REG - UK Oil & Gas PLC - Portland Oil Production Resumes at Horse Hill

UK Oil & GasAnnouncement

18/02/2019 07:06

RNS Number : 2877Q
UK Oil & Gas PLC
18 February 2019
 


UK Oil & Gas PLC
("UKOG" or the "Company")
 
Portland Oil Production Resumes at Horse Hill Oil Field
 
UK Oil & Gas PLC (London AIM: UKOG), is pleased to announce that its subsidiary company, Horse Hill Developments Ltd has re-established Portland oil production from the Horse Hill-1 ("HH-1") well in which the Company has a 50.635% majority interest. The resumption of continuous Portland dry oil flow (i.e. oil with zero water content), at a stable daily rate of between 208 to 218 barrels per day ("bopd"), forms a key part of the schedule of works required to finalise the Portland field development plan and to the targeted establishment of permanent long-term Portland production, planned by end 2019.
 
Further details of extended well test ("EWT") results to date are summarised below.
 
Horse Hill 2018-19 EWT Oil Production Milestones:
 
·     Over 30,200 barrels ("bbl") aggregate Kimmeridge and Portland oil production to date.
·    Over 25,000 bbl total Kimmeridge oil production.
·     Over 5,100 bbl total Portland production to date, flow continues.
·     142 tankers of crude successfully exported primarily to Perenco's Hamble oil terminal. The KL's 40° API Brent quality crude containing no produced water, continues to be sold at prevailing Brent crude oil prices, less a small deduction for handling and marketing.
 
Portland Test Production and Future Plans
 
For prudent reservoir management purposes, the average test production rate from the 114 ft vertical perforated Portland section has been maintained below the previously reported 362 bopd calculated optimised sustainable rate. HH-1 test production is planned to continue until the completion of the new HH-2 Portland horizontal well, scheduled to start in spring 2019, and for which planning and environmental permits are in place. Portland test production will then be switched over to HH-2.
 
As detailed in UKOG's 23 January 2019 Strategic Review, the HH-2 Portland flow rate target of 720-1,080 bopd from the HH-2 horizontal well, which has been externally verified as a realistic and viable expectation by Xodus Group Ltd ("Xodus"), is designed to position Horse Hill as the Weald Basin's leading oil producing field by year end. Subsequent planned horizontal wells in 2020 are designed to further boost gross Portland production and to position UKOG as one of the current top three oil producing companies in the UK onshore sector.
 
Kimmeridge Future Test Production Plans
 
In tandem with Portland operations, the Kimmeridge oil pool was shut-in to conduct a further long-term pressure build up test.  Pressure gauges, set within the Kimmeridge reservoir, will monitor the Kimmeridge reservoir whilst the Portland is flowed.
 
Resumption of continuous Kimmeridge test production is now planned to follow directly after the drilling of HH-2. Initially via a short flow test period from HH-1, then by further long term production testing of the new HH-1z Kimmeridge sidetrack, for which planning and environmental consent are in place. As the HH-1z Kimmeridge horizontal has similar flow rate targets as the Portland, there is significant potential to increase aggregate production towards the 3,500 bopd envisaged maximum detailed in the recent planning application.
 
Stephen Sanderson, UKOG's Chief Executive, commented:
 
" After a 6-month shut in period, the continued good flow performance from the Portland further reinforces the viability of Xodus' and the Company's 720-1,080 bopd horizontal well production targets. We remain on course to commence the first two horizontals in Spring, with long term production testing of both wells planned to follow directly afterwards. The flow test results to date, combined with the prospect of further near term drilling, place Horse Hill in a strong position to deliver positive "free" cash flow to UKOG in the near and foreseeable future."
 
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:
 
UKOG
Stephen Sanderson / Kiran Morzaria                                                      Tel: 01483 900582
 
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 900582
 
Glossary
 




°API


a measure of the density of crude oil, as defined by the American Petroleum Institute




oil field


an accumulation, pool or group of pools of oil in the subsurface that produces oil to surface.




extended well test (EWT) or production 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 generally up to 90 days maximum flowing time per productive horizon. The objective being to establish whether a discovery is commercially viable and the best methods of future production and recovery




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 follow and remain within a particular geological stratum or reservoir unit having a trajectory that runs  approximately parallel to the top and or base of the target horizon




positive "free" cash flow


Revenues that have paid back the full capital cost of the activity, in this case the cost of the well. If the prognosed target rates are met, and at current oil prices, the planned horizontal wells are expected to pay-back capital costs in under 6 months.




sidetrack


re-entry of a well from the well's surface location with drilling equipment for deviating from the existing well bore to achieve production or well data from an alternative zone or bottom hole location




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




Asset


Licence


UKOG's Interest


Licence Holder


Operator


Area (km2)


Status




Avington 1


PEDL070


5%


UKOG (GB) Limited


IGas Energy Plc


18.3


Field currently temporarily shut in




Broadford Bridge 3


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


50.635%


Horse Hill Developments Ltd ⁶


Horse Hill Developments Ltd ⁶


99.3


Production tests ongoing, two further appraisal wells scheduled for 2019




Horse Hill 5


PEDL246


50.635%


Horse Hill Developments Ltd⁶


Horse Hill Developments Ltd ⁶


43.6


As above




Isle of Wight (Onshore) 2, 3


PEDL331


95%


UKOG


UKOG


200.0


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




Markwells Wood


PEDL126


100%


UKOG (GB) Limited


UKOG (GB) Limited


11.2


MW-1 P&A




               
Notes:
 
1.  Oil field currently in stable production.
2.  Oil discovery pending development and/or appraisal drilling.
3.  Exploration asset with drillable prospects and leads.
4.  Contains the Broadford Bridge-1 /1z Kimmeridge oil discovery, the eastern extension of the Godley Bridge Portland gas discovery plus further undrilled Kimmeridge exploration prospects.
5.  Oil field with three productive and commercially viable zones, EWT ongoing, two further wells HH-1z and HH-2 scheduled in Q2 2019, development underway subject to grant of planning consent, expected in Q3 2019.
6.  UKOG has a direct 77.9% 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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