 32.435%
interest, that the OGA has granted its consent for the forthcoming
HH-1 EWT programme. All other necessary regulatory consents from
Surrey County Council ("SCC"), the Environment Agency ("EA") and
the Health and Safety Executive are in place. The Company has
funded its full share of operational EWT costs. Commencement of the
EWT, expected shortly, will be announced in due course.
Stephen Sanderson, UKOG's Executive Chairman, commented:
"Horse Hill is the first in a series of planned near-continuous
appraisal drilling and testing operations designed to convert the
company's recoverable resources into permanent production and
reserves.
UKOG remains confident that the comprehensive long-term flow
testing campaign will provide the necessary data to fully assess
Horse Hill's commerciality and, most importantly, help meet our
corporate target of first stable oil production and significant
positive cash flow in 2019."
Horse Hill Oil Discovery
The HH-1 Portland sandstone and KL3 and KL4 oil discoveries lie
within onshore Weald Basin licences PEDL137 and PEDL246, covering
an area of 55 square miles (143 km(2) ) north of Gatwick Airport.
As reported on 21 March 2016, HH-1 flow tested at a significant
commercial aggregate stable dry oil rate of 1,688 barrels of oil
per day ("bopd") from the Portland, KL3 and KL4 reservoir horizons.
Over the 30-90 hour flow periods from each of the 3 zones, no clear
indication of any reservoir pressure depletion was observed.
EWT Overview
The EWT will comprise a series of three separate test sequences
commencing in the Portland followed by the KL4 and finally, the
deeper KL3. If time permits a test combining the KL4 and KL3 (a
commingled test) may be undertaken. Each test will utilise existing
perforated zones as per the 2016 test programme. The expected
duration of the full flow programme is around 150 days.
As the 2016 short flow test campaign established commercially
viable initial flow rates for each of the Portland, KL4 and KL3
zones, the 2018 long-term testing programme's goal is to determine
commerciality by confirming that HH-1's reservoirs are each
connected to a commercially viable oil volume.
It is expected that, should the minimum commercial volume
threshold be met or exceeded, a declaration of commerciality for
each horizon could be made in a timely mannerafter the completion
of each testing sequence.
Given a positive Portland and Kimmeridge test outcome at Horse
Hill, it is expected that a Competent Person's Report covering
Kimmeridge resources and an updated Portland recoverable
resources/reserves will be undertaken in due course.
Portland Test
As per the 2016 test, which flowed oil from the Portland at a
stable metered rate of 323 bopd over an 8.5 hour period, a linear
rod-pump will be utilised to flow Portland oil from around 35
metres of existing perforations located at around 615 metres below
surface. As the 2016 test rates were constrained by the pump's
capacity, the new test will use a larger pump with a capacity of
around 475 bopd.
Given the currently estimated low Portland production costs of
around $20-25 per barrel, the 32 million barrels most likely
Portland oil in place calculated by Xodus in 2017, together with
the good flow rates recorded in 2016, the Company believes that the
Portland is a strong candidate for commercial viability.
Consequently, subject to a successful test outcome, the Company is
targeting an assessment of Portland commerciality in Q3 2018.
KL3 and KL4 Tests
The planned Kimmeridge programme is designed to build upon the
short stabilised natural flow periods of the 2016 test campaign,
which tested at an aggregate stable dry oil rate of 1,365 bopd,
comprised of 901 bopd and 464 bopd from the KL4 and KL3 zones
respectively. The 2016 dry oil rates were recorded over 4-7.5 hour
stabilised flow periods through restricted choke settings of 1" and
1/2 " respectively.
The two 2018 long term Kimmeridge tests will utilise existing
perforations and will access around a 30 metre gross reservoir zone
in each of the KL3 and KL4 zones, located at around 840 and 900
metres below surface respectively. As well as determining the
volume of Kimmeridge oil in contact with the wellbore, the testing
programme is designed to assess whether the Kimmeridge is one large
single reservoir where both KL3 and KL4 are connected by natural
fractures within the encasing oil generative shales.
Furthermore, the long term Kimmeridge reservoir performance data
is expected to provide the necessary data to enable, for the first
time, Petroleum Resources Management System compliant Kimmeridge
limestone reserve and resource figures to be estimated at Horse
Hill and, by analogy, for the wider Kimmeridge play.
Future Drilling and Production Plans
Subject to a successful testing outcome in the Kimmeridge and
Portland, the HH-2 appraisal well is planned to immediately follow
the EWT in late 2018/early 2019. The well will be drilled as a
future Portland production well. Drilling plans include optionality
to deepen HH-2 into the Kimmeridge to gather core and image log
data, together with a possible northwards deviation to access the
adjacent oil bearing Collendean Farm fault block's significant
Portland oil resources.
Similarly, contingent upon EWT success, an HH-1z Kimmeridge
sidetrack spud is planned in 2019 following integration of HH-1
Kimmeridge production data into a reservoir model and data from any
future HH-2 Kimmeridge core. Necessary Planning and EA permits for
HH-2 and HH-1z are in place.
To achieve its goal of stable, long-term Horse Hill oil
production during 2019, HHDL now plans to submit a further
production planning application to SCC in summer 2018. This
application will seek consent to produce oil initially from HH-1
& 1z, and HH-2, together with further production wells in a
second contingent drilling phase.
Qualified Person's Statement
Stephen Sanderson, UKOG's Executive Chairman, who has over 35
years of relevant experience in the oil industry, has approved the
information contained in this announcement. Mr Sanderson is a
Fellow of the Geological Society of London and is an active member
of the American Association of Petroleum Geologists.
For further information, please contact:
UK Oil & Gas Investments PLC
Stephen Sanderson / Kiran Morzaria Tel: 01483 243450
WH Ireland (Nominated Adviser and Broker)
James Joyce / James Sinclair-Ford Tel: 020 7220 1666
Cenkos Securities PLC (Joint Broker)
Joe Nally / Neil McDonald Tel: 0207 397 8919
Public Relations
Brian Alexander / David Bick Tel: 01483 243450
Glossary:
discovery a discovery is a petroleum accumulation
for which one or several exploratory
wells have established through
testing, sampling and/or logging
the existence of a significant
quantity of potentially moveable
hydrocarbons
------------ ------------------------------------------
limestone a sedimentary rock predominantly
composed of calcite (a crystalline
mineral form of calcium carbonate)
of organic, chemical or detrital
origin. Minor amounts of dolomite,
chert and clay are common in limestones.
Chalk is a form of fine-grained
limestone
------------ ------------------------------------------
oil field an accumulation, pool or group
of pools of oil in the subsurface.
An oil field consists of a reservoir
in a shape that will trap hydrocarbons
and that is covered by an impermeable
or sealing rock
------------ ------------------------------------------
pump stroke in a rod pump the product of the
capacity rod cross-sectional area, maximum
distance between the top and bottom
of the rod stroke movement and
the pump stroking speed
------------ ------------------------------------------
recoverable those quantities of petroleum (oil
volumes or in this case) estimated, as of
resources a given date, to be potentially
recoverable from known accumulations
------------ ------------------------------------------
reserves those quantities of petroleum anticipated
to be commercially recoverable
by application of development projects
to known accumulations from a given
date forward under defined conditions.
Reserves must further satisfy four
criteria: they must be discovered,
recoverable, commercial, and remaining
(as of the evaluation date) based
on the development project(s) applied.
Reserves are further categorised
in accordance with the level of
certainty associated with the estimates
and may be sub-classified based
on project maturity and/or characterised
by development and production status
------------ ------------------------------------------
sandstone a clastic sedimentary rock whose
grains are predominantly sand-sized.
The term is commonly used to imply
consolidated sand or a rock made
of predominantly quartz sand.
------------ ------------------------------------------
UKOG Licence Interests
The Company has interests in the following UK licences:
Asset Licence UKOG's Licence Holder Operator Area (km(2) ) Status
Interest
---------------- --------- --------------- --------------- --------------- -------------- ----------------------
UKOG (GB) IGas Energy Field currently shut
Avington (1) PEDL070 5% Limited Plc 18.3 in
---------------- --------- --------------- --------------- --------------- -------------- ----------------------
Baxters Copse PEDL233 50% UKOG Weald IGas Energy 89.6 Appraisal/development
(2) Limited Plc well planned; licence
extended to 2018
---------------- --------- --------------- --------------- --------------- -------------- ----------------------
Broadford Bridge PEDL234 100% Kimmeridge Oil Kimmeridge Oil 300.0 BB-1 & 1z completed,
(3) & Gas Limited & Gas Limited preparing two further
(4) (4) planning applications
---------------- --------- --------------- --------------- --------------- -------------- ----------------------
Holmwood (3) PEDL143 40% UKOG Europa Oil & 91.8 Holmwood-1
Gas (Holdings) exploration well
plc planned in 2018
---------------- --------- --------------- --------------- --------------- -------------- ----------------------
UKOG (GB) IGas Energy Field in stable
Horndean (1) PL211 10% Limited Plc 27.3 production
---------------- --------- --------------- --------------- --------------- -------------- ----------------------
Horse Hill (5) PEDL137 32.435% Horse Hill Horse Hill 99.3 Production tests and
Developments Developments further appraisal
Ltd Ltd well(s) scheduled for
2018
---------------- --------- --------------- --------------- --------------- -------------- ----------------------
Horse Hill Horse Hill
Developments Developments
Horse Hill (5) PEDL246 32.435% Ltd Ltd 43.6 As above
---------------- --------- --------------- --------------- --------------- -------------- ----------------------
Isle of Wight PEDL331 65% UKOG UKOG 200.0 Preparing Arreton-3
(Onshore) (2, oil discovery
3) appraisal well
planning submission
---------------- --------- --------------- --------------- --------------- -------------- ----------------------
Markwells Wood PEDL126 100% UKOG (GB) UKOG (GB) 11.2 Revised drilling and
(2) Limited Limited testing planning
application underway
---------------- --------- --------------- --------------- --------------- -------------- ----------------------
Notes:
1. Oil field currently in production.
2. Oil discovery pending development and/or appraisal
drilling.
3. Exploration asset with drillable prospects and leads. PEDL234
contains the Broadford Bridge-1 and 1z
discovery well, the extension of the Godley Bridge Portland gas
discovery plus further exploration
prospects.
4. UKOG has a 100% interest in Kimmeridge Oil & Gas Limited,
which has a 100% interest in PEDL234.
5. Oil discovery with successful flow test in 3 zones, further
long-term testing scheduled in 2018
6. UKOG has a direct 49.9% interest in HHDL, which has a 65%
interest in PEDL137 and PEDL246.
The information contained within this announcement is deemed by
the Company to constitute inside information under the Market Abuse
Regulation (EU) No. 596/2014.
This information is provided by RNS, the news service of the
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contact rns@lseg.com or visit www.rns.com.
END
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