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UK Oil & Gas Investments PLC Operational Update

10/08/2017 1:00pm

UK Regulatory (RNS & others)


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RNS Number : 6747N

UK Oil & Gas Investments PLC

10 August 2017

UK Oil & Gas Investments PLC

("UKOG" or the "Company")

Operational Update,

Successful Broadford Bridge-1z Sidetrack Drilled to Optimise Flow Test Potential

Broadford Bridge-1 Exploration Well, Weald Basin, UK

Highlights

-- To deliver optimal Kimmeridge flow test potential, a sidetrack, designated Broadford Bridge-1z ("BB-1z"), has been successfully drilled, logged and cased over the entire 1,480 ft thick Kimmeridge reservoir section.

-- BB-1z delivers a fresh, fractured oil-bearing Kimmeridge reservoir section identical to BB-1, with minimal formation damage and an in-gauge 8.5-inch borehole optimal for well completion and flow testing.

-- The sidetrack, from 2,613-5,757 ft measured depth ("MD"), runs parallel to BB-1, some 200 ft to the south, mirroring the original BB-1 trajectory. All necessary regulatory permissions to drill BB-1z were obtained. BB-1 plugged and abandoned over entire Kimmeridge section.

-- Significant oil traces in drilling fluid seen throughout 1,400 ft vertical thickness of BB-1z Kimmeridge section. Wet gas shows near identical to BB-1. Southerly trajectory aimed at possible more intensely natural fractured zones than BB-1.

-- Completion of BB-1z as a potential oil producer is now underway and on track. All permissions in place for a comprehensive multiple zone extended flow test, comprising 926 ft total aggregate perforated section.

UK Oil & Gas Investments PLC (London AIM and ISDX: UKOG) is pleased to announce that, to optimise well completion and subsequent flow test performance, it has successfully drilled, logged and cased a mechanical sidetrack, BB-1z, at its 100% owned Broadford Bridge-1 ("BB-1") exploration well located in licence PEDL234. The sidetrack has fulfilled its objective of replicating the geological success of BB-1, via a mirror-image borehole within the Kimmeridge. The new borehole delivers a fresh, identical section of heavily-fractured oil-bearing Kimmeridge reservoir, with minimal formation damage and an in-gauge, cased-off, 8.5-inch borehole optimal for well completion and flow testing.

A mechanical sidetrack was included as a provision in the Oil and Gas Authority's ("OGA") permission to drill BB-1, being a normal contingency during drilling operations.

Following the month-long coring and electric logging programme it became apparent that the duration and difficulty of coring such highly-fractured rocks in an inclined well led to potential plugging of some intensely fractured Kimmeridge zones likely jeopardising flow test performance. Sections of the overlying Purbeck also exhibited washout zones making both optimal casing-setting in the full 8.5-inch open hole section and resultant Kimmeridge well completion problematic. Using lessons learnt from BB-1, the short-duration sidetrack was drilled using the same non-toxic drilling fluid but with a lower density and higher viscosity mixture to minimise reservoir formation damage via possible plugging of oil-filled fractures. The sidetrack's in-gauge 8.5-inch borehole was cased-off successfully without problem and will now be completed for flow testing.

The sidetrack, drilled in five days, was drilled out from BB-1's existing 9 5/8-inch casing and extends from 2,613-5,757 ft measured depth ("MD"), from within the Purbeck Limestones to below the base of the Kimmeridge Limestone Zero ("KL0") fracture zone. The sidetrack's surface trace runs parallel to BB-1, some 200 ft to the south, mirroring the original BB-1 trajectory.

Significant oil traces were recovered from drilling fluid throughout the Kimmeridge section from 3,622 ft MD to below 5,562 ft MD, a vertical thickness of around 1,400 ft, greater than seen in BB-1. Wet gas shows were at near identical levels to that seen in the original BB-1 borehole.

The more southerly BB-1z trajectory was designed to encounter a potentially higher degree of natural fracturing associated with a nearby significant fault within the Kimmeridge. Initial CMI/MMI log quick-look interpretations indicate that this strategy was successful.

Additionally, BB-1z delivers a unique opportunity to map the lateral connectivity of the natural fracture system between BB-1 and BB-1z. This is a key piece of reservoir information, which along with the analysis of 554 ft of core and electric logs, will greatly aid the placement of future wells and ultimately help optimise any potential production from the reservoir at Broadford Bridge.

Prior to operations start, the original borehole, BB-1, was permanently abandoned with three continuous cement plugs over the entire oil-bearing Kimmeridge section, in full accordance with current required safety and well abandonment regulations.

All necessary regulatory permissions to drill the mechanical sidetrack, BB-1z, were obtained from the Environment Agency, Health and Safety Executive and OGA. The sidetrack's surface trace also lies within the approved "zone of deviation" as specified under West Sussex County Council's ("WSCC") planning consent. The completion of the sidetrack as a potential oil-producing well will constitute the end of the permitted "well construction phase" as defined under WSCC's planning consent.

Operations at site continue to prepare and complete BB-1z as a potential oil producing well from multiple zones over a gross perforated interval of 926 ft. Flow testing will commence after the rig has vacated the site, which will be announced in due course.

The extended flow test programme, to be conducted over a maximum 14-week period, is specifically designed to gather further supportive evidence that the Kimmeridge contains a continuous oil deposit, with mobile light oil and which can flow to surface at commercial rates and in commercial volumes.

The BB-1 and BB-1z technical learnings also have clear positive implications for the forthcoming Horse Hill flow test, which is now being technically reviewed to include further zones and an increased perforated section.

About BB-1

BB-1 and BB-1z, an exploration step-out, is located south of Billingshurst, West Sussex, within the 300 km(2) PEDL234 licence, in which the Company has a 100% interest via its ownership of the licence's operator, Kimmeridge Oil & Gas Limited ("KOGL").

As previously reported, in the Company's opinion, the multiple positive indications of mobile light oil observed throughout the entire naturally fractured Kimmeridge Limestone 0 ("KL0") to KL4 and shale target section are supportive that a significant continuous oil deposit, with a vertical extent of around 1,400 ft has been demonstrated by BB-1 and 1z. The uppermost two units of this zone, KL4 and KL3, flowed oil at a stable aggregate rate of 1,365 barrels per day in the Horse Hill-1 discovery near Gatwick Airport in 2016.

This continuous oil deposit therefore likely underlies the entire PEDL234 licence and a significant area of the wider Weald Basin, including the Horse Hill-1 Kimmeridge oil discovery some 27 km to the north east. The Company has the largest licence holding in the Weald Basin and within the prospective area of the Kimmeridge play.

Stephen Sanderson, UKOG's Executive Chairman, commented:

"Although BB-1 drilling and coring results were highly successful, proving our geological concept, it became clear that the duration and difficulty of coring such highly-fractured rocks in an inclined hole put the borehole in a less than optimal condition, ultimately jeopardising Kimmeridge flow-test performance. Consequently, using the drilling knowledge gained from BB-1, we have delivered BB-1z, consisting of a fresh, undamaged, 1,480 ft thick, intensely fractured Kimmeridge oil-bearing reservoir in optimal condition for flow testing.

The sidetrack's comprehensive image log data also presents an opportunity to unravel the extent and connectivity of natural fracturing within the Kimmeridge reservoir between BB-1 and BB-1z. This will greatly assist our understanding of flow test behaviour and the optimal placement of potential future Kimmeridge production wells at the site.

The sidetrack, BB-1z, is thus a solid investment in the future of the flagship Broadford Bridge discovery and the wider Kimmeridge play that underlies UKOG's significant licence holdings."

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 Bavister                                                   Tel: 020 7220 1666 

Cenkos Securities PLC (Joint Broker)

   Nick Tulloch / Neil McDonald                                                   Tel: 0131 220 6939 

BPA Media/Square 1 Consulting (Public Relations)

   Brian Alexander / David Bick                                                    Tel: 01483 243450 

Glossary:

 
 casing                heavy gauge steel tubing designed 
                        to line the wall of a well. The 
                        casing provides a safe controlled 
                        space in which the drill pipe and 
                        bit can operate in isolation from 
                        conditions in overlying rock units. 
                        The steel tubing is bonded to the 
                        surrounding rock by impermeable 
                        concrete, known as "cement" 
--------------------  ------------------------------------------------ 
 core or coring        a drilling technique that involves 
                        using a doughnut-shaped drilling 
                        bit to capture or "cut" a continuous 
                        cylinder-shaped core of undamaged 
                        in-situ rock. The core is captured 
                        in a steel pipe or "core barrel" 
                        above the bit. Core is normally 
                        cut in 30 feet lengths, or multiples 
                        of 30 feet, and normally with a 
                        diameter of 3.5 or 4 inches. Core 
                        is taken in petroleum reservoir 
                        rocks for detailed laboratory analyses 
                        of petrophysical and geomechanical 
                        parameters 
--------------------  ------------------------------------------------ 
 completion            the process of making a well ready 
  or well completion    for production. This principally 
                        involves preparing the bottom of 
                        the hole to the required specifications, 
                        running in the production tubing 
                        and its associated down hole tools 
                        as well as perforating as required, 
                        together with the selection of 
                        the appropriate completion fluid 
                        contained in the well. The process 
                        of running in and cementing the 
                        casing can also be included in 
                        this category 
--------------------  ------------------------------------------------ 
 continuous            a petroleum accumulation that is 
  oil deposit           pervasive throughout a large area, 
  or resource           which is not significantly affected 
  deposit               by hydrodynamic influences (i.e. 
                        the buoyancy of oil in water) and 
                        is not trapped by structural or 
                        stratigraphic geological conditions. 
                        The deposit, in contrast to conventional 
                        accumulations, has therefore not 
                        accumulated by the migration of 
                        petroleum over medium to long distances. 
                        The petroleum in such deposits 
                        is found within, or immediately 
                        adjacent or close to, the pore 
                        spaces where the petroleum is generated, 
                        i.e. those pore spaces lying within 
                        petroleum source rocks containing 
                        organic rich compounds (kerogen) 
                        that, when heated over geological 
                        time, transform into petroleum. 
                        These accumulations are generally 
                        associated with organic-rich shales 
                        such as the Kimmeridge Clay Formation. 
                        Such accumulations do not generally 
                        contain significant volumes of 
                        free, mobile formation water and 
                        therefore have no observable hydrocarbon-water 
                        contacts. The extent of the accumulation 
                        is generally defined by the limit 
                        of where burial depths have been 
                        sufficient to transform organic 
                        matter within the petroleum source 
                        rock unit into petroleum 
--------------------  ------------------------------------------------ 
 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 
--------------------  ------------------------------------------------ 
 electric logs         tools which measure the electrical 
                        properties of the rock and fluids 
                        in and surrounding the wellbore 
                        to determine the petrophysical 
                        and geological properties of the 
                        rock in its in-situ state. The 
                        logging equipment is lowered into 
                        the borehole on a steel cable through 
                        which a wire conveys data to be 
                        recorded at surface. The logging 
                        at BB-1 also includes tools which 
                        record 3-dimensional images and 
                        ultrasound scans of the rock designed 
                        to map and characterise natural 
                        fractures, known as " image logs" 
--------------------  ------------------------------------------------ 
 formation             the presence of residual drilling 
  damage                fluid and/or lost circulation materials 
                        across the reservoir which acts 
                        as a barrier or restriction to 
                        the subsequent flow of fluids (hydrocarbons) 
                        into the wellbore. Damage can be 
                        created to plug or block pore-spaces 
                        and/or fractures via three mechanisms 
                        directly related to the composition, 
                        density and viscosity of the drilling 
                        and lost circulation material, 
                        namely; solid particles and precipitates, 
                        swelling clay reactions with water, 
                        chemical reactions forming chemical 
                        precipitates 
--------------------  ------------------------------------------------ 
 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 
--------------------  ------------------------------------------------ 
 lost circulation      a zone of highly porous and permeable 
  zone (LCZ)            rock or voids directly intersecting 
                        the wellbore into which drilling 
                        fluid can escape. Commonly LCZs 
                        occur in extensive open fracture 
                        networks, voids or vugs within 
                        limestones and highly porous and 
                        permeable sandstones 
--------------------  ------------------------------------------------ 
 naturally             a fractured reservoir contains 
  fractured             open and usually connected cracks 
  reservoir             or fissures within the rock matrix; 
                        fractures can enhance permeability 
                        of rocks greatly by connecting 
                        pore-spaces together; naturally 
                        fractured reservoirs have been 
                        created over geological time by 
                        nature, not man-made via hydraulic 
                        fracturing 
--------------------  ------------------------------------------------ 
 shale                 a fissile rock that is formed by 
                        the consolidation of clay, mud, 
                        or silt particles, and that has 
                        a finely stratified or laminated 
                        structure. Certain shales, such 
                        as those of the Kimmeridge Clay, 
                        often contain a significant proportion 
                        of organic material, which when 
                        subject to increasing temperature 
                        and pressure over geological time 
                        transform into petroleum (known 
                        as petroleum "source rocks") 
--------------------  ------------------------------------------------ 
 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 existing well bore 
--------------------  ------------------------------------------------ 
 step-out well         a well specifically designed to 
                        determine the lateral extent of 
                        a discovered hydrocarbon accumulation 
                        or play 
--------------------  ------------------------------------------------ 
 well "zone            an arc or "cheese wedge" within 
  of deviation"         which the surface trace of a deviated 
                        well is permitted to travel under 
                        planning consent. The apex of the 
                        arc being the well's surface location 
--------------------  ------------------------------------------------ 
 wet gas               natural gas, predominantly consisting 
                        of methane (C1), ethane (C2) and 
                        propane (C3) but also containing 
                        the longer molecular chain natural 
                        gases butane and iso-butane (C4), 
                        pentane and iso-pentane (C5). The 
                        C4 and C5 gases are created during 
                        oil-generation within a petroleum 
                        source rock unit when oil is thermally 
                        cracked. At Horse Hill these natural 
                        gases lie in solution within the 
                        oil in the KL3 and KL4 Kimmeridge 
                        Limestone reservoirs (i.e. solution 
                        or associated gas and not as a 
                        separate free-gas phase). 
--------------------  ------------------------------------------------ 
 

UKOG Licence Interests

The Company has interests in the following ten 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 
----------------  ---------  ---------------  ---------------  ---------------  --------------  ---------------------- 
                                               Kimmeridge Oil   Kimmeridge Oil 
Broadford Bridge                               & Gas Limited    & Gas Limited                        BB-1 drilling 
 (3)               PEDL234         100%             (4)              (4)             300.0             underway 
----------------  ---------  ---------------  ---------------  ---------------  --------------  ---------------------- 
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       32.435%         Horse Hill       Horse Hill         99.3         Submitted planning 
                                                Developments     Developments                    application for long 
                                                    Ltd              Ltd                         term production tests 
                                                                                                  and drilling of two 
                                                                                                         wells 
----------------  ---------  ---------------  ---------------  ---------------  --------------  ---------------------- 
                                                 Horse Hill       Horse Hill 
                                                Developments     Developments 
Horse Hill (5)     PEDL246       32.435%            Ltd              Ltd             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 
----------------  ---------  ---------------  ---------------  ---------------  --------------  ---------------------- 
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 direct 48% 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 company news service from the London Stock Exchange

END

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