REG - UK Oil & Gas PLC - Extended Well Test and Regulatory Update

UK Oil & GasAnnouncement

05/10/2018 11:30

RNS Number : 1481D
UK Oil & Gas PLC
05 October 2018
 


UK Oil & Gas PLC
("UKOG" or the "Company")
 
Extended Well Test ("EWT") and Regulatory Update
Horse Hill-1 ("HH-1") Portland and Kimmeridge Oil Discovery, Weald Basin, UK
 
Key Points:
 
·   Kimmeridge Limestone 4 ("KL4") EWT operations now underway. Further updates to follow in due course following flow stabilisation and pressure build up ("PBU") tests.
·   Final Xodus report determines that the single HH-1 well "sees" a connected Portland oil in place ("OIP") of approximately 7-11 million barrels, a robustly viable commercial volume for a single well.
·    Horse Hill Portland and Kimmeridge long-term production scoping report submitted to Surrey County Council ("SCC"). Overall plan includes a total of six production wells, with up to 3 production wells and a reservoir pressure support well in the Portland oil pool. A planning application for production will be submitted to SCC prior to the completion of the 2018 EWT programme.
 
UK Oil & Gas PLC (London AIM: UKOG) announces that HHDL, a UKOG subsidiary company and the operator of the HH-1 Kimmeridge Limestone and conventional Portland Sandstone oil discovery, has informed the Company that, following the successful Portland EWT programme, the KL4 EWT flow sequence operation has now commenced. HH-1 is located in licence PEDL137 in which UKOG holds a 46.735% beneficial interest.
 
Further to the reported Portland EWT results, Xodus have now delivered a report which details that, to date, the single HH-1 well has "seen" approximately 7-11 million connected barrels of the total full field OIP (or Stock Tank Oil Initially in Place "STOIIP") reported in the Company's July 2018 AIM re-admission document. Based upon modelled production profiles and oil recoveries, the Company and Xodus believe this to be a commercial connected OIP volume for a single well that supports the Company's envisaged multi-well Portland oil drilling and production programme. It should be noted that the calculated connected OIP should  not be misconstrued as recoverable volumes or reserves.
 
Given the EWT has delivered both commercially viable Portland flow rates and connected oil volumes, an internal declaration of Portland commerciality will be made shortly by HDDL.  
 
As the first part of the regulatory process necessary to deliver the Company's goal of long-term oil production at Horse Hill in 2019, HHDL has recently submitted an outline production scoping report to SCC.
 
The scoping report details the envisaged environmental impacts from the outline development's future drilling, production, decommissioning and site restoration phases. The envisaged development has a total of six production wells and assumes a maximum daily rate of around 3,500 bopd. During the production phase it is envisaged that should production capacity exceed 3,500 bopd an application to increase total produced volumes will be made. The Portland oil pool is envisaged to be produced via up to three wells and one pressure support well. As previously reported, regulatory permissions are in place to drill and flow test the first two new wellbores, HH-1z and HH-2 with a planned early 2019 spud date.
 
The scoping report and a table of estimated HGV movements during the production phase is available on the Company's website. Average HGV movements during the plan's 20-year field production life are estimated to total three per day.
 
Following SCC's feedback on the scoping report, HHDL will then submit a full-scale production planning application, currently planned before the completion of the current 2018 EWT programme.
 
Stephen Sanderson, UKOG's Chief Executive, commented:
 
"The Portland continues to out-perform our initial expectations and looks set to provide the production and cash flow base that can underpin UKOG's future growth. Our immediate operational focus now switches to the Kimmeridge EWT, which, if successful, has the potential to make Horse Hill one of the UK's leading onshore producing oil fields and to help unlock the value within our extensive Kimmeridge asset portfolio in the Weald."
 
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
 
Matt Cartwright, UKOG's Chief Operating Officer, who has over 35 years of relevant experience in the oil industry, has approved the information contained in this announcement. Mr Cartwright is a Chartered Engineer and member of the Society of Petroleum Engineers.
 
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
 
Novum Securities (Joint Broker)                                                                                                              
John Bellis                                                                                                                     Tel: 020 7399 9400
 
Public Relations
Brian Alexander / David Bick                                                                                     Tel: 01483 243450
 
Glossary
 




connected oil in place


A volume of OIP that is demonstrated by reservoir pressure and flow data to be directly accessed and drained by a well during production. Only part (or a fraction) of the volume, known as the recoverable volume, will normally be recovered to surface during oil production. The percentage of the recoverable volume compared to the total connected OIP is known as the recovery factor for that well.




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




extended well test


a well test, as per the permission granted by 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




oil in place


the quantity of oil or petroleum that is estimated to exist in naturally occurring accumulations.




 
UKOG Licence Interests
 
The Company has interests in the following UK licences:
 




Asset


Licence


UKOG Interest


Licence Holder


Operator


Area (km2)


Status




Avington 1


PEDL070


5%


UKOG (GB) Limited


IGas Energy Plc


18.3


Field currently shut in




Broadford Bridge 4


PEDL234


100%


UKOG (234) Ltd 4


UKOG (234) Ltd 4


300.0


BB-1 & 1z oil discovery, planning application approved




Holmwood 3


PEDL143


40%


UKOG


Europa Oil & Gas (Holdings) plc


91.8


Seeking alternate sites to drill Holmwood and other Kimmeridge prospects




Horndean 1


PL211


10%


UKOG (GB) Limited


IGas Energy Plc


27.3


Field in stable production




Horse Hill 5


PEDL137


46.735%


Horse Hill Developments Ltd ⁶


Horse Hill Developments Ltd ⁶


99.3


Production tests ongoing, 2 further appraisal wells scheduled for 2018/19




Horse Hill 5


PEDL246


46.735%


Horse Hill Developments Ltd⁶


Horse Hill Developments Ltd ⁶


43.6


As above




Isle of Wight (Onshore) 2, 3


PEDL331


65%


UKOG


UKOG


200.0


Preparing planning submission  for Arreton-3 oil appraisal well and Arreton South exploration well 




Markwells Wood 2


PEDL126


100%


UKOG (GB) Limited


UKOG (GB) Limited


11.2


Revised drilling and 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

    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 in 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




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