TIDMUKOG
RNS Number : 2898A
UK Oil & Gas PLC
10 September 2018
UK Oil & Gas PLC
("UKOG" or the "Company")
Portland extended well test ("EWT") successfully completed,
Kimmeridge EWT to commence
Horse Hill-1 ("HH-1") Portland and Kimmeridge oil discovery,
Weald Basin, UK
Key Points:
-- Final HH-1 Portland flow test sequence successfully
completed. all Portland operational objectives achieved.
-- Successful Portland re-perforation programme targeted 114
feet of oil pay, adding 14 feet of new pay. Following
re-perforation, well productivity increased by up to 65%.
-- Independent oil consultants Xodus Group's ("Xodus") analysis
of flow and pressure data interprets that further HH-1 Portland
vertical well optimisation could achieve a forecast sustainable
initial 24/7 pumped rate of around 362 barrels of oil per day
("bopd")* when full scale long-term production commences, exceeding
original estimates. This analysis is key as it establishes the
absolute flow potential of the Portland reservoir for future
production wells.
-- Given the knowledge of the Portland's true flow potential,
plans are now being formulated to drill either the HH-1z sidetrack
or HH-2 new drill as a horizontal Portland appraisal well, with a
targeted* sustainable daily production rate of 720 to 1,080 bopd, 2
to 3 times the forecast calculated* HH-1 vertical well rate of 362
bopd. All planning permissions, Environment Agency permits and the
HH-2 well cellar are in place for a horizontal well. If successful
it is envisaged that all future Portland production will be via
horizontal wells.
-- The Company's economic modelling indicates that HH-1 Portland
is robustly commercial at even the lowest observed sustainable
daily rate of 140 bopd and at oil prices below $60 per barrel. A
formal Horse Hill Developments Ltd ("HHDL") declaration of Portland
commerciality is therefore expected shortly following receipt of
Xodus' final connected oil volume analysis. A planning application
for long term production is planned to be submitted to Surrey
County Council shortly, prior to the completion of the forthcoming
Kimmeridge EWT programme. Full-scale long-term production, targeted
for 2019, is subject to co-venturer and regulatory approvals.
-- All 36deg API Brent quality oil produced during the EWT is
"dry", containing only 0.02% water.
-- Preparation for the primary EWT objective, to establish the
commerciality of the Kimmeridge Limestone 3 ("KL3") and KL4 oil
pools underlying the Portland, has now commenced.
-- Kimmeridge testing will begin in the uppermost KL4 oil pool
immediately following the removal of two suspension plugs and
installation of a new completion string straddling the two
Kimmeridge oil pools.
Note: * There can be no absolute guarantee that forecast,
targeted or calculated rates of production will be achieved.
UK Oil & Gas PLC (London AIM: UKOG) announces that HHDL, the
operator of the HH-1 Kimmeridge and Portland oil discovery, located
in licence PEDL137, in which UKOG holds a 46.735% beneficial
interest, has informed the Company that the final Portland EWT
sequence has been successfully completed and that all Portland
operational test objectives were achieved.
Following a final long duration pressure build up test,
preparations for the primary Kimmeridge EWT are now underway. The
Kimmeridge EWT's goal is to establish the commerciality of the
underlying KL3 and KL4 oil pools, which in 2016 flowed 40deg API
crude naturally to surface at an aggregate implied stable dry oil
rate of 1,365 bopd. Further updates will be provided as the
Kimmeridge EWT progresses.
Stephen Sanderson, UKOG's Chief Executive, commented:
"We are delighted that the HH-1 re-perforation and optimisation
programme has resulted in the forecast sustainable Portland
production rate of 362 bopd, which significantly exceeds our
initial test programme expectations. This high rate, together with
our economic modelling, strongly indicates that the HH-1 Portland
vertical well is commercially viable and robustly economic at the
lowest observed sustainable test rates and the predicted future
sustainable production rates. HHDL's internal declaration of
Portland commerciality is therefore expected shortly following
receipt of Xodus' final connected oil volume analysis.
We also look forward to the near-term prospect of a new Portland
horizontal appraisal well attaining a sustainable test rate in
early 2019. This commercial result would make the Portland a
significant asset and would underpin both the Horse Hill oil
discovery's and the Company's future.
In the light of Portland success, we now eagerly anticipate the
start of the Kimmeridge test programme, the goal of which is to
establish the commerciality of the underlying KL3 and KL4 oil pools
which flowed so prolifically in the 2016 short duration test
programme."
Additional EWT Information
In order to calculate the Portland oil volume connected to, or
"seen by" HH-1, steady state flow conditions were required (i.e.
stable; oil rate, gas oil ratio, bottom hole and tubing head
pressures). Consequently, post perforation, production was
restricted to sustainable 24/7 rates of between 140-160 bopd. It
should be noted that these rates do not reflect the Portland's full
flow potential that could be achieved either via successful further
optimisation of the HH-1 vertical well or a new horizontal
production well.
During these sustained flow periods, intermittent natural flow
was evident, with metered rates at the separator exceeding the
nominal pumped volume by up to 50 bopd, with the highest rate
recorded of 191 bopd. Gas rates at the test separator and through
the enclosed flare remained broadly constant at around 15,000 cubic
feet per day.
Throughout testing, sustained pumped oil rates were recorded
with stable bottom hole pressures of around 200 psi below the
initial reservoir pressure of around 915 psi. Following shut-in
periods, bottom hole pressures recovered rapidly back to initial
reservoir pressure, indicating good connectivity within the
Portland oil pool. The observed pressure response during the EWT is
interpreted to have positive implications for oil recovery
efficiency during planned future long-term production.
Appointment of Joint Broker
The Company is pleased to announce that is has appointed Novum
Securities Limited as joint broker to the Company with immediate
effect.
About Xodus-
Xodus are an international, globally recognised consultancy
group providing engineering and advisory services to clients in the
oil & gas, LNG, renewables and utilities industries worldwide.
They are certified as Competent Persons for the purposes of oil and
gas resource and reserve assessments. More details can be found at
www.xodusgroup.com
Qualified Person's Statement
Rob Wallace, UKOG's principal technical advisor, who has over 40
years of relevant experience in the oil industry, has approved the
information contained in this announcement. Mr Wallace is a
Chartered Scientist, Chartered Geologist and Fellow of the
Geological Society of London, an active member of the American
Association of Petroleum Geologists, a member of the Petroleum
Exploration Society of Great Britain and a member of the South
African Geophysical Society.
For further information, please contact:
UK Oil & Gas 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
degAPI a measure of the density of crude oil, as defined
by the American Petroleum Institute
----------------------------------------------------------
extended flow a flow test, as per the permission granted by
test the Oil and Gas Authority, with an aggregate flow
period duration over all zones of greater than
96 hours and up to 90 days maximum
----------------------------------------------------------
flow test a flow test or well test involves testing a well
by flowing hydrocarbons to surface, typically
through a test separator. Key measured parameters
are oil and gas flow rates, downhole pressure
and surface pressure. The overall objective is
to identify the well's capacity to produce hydrocarbons
at a commercial flow rate
----------------------------------------------------------
horizontal well a well that during drilling is steered so as to
be at or close to 90 degrees from the vertical
to follow a particular geological stratum or reservoir
unit
----------------------------------------------------------
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
----------------------------------------------------------
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
----------------------------------------------------------
sidetrack re-entry of a well from the well's surface location
with drilling equipment for the purpose of deviating
from the existing well bore to achieve production
or well data from an alternative zone or bottom
hole location, or to remedy an engineering problem
encountered in the original well bore
----------------------------------------------------------
UKOG Licence Interests
The Company has interests in the following UK licences:
Asset Licence UKOG Licence Operator Area Status
Interest Holder (km(2)
)
Avington UKOG (GB) IGas Energy Field currently
(1) PEDL070 5% Limited Plc 18.3 shut in
----------------- ---------- -------------- ------------------ -------- --------------------------
Broadford BB-1 & 1z oil
Bridge UKOG (234) UKOG (234) discovery, planning
(3) PEDL234 100% Ltd (4) Ltd (4) 300.0 application submitted
----------------- ---------- -------------- ------------------ -------- --------------------------
Seeking alternate
Europa Oil sites to drill
Holmwood & Gas (Holdings) Holmwood and other
(3) PEDL143 40% UKOG plc 91.8 Kimmeridge prospects
----------------- ---------- -------------- ------------------ -------- --------------------------
Horndean UKOG (GB) IGas Energy Field in stable
(1) PL211 10% Limited Plc 27.3 production
----------------- ---------- -------------- ------------------ -------- --------------------------
Production tests
ongoing, 2 further
Horse Hill Horse Hill appraisal wells
Horse Hill Developments Developments scheduled for
(5) PEDL137 46.735% Ltd Ltd 99.3 2018/19
----------------- ---------- -------------- ------------------ -------- --------------------------
Horse Hill Horse Hill
Horse Hill Developments Developments
(5) PEDL246 46.735% Ltd Ltd 43.6 As above
----------------- ---------- -------------- ------------------ -------- --------------------------
Preparing planning
submission for
Arreton-3 oil
Isle of appraisal well
Wight (Onshore) & Arreton S. exploration
(2, 3) PEDL331 65% UKOG UKOG 200.0 well
----------------- ---------- -------------- ------------------ -------- --------------------------
Revised drilling
Markwells UKOG (GB) UKOG (GB) and testing planning
Wood (2) PEDL126 100% Limited Limited 11.2 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
oil discovery well, the extension of the Godley Bridge Portland
gas discovery plus further exploration
prospects.
4. UKOG has a 100% interest in UKOG (234) Ltd, which has a 100%
interest in PEDL234.
5. Oil discovery in 3 zones, EWT ongoing, two further wells
HH-1z and HH-2 planned end 2018/early 2019
6. UKOG has a direct 71.9% 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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END
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