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UK Oil & Gas PLC Horse Hill-1 Production Test Update

17/05/2019 7:00am

UK Regulatory (RNS & others)


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TIDMUKOG

RNS Number : 3326Z

UK Oil & Gas PLC

17 May 2019

UK Oil & Gas PLC

("UKOG" or the "Company")

Horse Hill-1 Production Test Update

Portland Oil Production now exceeds 20,500 barrels

UK Oil & Gas PLC (London AIM: UKOG) is pleased to announce that, following a successful week-long pressure build-up test ("PBU"), the aggregate total Portland oil production at the Horse Hill oil field, in which the Company has a 50.635% majority interest, now exceeds 20,500 barrels ("bbl"). The Portland continues to produce at a stable rate of over 220 barrels of dry oil per day ("bopd") at a modest reservoir pressure draw-down. No formation water has yet been produced to surface.

The latest PBU yielded significantly better than expected results, with little or no apparent pressure depletion compared to the last PBU in early April. The potential positive impact on connected oil in place will therefore be thoroughly evaluated and reported in due course.

The successful Portland and Kimmeridge extended well test ("EWT") programme has now produced an aggregate volume in excess of 45,500 bbl to date, with a landmark target of 50,000 barrels set to be achieved over the coming month and prior to the start of the forthcoming horizontal well campaign. In order that the HH-2 Portland well can be drilled, the current plan envisages that once HH-1 Portland test production exceeds 25,000 bbl, production will be switched back to the Kimmeridge oil pool.

For prudent Portland reservoir management purposes and to ensure there is no detriment to the expected high performance of the HH-2 Portland horizontal well, the average pumped rate from HH-1 continues to be maintained below the previously reported 362 bopd calculated sustainable rate. As previously stated, based upon well-established reservoir engineering metrics, it is expected that HH-2 has the potential to achieve a rate of 2-3 or more times the HH-1's vertical rate of 362 bopd.

Following a successful tender process, the Company is now finalising contracts for the forthcoming drilling campaign and preparations are now well advanced for simultaneous test production and horizontal drilling operations at Horse Hill.

The HH-1 well and surrounding highly prospective PEDL137 and PEDL246 licences are operated by UKOG's subsidiary Horse Hill Developments Ltd in which the Company holds a 77.9% direct interest.

Further details of EWT results to date are summarised below.

Horse Hill 2018-19 EWT Oil Production Milestones:

   --    Over 45,500 bbl aggregate Kimmeridge and Portland oil production to date. 
   --    Over 25,000 bbl total Kimmeridge oil production. 
   --    Over 20,500 bbl total Portland production to date, flow continues. 

-- 213 tankers of crude exported primarily to BP's Hamble oil terminal. The Portland's 36deg API Brent quality crude, containing zero produced water, continues to be sold to Perenco at prevailing Brent crude oil prices, less a small deduction for handling and marketing.

Stephen Sanderson, UKOG's Chief Executive, commented:

"The Portland test programme continues to exceed our technical expectations with dry oil production now exceeding 20,500 bbl. Our overall testing costs have also been significantly offset by the associated sales revenues. Moving forwards, we now expect to exceed 25,000 bbl Portland test production before the HH-1 test is switched back to the Kimmeridge to facilitate the drilling of HH-2.

The recent extensive pressure build-up also indicates HH-1 is likely connected to a larger oil volume than previously recognised. Further Portland test data will now be collected and analysed before the HH-2 drilling campaign to confirm this important development.

The Horse Hill oil field and its associated significant future cash flow stream is of paramount importance to UKOG and will, therefore, continue to be the Company's prime short-term focus. In this respect, we remain on track to commence drilling HH-2 as previously reported."

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

 
 degAPI             a measure of the density of crude oil, as defined 
                     by the American Petroleum Institute 
 draw down          Pressure drawdown ( P) is defined as the difference 
                     between the reservoir pressure and the flowing 
                     bottom hole pressure. Drawdown enables fluids 
                     to flow from the reservoir into the wellbore. 
                     The magnitude of the drawdown is a major controlling 
                     factors of a well's production rate. 
                   --------------------------------------------------------- 
 extended well      a well test, as per the permission granted by 
  test (EWT) or      the Oil and Gas Authority, with an aggregate flow 
  production test    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 
                   --------------------------------------------------------- 
 oil field          an accumulation, pool or group of pools of oil 
                     in the subsurface that produces oil to surface. 
                   --------------------------------------------------------- 
 

UKOG Licence Interests

The Company has interests in the following UK licences:

 
Asset               Licence     UKOG's        Licence        Operator       Area              Status 
                                Interest       Holder                       (km(2) 
                                                                              ) 
                                                                                          Field currently 
Avington                                     UKOG (GB)      IGas Energy                   temporarily shut 
 (1)                PEDL070       5%          Limited           Plc         18.3                 in 
-----------------             ----------  --------------  --------------  --------  -------------------------- 
Broadford                                                                            BB-1 & 1z oil discovery, 
 Bridge                                     UKOG (234)      UKOG (234)                  planning application 
 (3)                PEDL234      100%         Ltd (4)         Ltd (4)       300.0             approved 
-----------------             ----------  --------------  --------------  --------  -------------------------- 
                                                                                         Seeking alternate 
                                                                                           sites to drill 
                                                                                      A24 and other Kimmeridge 
A24 (3)             PEDL143     67.50%         UKOG          UKOG (7)       91.8             prospects 
-----------------             ----------  --------------  --------------  --------  -------------------------- 
Horndean                                     UKOG (GB)      IGas Energy                   Field in stable 
 (1)                 PL211        10%         Limited           Plc         27.3             production 
-----------------             ----------  --------------  --------------  --------  -------------------------- 
                                                                                         Production tests 
                                            Horse Hill      Horse Hill                  ongoing, two further 
Horse Hill                                  Developments    Developments                  appraisal wells 
 (5)                PEDL137     50.635%         Ltd             Ltd         99.3         scheduled for 2019 
-----------------             ----------  --------------  --------------  --------  -------------------------- 
                                            Horse Hill      Horse Hill 
Horse Hill                                  Developments    Developments 
 (5)                PEDL246     50.635%         Ltd             Ltd         43.6             As above 
-----------------             ----------  --------------  --------------  --------  -------------------------- 
                                                                                        Preparing planning 
                                                                                           submission for 
                                                                                      Arreton-3 oil appraisal 
Isle of                                                                                   well and Arreton 
 Wight (Onshore)                                                                         South exploration 
 (2, 3)             PEDL331       95%          UKOG            UKOG         200.0               well 
-----------------             ----------  --------------  --------------  --------  -------------------------- 
Markwells                                    UKOG (GB)       UKOG (GB) 
 Wood               PEDL126      100%         Limited         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.

7. OGA consent received for the transfer of operatorship from Europa to UKOG

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 London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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May 17, 2019 02:00 ET (06:00 GMT)

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