UK Oil & Gas Investments PLC OGA Extends Retention Area Periods for Horse Hill (4581B)

TIDMUKOG

RNS Number : 4581B

UK Oil & Gas Investments PLC

04 April 2017

UK Oil & Gas Investments PLC

("UKOG" or the "Company")

OGA Agrees Work Programme and Extends Retention Area Periods for Horse Hill Licences, Weald Basin, SE UK

UK Oil & Gas Investments PLC (London AIM & NEX: UKOG) announces that it has been informed by the operator, Horse Hill Developments Ltd ("HHDL"), that the Oil and Gas Authority ("OGA") has consented to extend the current PEDL137 and PEDL246 Retention Areas ("RAs") until 2021. The PEDL137 and PEDL246 RAs, which cover the entirety of the licences, will now expire on 30(th) September and 30(th) June 2021, respectively. The Company holds a 31.2% net interest in the licences via its 48% ownership of the licence's operator HHDL.

The RA work programmes, now agreed with OGA, comprise; the planned Horse Hill-1 ("HH-1") Kimmeridge and Portland production tests, HH-1z Kimmeridge Limestone ("KL") and HH-2 Portland appraisal wells, 50 km(2) of 3D seismic, 25 km of 2D seismic and a PEDL246 exploration step-out well. The RAs for each licence can be further extended or modified subject to an ongoing minimum work programme agreed by the OGA.

Stephen Sanderson, UKOG's Executive Chairman, commented:

"The revised RA expiry dates ensure that the knowledge gained from the Company's forthcoming extensive 2017 Broadford Bridge, Horse Hill and Holmwood drilling and test campaign, can be fully incorporated into future Kimmeridge Limestone step-out wells in PEDL246 and PEDL137. 2017 is set to become a pivotal year for the Company."

HH-1 Oil Discovery (UKOG interest 31.2%)

The HH-1 Kimmeridge Limestone and Portland oil discovery well is located within onshore exploration Licence PEDL137, on the northern side of the Weald Basin, 3 km north of Gatwick Airport. As previously reported in February and March 2016, two naturally-fractured limestone members within the Kimmeridge section, known as KL3 and KL4, flowed dry, 40-degree API oil, at an aggregate stabilised natural flow rate of 1,365 barrels per day ("bopd") with no clear indication of depletion. The overlying Portland flowed dry, 35-degree API gravity oil at a stable pumped rate of 323 bopd. The Portland oil was produced at the rod-pump's maximum achievable rate and thus flow was constrained by the pump's mechanical capacity.

As previously reported in October 2016 and February 2017, an application for long term production testing and further appraisal drilling was submitted to Surrey County Council in October 2016, and is now scheduled to be decided at the Council's planning committee meeting in July 2017. The Company therefore envisages that these operations will commence in the second half of 2017 upon grant of the necessary remaining regulatory permissions.

Broadford Bridge-1 Exploration well (UKOG interest 100%)

The Broadford Bridge-1 ("BB-1"), planned to commence in Q2 2017, will be a deviated or "slant" well, drilled to a true-vertical depth of approximately 1,300 metres. The well is designed to penetrate four naturally-fractured Kimmeridge Limestone reservoirs (KL1-KL4) on the southern flank of the Weald Basin, within a mirror-image of the Horse Hill fault block. The Kimmeridge section is planned to be drilled at an angle of approximately 50 degrees to vertical and approximately orthogonal to the predicted direction of open natural fractures within the Kimmeridge Limestones.

Operations will include the acquisition of an extensive coring, electric log and borehole imaging data set to provide further key information on the limestone reservoirs and natural fracturing. All pre-drill tenders have been received and a drilling rig chosen. The civil construction works necessary to commence drilling have been completed. Planning permission to drill the well was granted by West Sussex County Council in 2013 and includes the ability to flow test the well for up to 14 weeks.

The well will use safe, tried and tested conventional oil field techniques, approved by the Environment Agency and Health and Safety Directorate, and as used at Horse Hill in Surrey in 2014 and 2016 and by 84 legacy wells. As previously reported in March 2017, BB-1 will be drilled utilising a British manufactured, natural, biodegradable drilling fluid. This zero-hazard drilling fluid (or "mud") will ensure that there can be zero contamination of any groundwater via the drilling process.

The drilling fluid, also used by water well drilling companies in the UK, is registered with the Centre for Environment, Fisheries and Aquaculture Science (CEFAS). It is also the only drilling fluid to be formally approved by the Department for the Environment, Food and Rural Affairs for use in drilling wells for public water supply.

Holmwood-1 Exploration Well (UKOG interest 30%)

The Holmwood-1 well, scheduled to be drilled in the second half of 2017, is located in PEDL143, approximately 8 km to the west of HH-1. The well is designed to test a further geological look-alike of Horse Hill with reservoir objectives in the Portland, Kimmeridge Limestones and Corallian.

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: [phone]

WH Ireland (Nominated Adviser and Broker)

James Joyce / James Bavister Tel: [phone]

Cenkos Securities PLC (Joint Broker)

Nick Tulloch / Neil McDonald Tel: [phone]

Square 1 Consulting (Public Relations)

Brian Alexander / David Bick Tel: [phone]

Glossary:

 
 degree API      a measure of the density of crude 
                  oil, as defined by the American 
                  Petroleum Institute 
--------------  ------------------------------------------ 
 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 
--------------  ------------------------------------------ 
 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 
--------------  ------------------------------------------ 
 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 
--------------  ------------------------------------------ 
 Retention       An area covering all or part of 
  Area ("RA")     an onshore UK "14(th) Round New 
                  Model" Licence that can be retained 
                  until the expiry date without any 
                  relinquishment and subject to a 
                  work programme agreed by the OGA. 
                  Usually, as in the case of PEDL137 
                  and PEDL246, the Retention Area 
                  covers the entire Licenced area 
--------------  ------------------------------------------ 
 seismic         use of reflected and refracted 
                  sound waves generated at the surface 
                  to ascertain the nature of subsurface 
                  geological structure. 2D seismic 
                  records a two-dimensional cross-section 
                  through the subsurface collected 
                  using the two-dimensional common 
                  mid-point method. 3D seismic records 
                  a three-dimensional image through 
                  the subsurface using the common 
                  depth-point method. 
--------------  ------------------------------------------ 
 step-out well   a well designed to determine the 
                  lateral extent of a discovered 
                  hydrocarbon accumulation or play 
--------------  ------------------------------------------ 
 

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 in stable 
Avington (1)       PEDL070          5%            Limited            Plc             18.3             production 
----------------  ---------  ---------------  ---------------  ---------------  --------------  ---------------------- 
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 well permitted, 
(3)                                            & Gas Limited    & Gas Limited                     drilling planned in 
                                                    (4)              (4)                                 2017 
----------------  ---------  ---------------  ---------------  ---------------  --------------  ---------------------- 
                                                Angus Energy     Angus Energy                      Well intervention 
Brockham            PL235         1.11%             (6)              (6)              8.9          programme ongoing 
----------------  ---------  ---------------  ---------------  ---------------  --------------  ---------------------- 
Holmwood (3)       PEDL143         30%              UKOG         Europa Oil &        91.8             Holmwood-1 
                                                                Gas (Holdings)                     exploration well 
                                                                     plc                            planned in 2017 
----------------  ---------  ---------------  ---------------  ---------------  --------------  ---------------------- 
                                                 UKOG (GB)       IGas Energy                        Field in stable 
Horndean (1)        PL211          10%            Limited            Plc             27.3             production 
----------------  ---------  ---------------  ---------------  ---------------  --------------  ---------------------- 
Horse Hill (5)     PEDL137        31.2%          Horse Hill       Horse Hill         99.3         Submitted planning 
                                                Developments     Developments                    application for long 
                                                  Ltd (7)          Ltd (7)                       term production tests 
                                                                                                  and drilling of two 
                                                                                                         wells 
----------------  ---------  ---------------  ---------------  ---------------  --------------  ---------------------- 
                                                 Horse Hill       Horse Hill 
                                                Developments     Developments 
Horse Hill (5)     PEDL246        31.2%           Ltd (7)          Ltd (7)           43.6              As above 
----------------  ---------  ---------------  ---------------  ---------------  --------------  ---------------------- 
Isle of Wight                                   UKOG Solent      UKOG Solent                      Preparing drilling 
 (Offshore) (3)     P1916          100%           Limited          Limited           46.7         planning submission 
---------------- 
Isle of Wight 
 (Onshore) (2,                                                                                    Preparing drilling 
 3)                PEDL331         65%              UKOG             TBA             200.0        planning submission 
----------------  ---------  ---------------  ---------------  ---------------  --------------  ---------------------- 
Lidsey              PL241         0.85%         Angus Energy     Angus Energy         5.3         Drilling of infill 
                                                    (6)              (6)                         well being considered 
----------------  ---------  ---------------  ---------------  ---------------  --------------  ---------------------- 
Markwells Wood     PEDL126         100%          UKOG (GB)        UKOG (GB)          11.2         Submitted planning 
 (2)                                              Limited          Limited                          application for 
                                                                                                  appraisal and field 
                                                                                                      development 
----------------  ---------  ---------------  ---------------  ---------------  --------------  ---------------------- 
 

Notes:

1. Oil field currently in production.

2. Oil discovery pending development and/or appraisal drilling.

3. Exploration asset with drillable prospects and leads. Contains the extension of the Godley Bridge Portland gas discovery and the site of the forthcoming Broadford Bridge-1 well.

4. UKOG has a 100% interest in Kimmeridge Oil & Gas Limited, which has a 100% interest in PEDL234.

5. Oil discovery with recently completed flow testing.

6. UKOG has a 1.71% interest in Angus Energy, which has a 50% interest in Lidsey and a 65% interest in Brockham; Angus hold an option to increase their Lidsey interest by a further 10% to 60%.

7. UKOG has a direct 48% interest in HHDL, which has a 65% interest in PEDL137 and PEDL246.

This information is provided by RNS

The company news service from the London Stock Exchange

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April 04, 2017 02:01 ET (06:01 GMT)