UK Oil & Gas Investments PLC Corporate Update & Notice of GM (6115U)

TIDMUKOG

RNS Number : 6115U

UK Oil & Gas Investments PLC

13 July 2018

UK Oil & Gas Investments PLC

("UKOG" or the "Company")

Corporate Update & Notice of GM

UK Oil & Gas Investments PLC (London AIM: UKOG) is pleased to announce that it has today posted a Circular to shareholders concerning the proposed change of status, from an AIM investing company to an operating company. The Circular and Admission Document will be available on the Company's website at www.ukogplc.com

Highlights

-- General meeting to be held to approve the admission of the company's shares to trading on AIM as an operating company;

   --     The appointment of Nicholas Mardon Taylor to the Board upon Admission; 

-- Extended Well Test Operations at the Horse Hill-1 site have, to date, included installation of all test-equipment and the commencement of the necessary well clean-up process in preparation for the first flow period of the Portland test sequence.

The letter from the Chairman within the Circular has been extracted and presented below. The full document is available on the Company's website at www.ukogplc.com

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 Sinclair-Ford Tel: [phone]

Cenkos Securities PLC (Joint Broker)

Joe Nally / Neil McDonald Tel: [phone]

Public Relations

Brian Alexander / David Bick Tel: [phone]

The information contained within this announcement is deemed by the Company to constitute inside information under the Market Abuse Regulation (EU) No. 596/2014.

RE-ADMISSION TO AIM OF EXISTING SHARE CAPITAL AS AN OPERATING COMPANY AND NOTICE OF GENERAL MEETING

   1.          INTRODUCTION 

The Board of UK Oil & Gas Investments PLC ("UKOG") announced earlier today that, subject to Shareholder approval, the Board has decided to implement fully a number of changes to the way that UKOG is managed which will have the effect of changing the status of the Company from an Investing Company under the AIM Rules to an Operating Company with a material trading activity.

The change to an Operating Company is classified as a fundamental change of the business of the Company under the AIM Rules and therefore is conditional, inter alia, upon the approval of Shareholders at the General Meeting. Accordingly, set out at the end of this Document, is a notice convening the General Meeting to be held at Hill Dickinson LLP, The Broadgate Tower, 8th Floor, 20 Primrose Street, London EC2A 2EW at 10.00 a.m. BST on 31 July 2018, at which Shareholders will be asked to approve the Proposal for the purposes of the AIM Rules.

Provided that the Resolution is duly passed at the General Meeting, trading in the Existing Ordinary Shares will be cancelled at 4.30 p.m. on 31 July 2018 and it is expected that the Shares will be readmitted to trading on AIM the following day at 8.00 a.m. on 1 August 2018.

It is also proposed that the Company will change its name to UK Oil & Gas Plc with effect from Admission.

The purpose of this Document, which comprises an Admission Document prepared under the AIM Rules, is to provide you with information on the Admission and to explain why the Directors consider the Proposal is in the best interests of the Company and its Shareholders as a whole, and why they unanimously recommend that Shareholders vote in favour of the Resolutions.

   2.          BACKGROUND 

UKOG is a British oil and gas investment company, seeking to support the drive for increased energy security for this country, while ensuring its assets preserve the natural beauty of the Weald and Wessex region. The Company specialises in investing in new geological ideas, concepts and methodologies to find and produce oil from previously under-explored rock formations within established oil-producing basins.

The Company is admitted to trading on AIM and currently has a portfolio of direct and indirect investments in 8 UK onshore exploration, appraisal, development and production assets. UKOG is the largest acreage holder in the South of England, and the fourth largest in the overall UK onshore, with assets covering 791.5 gross km2. The Company's portfolio includes 4 non-KL oil discoveries and the Directors believe that this area has the potential for significant growth in the future. UKOG is focussed on the KL geological section and its licences cover 591.51 gross km2 of KL reservoir targets. The Directors advise that the Company's Kimmeridge 'sweet spot' licences were independently calculated by Nutech to contain a significant proportion of the play's total OIP which was 9.831BB. Subsequent to this, PEDL233 has expired and as such the Company has calculated the remaining oil as 8.651BB.

The Company is generating cash from its interests in the Horndean oil field, as well as developing the Horse Hill project. UKOG is also working to advance its Markwells Wood, Holmwood and the Arreton (onshore Isle of Wight) licences, which are set out in further detail in this Document.

By making use of some of the world's latest oil and gas technologies, UKOG is endeavouring to turn its discoveries into commercially viable producing assets.

UKOG is currently categorised as an Investing Company under the AIM Rules and is therefore subject to the requirements of the AIM Note for Investing Companies. The Company substantially implemented its current investing policy on 19 September 2014. The Company is seeking to re-admit its shares to trading on AIM as an Operating Company subject to approval by Shareholders. Following this change in status, the Company will no longer have an investing policy.

In the course of its investment strategy, UKOG has taken indirect and direct non-controlling stakes in oil and gas asset in the Weald Basin. It is now seeking to become more active in the development of these investments and in other assets it may identify. Following approval for and the change of status to an Operating Company, UKOG's investing policy will cease and UKOG will be able to take direct controlling interests in oil and gas assets without restriction and under the AIM Rules become the operator of such assets.

   3.          OUTLINE OF INTERESTS 

An overview of UKOG's wholly-owned assets and assets in which UKOG owns an interest are outlined in the below table (Figure 1) and their geographic spread is presented in Figure 3.

 
                               UKOG         Licence                              Area 
  Asset            Licence      Interest     Holder            Operator           (km2)                         Status 
                                            UKOG (GB)        IGas Energy                               Field currently 
Avington1        PEDL070       5%            Limited          Plc                18.3                          shut in 
                                                                                                  BB-1 & 1z 
                                                                                                  completed, 
                                                                                                  preparing 
                                            Kimmeridge       Kimmeridge                           two further 
Broadford                                    Oil & Gas        Oil & Gas                           planning 
 Bridge3         PEDL234       100%          Limited          Limited            300.0            applications 
                                                                                                         Holmwood-1 
                                                                                                          exploration 
                                                             Europa Oil                                   well 
                                                              & Gas (Holdings)                            planned in 
Holmwood3        PEDL143       40%          UKOG              plc                91.8                     2018 
                                            UKOG (GB)        IGas Energy                               Field in stable 
Horndean1        PL211         10%           Limited          Plc                27.3                       production 
                                                                                                        Production 
                                                                                                        tests and 
                                                                                                        further 
                                                                                                        appraisal 
                                            Horse Hill       Horse Hill                                 well(s) 
Horse                                        Developments     Developments                              scheduled 
 Hill5           PEDL137       32.435%       Ltd6             Ltd6               99.3                   for 2018 
                                            Horse Hill       Horse Hill 
Horse                                        Developments     Developments 
 Hill            PEDL246       32.435%       Ltd6             Ltd                43.6                         As above 
                                                                                                             Preparing 
                                                                                                             Arreton-3 
                                                                                                         oil discovery 

Isle                                                                                                         appraisal 
 of Wight                                                                                                well planning 
 (Onshore)2,3    PEDL331       65%          UKOG             UKOG                200.0                      submission 
                                                                                                      Revised planning 
Markwells                                   UKOG (GB)        UKOG (GB)                                 application 
 Wood2           PEDL126       100%          Limited          Limited            11.2                  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 discovery well, the extension of the Godley Bridge Portland gas discovery plus further exploration prospects.

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

5. Oil discovery with successful flow test in 3 zones, further long-term testing scheduled in 2018

   6.    UKOG has a direct 49.9% interest in HHDL, which has a 65% interest in PEDL137 and PEDL246. 

Figure 1, KOG, Table of Interest in Assets

UKOG CORPORATE STRUCTURE

The below (Figure 2) outlines the corporate structure of UKOG, its assets and economic interests in each.

http://www.rns-pdf.londonstockexchange.com/rns/6115U_1-2018-7-13.pdf

   4.          SUMMARY OF THE ASSETS 

Xodus Group have completed a Competent Persons Report as commissioned by UKOG. The report has covered UKOG's 8 licences in the south of England, 7 of which are located in the Weald Basin and 1 in the Wessex Basin. One of those licences contains a currently producing oil field, another contains a shut-in oil field that is not economically viable and a number of others contain existing discoveries. The following is a summary of UKOG's assets. Further details can be found within the CPR section in Part III of this Document.

OIP projections for the KL, Kimmeridge Clay Formation and other tight Jurassic reservoirs have been made by Nutech. These reports have been made public and OIP volumes reported by UKOG in its regulatory press releases, most recently in December 2016 where Nutech calculated a P50 estimate of the Company's net interest over its licence interests in the Weald Basin of 9.831 BB of OIP in the Kimmeridge clay formation. These estimates have not been updated since the drilling and testing of the BB-1/BB-1z discovery well. Subsequent to this PEDL233 expired and as such the OIP reduced by

1.180 BB to 8.651 BB OIP.

It should be noted that to date insufficient data exists in regards to the KL and other Jurassic continuous oil deposits to make an assessment of any resources or reserves under SPE standards. Accordingly these OIP numbers should not be construed as either resources or reserves and for the avoidance of doubt the Competent Person has not audited these OIP estimates of Nutech.

The Company will update the market in the event of any material change or change in status of the following assets.

Broadford Bridge

UKOG acquired exploration licence PEDL234 (interest 100%) in 2016, significantly increasing its acreage holding within the KL's prime prospective area. The licence is operated by Kimmeridge Oil & Gas Limited ("KOGL"), a wholly-owned subsidiary of UKOG. The onshore licence, PEDL234, covers 300 km(2). The licence acquisition included the existing Broadford Bridge well pad, along with planning permission and Environmental Agency ("EA") consent to drill the exploratory well ("BB-1").

Kimmeridge Potential - Broadford Bridge

UKOG, as disclosed within the analysis in section 10.2.2 of the CPR, has previously conducted analysis of PEDL234 and suggests that KL oil potential is also prevalent in a similar way to that at Horse Hill. BB-1 drilling commenced in May 2017 and was designed to penetrate the KL units at an inclination and orientation to test the open natural fractures within the KLs. Mobile light oil was recovered from open fractures in the KL5 cores within the Kimmeridge section. BB-1 was sidetracked to Broadford Bridge-1z ("BB-1z") in August 2017 due to difficult hole conditions to seek to maximise the Kimmeridge flow test potential.

BB-1z was completed as a potential oil producer with a multizone completion and over 1000ft of perforations The well was tested over multiple zones within the KL0-KL5 sections with the well free flowing light oil for short periods during the clean-up operations. Oil was also recovered to surface via pumping from multiple zones. The oil flowed to the surface during this testing programme, although at likely sub commercial rates. This has led the company to explore new completion methods that might achieve higher sustainable flow rates.

The BB-1z oil discovery within PEDL234 licence area is reported in section 10.2.2 of the CPR with no resource associated with it. The CPR details that Godley Bridge, a discovery, which is combined with PEDL235 and adjoins PEDL234, may extend into PEDL234, in which UKOG has a 100% interest. At Godley Bridge, wells GB-2/2Z and Alfold-1 failed to find hydrocarbons unlike Godley Bridge-1. See section 10.1 of the CPR, page 106 for further information. The report also notes that the previous competent persons reports for IGas, the operator of PEDL235, have calculated estimated of Contingent Resource of between 5 and 10 bcf.

The CPR states that after workover operations had been completed, testing continued and recovered 38 degree API oil. UKOG's analysis suggests that the Upper Jurassic Kimmeridge potential covers most of PEDL234, north of BB-1. To further prove the potential of the Kimmeridge reservoirs, UKOG is working to acquire 2 further drilling sites in PEDL234. If this is successful, planning applications are expected to be submitted for the first site (which neighbours Godley Bridge) later this year.

The well results from the UKOG operated wells at Horse Hill and Broadford Bridge, which have tested the KL, as well as the reported results of Brockham-X4Z, show a consistent picture of Kimmeridge prospectivity across these licence areas. The Kimmeridge oil potential appears to be regionally extensive with thick sections of high total organic carbon ("TOC") shale with limestone beds; all of which are naturally fractured. To date, oil has also flowed from all three exploration wells that has tested the KL. At present, significant additional work is required to determine the development potential of these reservoirs.

Horse Hill

UKOG has an indirect 32.435% interest in each of its 2 Horse Hill area licences operated by Horse Hill Developments Ltd (HHDL): PEDL137 and PEDL246. UKOG holds a 49.9% interest in HHDL which, in turn, has a 65% interest in PEDL137 and PEDL246.

The Horse Hill discovery comprises several prospective intervals; with only the Upper Portland Sandstone being considered as Contingent Resource. HHDL flow tested the Portland Sandstone and KL intervals of the Horse Hill-1 (HH-1) oil discovery well in 2016. The Company notes that the three reservoirs tested in 2016 demonstrated an initial aggregate stabilised natural flow rate of 1,688 barrels of oil per day.

Horse Hill is the first in a series of planned near-continuous appraisal drilling and testing operations designed to convert the company's recoverable resources into permanent production and reserves. The Directors believe that if the current Horse Hill testing programme is successful then it could deliver stable oil production in 2019, subject to obtaining the necessary regulatory consents and capital financing. The anticipation is that, should the Horse Hill testing programme produce oil in sufficient quantities and of the right quality it will be sold to offset the costs of the well test.

The extended well test is specifically designed to determine the presence of a commercial value of OIP. Consequently, the Company expects that HHDL will be able to determine the commerciality for the Kimmeridge and Portland following these test results. This is further explained in paragraph 5 of this Part I which outlines the future plans in respect of Horse Hill.

As reported on 27 June 2018, EWT operations at the Horse Hill site have commenced. As of the date of this Document operations to date have included equipment set-up and the necessary well clean-up process in preparation for the first sequence of the planned Portland flow test programme.

Horse Hill - Kimmeridge Potential

Within section 10.2.1 of the CPR, it is noted that the Kimmeridge shows good evidence of natural fracturing and that this is consistent with recent results from Brockham-X4z well where image log interpretation shows that both the Kimmeridge shale and the limestone beds are naturally fractured as at Horse Hill.The HH-1 KL3 and KL4 reservoirs were flow tested in 2016. The upper 2 limestones were tested and flowed an aggregate stable dry oil flow of 1,365 bopd under natural flow with no water produced. Interpretation of the tests suggest that there is a dual porosity system which exhibited no observed depletion.

Figure 4 outlines the report's estimate for Contingent Resources of PEDL137, Portland Reservoir.

 
Oil Contingent                 Contingent Resources         Contingent        Commercial 
 Resources                      Gross                        Resources Net     Risk 
                                                             to UKOG           Factor 
(MMbbl)                                    1C 2C 3C    1C            2C 3C 
Upper Portland                    0.592 1.498 3.629  0.19        0.49 1.18            75 
 

Figure 4. CPR, Contingent Resources for PEDL137 Portland Reservoir.

Avington

The Avington oil field (onshore licence PEDL070) in which UKOG holds a 5% interest is located in Hampshire, close to the Stockbridge oil field, and is operated by IGas Energy PLC. It was discovered in 1960 and commenced production in 2007. UKOG acquired its indirect 5% interest from Northern Petroleum plc in 2014.

As outlined in section 5 of the CPR, Avington is a conventional field producing from the Jurassic Great Oolite limestone reservoir. Average Avington production in 2017 was approximately 35 bopd. Due to high operating costs and issues with one of the production wells, Avington production was temporarily shut down in early 2018. Three wells were drilled at Avington between 1987 and 2006 and the site has been in production since August 2007, with initial production rates over 500 bopd. The field has produced continuously from 2009 with low oil rates and high water cut (>90%).

The field is temporarily shut as the low oil production rate and costs linked to the high water cut have resulted in the field being uneconomic at the current cost and oil price.

Historically there has been Contingent Resource reported alongside Reserves. These resources were based on a further phase of development, However, given the current status of the field, further development appears unlikely.

Baxters Copse

UKOG held a 50% interest in the Baxters Copse (onshore licence PEDL233) oil discovery located in Hampshire, close to the Singleton oil field and which was operated by IGas Energy PLC. The initial term of the licence expired on 30 June 2018 and, due to the operator not having carried out the relevant exploration work commitment, the OGA served notice of determination of the licence on 5 July 2018.

IGas Energy Plc (as licence operator) must formalise an expiry of the licence by providing a relinquishment report to the OGA. This is due within 3 months of notification of the expiry of the licence. The Company expects to be responsible for 50% of the operator's costs associated in preparing the relinquishment report, but does not expect there to be any material costs associated with the relinquishment of the licence as no substantive works have been carried out to date.

Holmwood Well

Onshore licence PEDL143 in which UKOG holds a 40% interest and is operated by Europa Oil & Gas Limited contains the Holmwood prospect. It is located to the west of the Horse Hill licence, in the northern part of the Weald Basin. Planning permission is in place to drill the Holmwood-1 well to test the Portland and the Kimmeridge in 2018. This is further explained in paragraph 5 of this Part I which outlines future plans.

Two reservoirs are considered, in section 8.2 of the CPR, at the Holmwood Prospect - the Portland and Corllian Sandstones. The Portland reservoir is known to be oil bearing in the Horse Hill discovery in the adjacent block and the Brockham field to the north. However, despite the presence or Corrilian Sandstones at both, neither are considered as oil bearing reservoirs in these fields. There are no wells on the licence, with the closest well on the adjacent Brockham field which lies in a "cut-out" in the northern portion of the PEDL143 licence. The CPR further notes that given the proximity to Horse Hill, the KLs are also highly prospective at Holmwood, but they are not included within the report.

Xodus have calculated the following STOIIP estimates for the Holmwood Well.

 
Prospective             Prospective               Prospective            Risk 
 Resources                Resources                 Resources          Factor 
                            Gross                  Net to UKOG 
                 Low Best             High Low        Best      High COS13(%) 
Portland        0.45 0.98             1.71 0.18       0.39      0.68 29 
Corallian       0.38 1.19             3.12 0.15       0.48      1.25 17 
============  ======================  ==========  ============  ============= 
Homwood 
 Total14        1.19 2.29             4.26 0.48       0.92      1.70 
 

Figure 5, CPR, Estimate of Holmwood Prospective Resource.

Horndean

Onshore licence PL211, in which UKOG holds a 10% interest is located in Hampshire, UK and is operated by IGas Energy PLC. Section 4 of the CPR states that 7 wells including horizontal sidetracks have been drilled into the Great Oolite Reservoir. Currently, the Directors believe that production is very stable at a rate of approximately 150 bbl/d (15 bbl/d net to UKOG). Historically, Horndean oil production has been above forecast due to improved well performance and this has been reflected in increases in Reserves estimates in the past, including from 2014 to 2016.

 
 Oil Reserves      W.I.               Gross Volumes                 Net to             Operator 
                                                                     UKOG 
(MMbbl)                      1P2 2P                    3P     1P            2P     3P 
==============  =======  ==========================  ====  =====  ============  =====  ======== 
Horndean          10%        0.39 0.85               1.29  0.039        0.085   0.129      IGas 
==============  =======  ==========================  ====  =====  ============  =====  ======== 
Total (MMboe)                0.39 0.85               1.29  0.039        0.085   0.129 
 

Figure 6, CPR, Reserves Estimates for Horndean.

Isle of Wight

The onshore licence PEDL331, in which UKOG holds a 65% interest, contains the Arreton oil discovery and two geologically similar prospects. The Directors see this as an important element of the Company's portfolio with a focus upon the Portland fracture-enhanced conventional reservoirs in Arreton and look-alike exploration prospects which other operators have missed. Recoverable gross 2C Contingent Resources were calculated as 15.7 MMbbl, with 10.2 MMbbl net to UKOG according to the CPR. Arreton site selection and regulatory permitting activities are now underway to permit a planned appraisal drilling campaign targeted for 2019.

The PEDL331 licence was formally granted to UKOG by the OGA in September 2016. Angus Energy Holdings UK Limited assigned its 5% licence interest to Doriemus Plc and UKOG was formally appointed by the OGA as the licence operator. The PEDL331 JOA was entered into by the Company with Doriemus plc and 30% partner Solo Oil Plc. UKOG is finalising the selection of the well site and preparing a planning application to drill the Arreton-3 appraisal well, with a view to achieving oil production in the event of success, as detailed in section 5 of the CPR.

Two wells have previously been drilled on the Arreton structure. The discovery was made by the Arreton-2 well which was a twin of the 1952 Arreton-1 drilled by BP as noted within section 7 of the CPR. This further outlines that as the Arreton North Portland Limestone reservoir is separated from the Arreton Main reservoir by a fault, the recoverable volumes in the prospect are classified as Prospective Resources. The estimated STOIIP volumes from the Xodus report are shown in Figures 7, 8 and 9, below.

 
Arreton North STOIIP (MMbbl)             Low     Best    High    Mean 
Portland Limestone                       3.7     22.0    59.9    27.6 
Figure 7, CPR, STOIIP Estimates 
 for Arreton North Portland 
 
  Arreton South STOIIP (MMbbl)            Low    Best    High    Mean 
Portland Limestone                      14.2     55.2   138.0    67.4 
Figure 8, CPR, STOIIP Estimates 
 for Arreton South 
 
  Arreton South STOIIP (MMbbl)            Low    Best    High    Mean 
Portland Limestone                       6.8     21.3    61.6    29.3 
Purbeck                                  4.7      9.2    19.6    11.2 
Inferior Oolite                         52.0     87.5   137.0    91.7 
================================  ===========  ======  ======  ====== 
Total STOIIP10                          82.0    127.0   189.0   132.0 
Figure 9, STOIIP Estimates 
 for Arreton Main 
 

Markwells Wood

The onshore licence PEDL126, in which UKOG holds a 100% interest through its subsidiary UKOG (GB) Limited, contains the Markwells Wood-1 oil discovery. In September 2016, UKOG submitted a planning application to the South Downs National Park Authority ("SDNPA") to further appraise and develop the Markwells Wood-1 oil discovery. The planned 2-phase programme would see 4 horizontal wells drilled within the conventional Great Oolite limestone reservoir.

Section 9 of the CPR states that currently, a single well has been drilled on the field, Markwells Wood-1. The surface location of the well lies approximately 75m away from the nearest seismic control (line CV85-369). As the well deviates to the south, the well track and seismic line navigation cross, with the effect that at reservoir level they are just 5m apart. The reservoir of the Markwells Wood discovery is of Great Oolite Limestone formation which is a common reservoir unit in the Weald Basin. This well encountered 318 ft of the Great Oolite reservoirs from the top of the Cornbrash to the base of the Lower Massive Oolite/top of the Fullers Earth which was logged and cored. There are

5 zones in this reservoir named as follows and more detail on each can be found in the CPR contained within Part III of this Document:

   --      The Cornbrash 
   --      Interbedded Oolite 
   --      Upper Massive Oolite 
   --      Oncolites 
   --      Lower Massive Oolite 

A geological summary of the Great Oolite was available to Xodus and demonstrates the lateral continuity and thickness variations in the different zones along strike in the analogue fields of Horndean to the west and Chilgrove to the east. Markwells Wood-1 well tests were conducted from December 2011 to May 2012 and produced 3931 bbl in total during that period. The CPR further notes, in section 9, that UKOG plans for a horizontal well in the crest of the structure a production forecast has been generated for a side track to Markswell Wood-1 1,200m length horizontal well with an east-west azimuth. The well is positioned high in the structure and targets the layers with the highest permeability.

Figure 10 below shows the STOIIP estimates calculated by Xodus in their report broken down into each of the reservoir's 5 zones, extracted from section 9 of the CPR. Likewise, Figure 12 outlines the CPR estimation of Markwells Wood Gross and Net Contingent Resources in '000 bbl, below.

 
STOIIP (MMbbl)                                             Low              Best      High     Mean 
Cornbrash                                                0.15              0.37 0.89           0.46 
Interbedded Oolite                                       6.74              13.4 22.9           14.3 
Upper Massive Oolite                                     13.8              22.4 35.0           23.6 
Oncolite                                                 0.36              0.98 2.09           1.13 
Lower Massive Oolite                                     2.66               6.3 12.4           7.07 
========================================  ======================  ========================  ======= 
Markwells Wood Total                                     32.7              45.6 61.8           46.6 
Figure 10, CPR, STOIIP 
 Estimates for Markwells 
 Wood. 
 
  Oil Contingent            Contingent                               Contingent 
                            Resources                                Resources 
Resources                          Gross                                 Net to UKOG           Risk 
                                                                                             Factor 
(MMbbl)              1C             2C            3C          1C              2C        3C      (%) 
Markwells 
 Wood              0.63           1.25          2.71        0.63             1.25     2.71       60 
 

Figure 11, CPR, Xodus estimation of Markwells Wood Contingent Resources.

Summary of Resources

The Competent person has estimated gross and net recoverable volumes for undeveloped discoveries and are classified as Contingent Resources. A commercial risk factor has been estimated for each discovery and shown in the following Figure 12.

Oil Contingent W.I. Gross Volumes Net to UKOG Risk Factor(1) Operator Resources

(MMbbl) 1C2 2C 3C 1C 2C 3C %

 
Avington          5%    0.31  0.37    0.41  0.016  0.019     0.021     40%  IGas 
Horse Hill 
 Portland        32%    0.59  1.50    3.63   0.19   0.49     1.18      75%  HHDL 
Isle of Wight 
 Onshore         65%    9.9   15.7    24.1   6.44  10.21     15.67     75%  UKOG 
Markwells 
 Wood           100%    0.63  1.25    2.71   0.63   1.25     2.71      60%  UKOG 
                                                                            (GB) 
==============  ====  ======  ====  ======  =====  =====  ========  ======  ==== 
Total                   11.5  18.8    30.9    7.3   12.0     19.6 
 

Figure 12, Gross and Net Contingent Resources (in MMbl).

1 "Risk Factor" for Contingent Resources means the estimated chance, or probability, that the volumes will be commercially extracted.

2 1C, 2C and 3C denote the low, best and high estimate scenario of Contingent Resources respectively as defined under the PRMS.

The Onshore Isle of Wight and Holmwood licences both include Prospective Resources. The Prospective Resources for UKOG's assets are shown in the following figure 13. "Risk Factor" for Prospective Resources means the estimated chance, or probability, of geological success.

 
Oil Prospective    W.I.                    Gross Volumes                           Net to UKOG       RF   Operator 
 Resources                 Low              Best High              Low              Best High 
 (MMbbl)                   Estimate         Estimate               Estimate         Estimate 
                                            Estimate                                Estimate 
Onshore Isle 
 of Wight          65%          4.0        10.5       21.6              2.6       6.8       14.0     50%      UKOG 
                                                                                                            Europa 
Holmwood           40%          1.2         2.3        4.3              0.5       0.9        1.7     17%     O&G 
================  =====  ==========  ==========  =========  ===============  ========  =========  ======  ======== 
Total                           5.2        12.8       25.9              1.9       7.1       18.0 
 

Figure 13, Gross and Net Prospective Resources (in MMbl).

   5.          PROPOSED UKOG WORK PROGRAMME 

In relation to Horse Hill, the OGA has granted its consent for the HH-1 Extended Well Test ("EWT") programme. All other necessary regulatory consents from Surrey County Council ("SCC"), the Environment Agency ("EA") and the Health and Safety Executive are in place. The Company has previously announced that it has funded its full share of operational EWT costs. The EWT will comprise a series of three separate test sequences commencing in the Portland followed by the KL4 and finally, the deeper KL3. If time permits a test combining the KL4 and KL3 (a commingled test) may be undertaken. Each test will utilise existing perforated zones as per the 2016 test programme. The expected duration of the full flow programme is around 150 days. The 2018 long-term testing programme's goal is to determine commerciality by confirming that HH-1's reservoirs are each connected to a commercially viable oil volume. It is expected that, should the minimum commercial volume threshold be met or exceeded, a declaration of commerciality for each horizon could be made in a timely manner after the completion of each testing sequence.

The Directors are targeting an assessment of Portland commerciality in Q3 2018 subject to a successful outcome of tests. In a similar manner to the 2016 test, which flowed oil from the Portland at a stable metered rate of 323 bopd over an 8.5 hour period, a linear rod-pump will be utilised to flow Portland oil from around 35 metres of existing perforations located at around 615 metres below surface. As the 2016 test rates were constrained by the pump's capacity, the new test will use a larger pump with a capacity of around 475 bopd.

Subject to a successful testing outcome in the Kimmeridge and Portland, the HH-2 appraisal well is planned to immediately follow the EWT in late 2018 / early 2019. The well will be drilled as a future Portland production well. Drilling plans include optionality to deepen HH-2 into the Kimmeridge to gather core and image log data, together with a possible northwards deviation to access the adjacent oil bearing Collendean Farm fault block's significant Portland oil resources.

Similarly, contingent upon EWT success, an HH-1z Kimmeridge sidetrack spud is planned in 2019 following integration of HH-1 Kimmeridge production data into a reservoir model and data from any future HH-2 Kimmeridge core. Necessary Planning and EA permits for HH-2 and HH-1z are in place. To achieve its goal of stable, long-term Horse Hill oil production during 2019, HHDL now plans to submit a further production planning application to SCC in Q3 2018. This application will seek consent to produce oil initially from HH-1 & 1z, and HH-2, together with further production wells in a second contingent drilling phase.

UKOG was awarded an extension of the licence term at its 100% owned PEDL234 from 30 June 2018 until 31 December 2023. The Licence has been converted into the 14th Licence Round Master Clauses Agreement which permits a Retention Area ("RA") covering the entirety of the 300km2 licence area to be created.

UKOG intends to progress leases and regulatory approvals for two further well sites and exploration wells in the north of PEDL234 and potentially for a BB-1y sidetrack. An application was made recently to the West Sussex County Council to extend the existing planning consent on the BB-1 site for a further 18 months to the end of 2019.

On PEDL331: UKOG intends to secure a site lease and regulatory steps necessary to drill an appraisal well on the Arreton Main oil discovery and look-alike Arreton South prospect in PEDL331. PEDL331 currently has an estimate of 10.2 million barrels UKOG Net P50 Contingent (recoverable) Resources.

UKOG intends to participate in the share of the planned Portland and Kimmeridge Holmwood exploration well which currently has an estimated 0.92 million barrels UKOG Net P50 Prospective Resources. Europa plans to drill the Holmwood-1 exploration well.

On Markwells Wood: UKOG intends to submit a revised planning application for further flow testing to include the Kimmeridge section of the well. UKOG will seek necessary consents from EA to test this area.

UKOG plans to continue to consolidate and expand its licence position in the UK onshore, particularly in its core Weald Basin Kimmeridge oil play, with additional exploration, development and production.

   6.          OIL & GAS REGULATORY BACKGROUND 

This paragraph is intended as background information in relation to the oil and gas regulatory framework in place in the UK. As such, it is only a summary of the more pertinent provisions of the Petroleum Act 1998 ("Petroleum Act"). The Petroleum Act is the principal legislation regulating the grant of rights to bore for and obtain petroleum in the United Kingdom. The Petroleum Act was enacted on 11 June 1998 and repealed the Petroleum Production Act 1934.

The Petroleum Act provides that petroleum deposits (which includes shale gas) below land in Great Britain are the property of the Crown but permits the OGA to grant licences to search and bore for and get petroleum to such persons as he thinks fit. The Petroleum Act is supplemented by various environmental and health and safety legislative provisions. All regulatory powers for the oil and gas industry, apart from those concerned with the environment, have been transferred from the Secretary of State to the OGA.

A PEDL (Production Exploration and Development Licence) is an onshore production licence which allows a company to pursue a range of oil and gas exploration activities, subject to necessary drilling/development consents and planning permission. All PEDLs run for the following 3 successive terms:

l The initial term is associated with an exploration work programme that the licensee will have agreed with the OGA during the competitive application process. The licence will expire at the end of its initial term unless the licensee has completed the work programme and surrendered a fixed amount of acreage (usually 50%). While the initial term is associated with a work programme of exploration work that must be completed if the licence is to continue into a second term, the licensee has the right to start production during the initial term, if the licensee can move quickly enough, subject to normal regulatory controls.

l The second term is associated with appraisal and development. There is no agreed work programme; instead the licence will expire at the end of its second term unless the OGA has approved a development plan.

l The third term is intended for production (production period). The OGA has the discretion to extend the term if production is continuing, but reserves the right to reconsider the provisions of the licence before doing so, especially the acreage and rentals. While the initial term is associated with a work programme of exploration work that must be completed if the licence is to continue into a second term, the licensee has the right to start production during the initial term, if the licensee can move quickly enough, subject to normal regulatory controls.

The length of each of the terms of a PEDL is agreed between the OGA and the licensees prior to the licence being issued, but may be subject to any subsequent amendments being agreed in the manner set out in this paragraph 6.

A PL (Production Licence) is an older form of onshore production licence issued by the UK government which grants exclusive rights to explore, drill and produce petroleum within a specified area for a specified time. An operator is approved for each petroleum licence and is responsible for managing all activities that take place in relation to that licence.

As from 1 October 2016, the Energy Act 2016, and Regulations made under it, transferred certain functions from the Secretary of State for Energy and Climate Change (now the Secretary of State for Business, Energy and Industrial Strategy) to the OGA. These include the licensing function conferred by the Petroleum Act 1998 insofar as it affects existing licences. Consequently, any legal agreement that would previously have named the Secretary of State for Energy and Climate Change as a party must correspondingly name the OGA instead (and all

pre-existing agreements are deemed to refer    to the OGA as necessary). 

All petroleum exploration and production licences that are granted incorporate the model clauses (the "Model Clauses") which are contained in statutory instruments at the time of grant of each respective licence. Alternatively the OGA may agree bespoke clauses that may apply to the exclusion of the Model Clauses.

Part 1 Article 5 of the Petroleum Act determines that all licences granted prior to the enactment of the Petroleum Act will incorporate the current Model Clauses in substitution of any previous model clauses. The current Model Clauses applicable to onshore licenses are contained in the Petroleum Licensing (Exploration and Production) (Landward Areas) Regulations 2014 (SI 2014/1686).

Clause 5 of the Model Clauses contains an option in favour of a licensee to continue a licence beyond the initial term of that licence. Notice to exercise this option must be given to the OGA no later than 1 month prior to the expiry of the initial term of the licence and will be subject to and conditional on: (i) all sums outstanding under the licence having been paid; and (ii) performance by the licensee of the work programme specified in the licence having been performed.

Clause 7 of the Model Clauses determines that a licensee may give notice to the OGA that it wishes for a licence to continue beyond a second term into the production period, provided that such notice may be given at any time not later than 3 months before the expiry of the second term of a licence, subject to all due payments having been made and the terms and conditions contained in the Model Clauses having been performed. In order for a licence to continue beyond a second term, the OGA must have either: (i) approved a programme submitted to him it and such programme must be in force upon expiry of the second term; (ii) served a programme on the licensee and such programme must be in force upon expiry of the second term; or (iii) the OGA has with a view to securing the maximum economic recovery of petroleum so directed in writing (subject to any conditions specified by the OGA).

The Model Clauses provide that each of the 3 terms of a PEDL may be amended as follows:

l The initial term and or the second term of a licence may be extended by the OGA, on application being made to him it in writing not later than 1 month prior to the expiry of the relevant period, subject to all due payments having been made and the terms and conditions contained in the Model Clauses having been performed. Any extension of the initial term or second term shall be given by the OGA and which shall be for such period, and subject to such conditions, as the OGA may determine. There is no limitation on the number of extensions that may be made to the initial term or second term contained in the Model Clauses.

l The production period of a licence may be extended for such further period as may be agreed by the OGA and a licensee in order to secure the maximum economic recovery of petroleum from the licensed area. Any such extension shall be subject to such modification of the terms and conditions of the licence as may be agreed by the OGA and a licensee. Any application to extend the production period must be made to the OGA no later than 1 month prior to the expiry of the production period. There is no limitation on the number of extensions that may be made to the production period contained in the Model Clauses.

The consideration payable in terms of respect of each licence shall be determined by the provisions contained in each such licence or shall be determined by the Model Clauses, as the case may be. In the past, a royalty regime applied whereby the UK government would receive a royalty (usually linked to petroleum produced, or profits made pursuant to licences), but this was abolished from 1 January 2003.

The Model Clauses contain restrictions prohibiting the (i) assignment of licences (or any interest therein) or (ii) the entry into agreements to share in the proceeds of sale from petroleum extracted from an area subject to a licence already granted by the OGA which has not, but may be, won and saved, unless the prior consent of the OGA has been obtained.

Fiscal and regulatory regime

There are currently two main elements of government tax to which oil and gas companies are subject. These are Ring Fence Corporation tax ("RFCT") and Supplementary Charge ("SC"). A third, Petroleum Revenue Tax (PRT), still exists but has been set at zero per cent with effect from 1 January 2016.

RFCT

Corporate profits generated in the upstream oil and gas industry are liable for RFCT which is assessed against the upstream profits of the company. The RFCT tax rate is currently 30% and is assessed on an annual basis. First year allowances are given as a relief at a rate of 100% for virtually all capital expenditure.

The RFCT rules are designed to prevent companies reducing their upstream ring fence profits with reliefs and allowances from other activities. The main restrictions are that losses and expenses from other activities, either within the company or accruing to an affiliate, cannot be deducted against ring fence profits. The deductibility of financing costs is also limited such that, broadly, interest deductions are only available in respect of monies borrowed which have been used in the ring fence business, and where the terms do not exceed those applicable at arm's length. Ring Fence Expenditure Supplement allow companies to claim a 10% supplement on their ring fence trading losses carried forward for 10 (previously six), not necessarily consecutive, periods.

SC

SC was introduced in 2002 and applies to all profits obtained from oil and gas production, and transportation and processing from 17 April 2002 onwards. SC is charged at a rate of 10% (with no deduction for finance costs) and is calculated in a very similar way to RFCT. SC can be reduced by the investment allowance, cluster area allowance or onshore allowance once the relevant allowance has been activated.

Investment Allowance

Investment Allowance is calculated as a percentage of the amount of qualifying ring fence expenditure, which was only capital expenditure when the Investment Allowance was originally introduced, with effect from 1 April 2015. However, the scope of the qualifying expenditure has been extended to include certain operating and leasing expenditure incurred on or after 8 October 2015. Once activated by production income from the relevant field the allowance reduces the company's profits subject to supplementary charge

Cluster Allowance

Cluster Allowance is similar to Investment Allowance in the way it is calculated; however qualifying costs for the purposes of Cluster Allowance are those in respect of qualifying expenditure incurred in relation to a cluster area on or after 3 December 2014. The definition of qualifying expenditure is the same as for Investment Allowance. Once an area has been determined as a cluster area all subsequent qualifying capital expenditure will qualify for the allowance. The benefit of cluster allowance over investment allowance is that income from any of the interests included in the cluster will activate the allowance, not just income from the licence in question.

Onshore Allowance

Onshore Allowance is designed to support the early development of onshore oil and gas projects including shale gas developments. The allowance is available in respect of capital expenditure incurred on and after 5 December 2013 in relation to an onshore oil and gas related activity, and is calculated as a percentage of a qualifying capital expenditure spend, reducing adjusted ring fence profits subject to supplementary charge once activated. The extension of qualifying costs to include certain operating and leasing costs does not apply to the onshore allowance. If the allowance cannot be activated (due to a lack of production income from the site) it can be transferred to another site three years after the expenditure was incurred.

Environmental Regime

The regulatory framework for the hydrocarbon extraction industry is administered by a number of regulatory authorities. The framework involves a number of review processes and permissions/consents to be obtained before any operation can commence. These requirements are in addition to the consenting process under the Town and Country Planning Act 1990. A brief summary of the key regulatory requirements is set out below.

The Oil and Gas Authority

The Petroleum Act 1998 vests all rights to petroleum in the Crown, including the rights to search for, bore for and get petroleum. It empowers the OGA to grant licences to search for and bore for and get petroleum to such persons as they see fit.

The OGA has regulatory control for petroleum licencing under the Petroleum Act 1998 (as amended by the Infrastructure Act 2015). Under the Petroleum Act, the Secretary of State (SoS) issues landward production licences (Petroleum Exploration and Development Licences (PEDL)).

Under the terms of a PEDL, a licensee is obligated to seek consent from the OGA to undertake well operations including but not limited to the drilling of a well, extended well test and production as well as consent to flaring or venting.

Standard provisions in PEDLs include obligations on the licensee to avoid harmful methods of working, powers for the SoS to execute works in the event of breach of the PEDL by the licensee and powers to revoke the PEDL.

The Environment Agency

Onshore oil and gas production is regulated by the Environment Agency (EA) by an environmental permitting regime granted by the EA pursuant to the Environmental Permitting (England and Wales) Regulations 2016 (EPR 2016).

One of the principal aims of the permitting regime is to protect the environment. Under the EPR 2016, the EA controls the treatment and disposal of mining waste and naturally occurring radioactive material (NORM) should this be encountered, any emissions to air and water as a result of the permitted operations through to restoration and aftercare. Other permits/licences may also be required from the EA depending on the site location and geological and hydrogeological characteristics of the site.

In addition to the EPR 2016, the EA controls water resources, water quality and water pollution under the Water Resources Act 1991. Part of its requirements relate specifically to drilling, by ensuring the protection of any groundwater sources.

Health and Safety Executive

The Health and Safety Executive (HSE) regulates the safety aspects of all phases of extraction. It ensures that safe working practices are adopted by onshore operators as required under the Health and Safety at Work etc Act 1974, and regulations made under the Act.

HSE works closely with the EA and the Department for Business, Energy and Industrial Strategy to share relevant information on such activities and to ensure that there are no material gaps between the safety, environmental protection and planning authorisation considerations, and that all material concerns are addressed.

Minerals Planning Authority

Minerals Planning Authorities (as part of local councils) grant planning permission for the location of any wells and well pads, and impose conditions to ensure that the impact on the use of the land is acceptable. Where planning permission is granted for petroleum exploration and development, the development will be subject to restoration and aftercare provisions, which will be enforced by way of planning condition.

The planning system controls the development and use of land in the public interest. The focus of the planning system is on whether the application is an acceptable use of the land, and the impacts of those uses. This includes ensuring that any new development is appropriate for its location. This takes into account the effects (including cumulative effects) of potential pollution on health, the natural environment or general amenity. Certain types of planning application are required to undertake an environmental impact assessment before they are determined.

The planning regime and other regulatory regimes are separate but do complement each other. Any control processes, health and safety issues or emissions themselves are then subject to the approval of the other regulators mentioned above.

Abandonment Framework

The Model Clauses prohibit operators from abandoning any well without the consent of the OGA. The operator must submit an application for consent to abandon a well and provide detailed information regarding the results of the well. The OGA's consent to well abandonment must be given before this operational activity is undertaken and the operator must adhere to any conditions imposed by the OGA. After well abandonment consent is given, the operator must notify the OGA upon completion of the work and a well engineering diagram must be submitted at this time.

   7.          REASONS FOR ADMISSION 

The Company is seeking readmission to trading on AIM as an Operating Company (instead of its current status as an Investing Company) under the AIM Rules. Following approval for and the change of status to an Operating Company, UKOG's investing policy will cease and the Company will be able to take direct controlling interests in oil and gas assets without restriction and under the AIM Rules become the operator of such assets.

   8.          DIRECTORS, EMPLOYEES AND KEY PERSONNEL Directors 

At Admission, the Board will comprise Stephen Sanderson, Kiran Morzaria, Allen Howard and Nicholas Mardon-Taylor.

Brief biographical details of the Directors are set out below:

Allen Dee Howard, Non-Executive Chairman - aged 40

Mr Howard has extensive experience in the oil sector. He was previously a Senior Vice President of Houston-based Premier Oilfield Laboratories, and Chief Commercial Officer of well analysis experts Nutech. Mr Howard also held senior positions with Schlumberger. He holds a degree in Chemical Engineering from Texas Tech University and an MBA from Mays Business School in Texas.

Stephen Paul Sanderson, CEO - aged 61

Stephen Sanderson joined UKOG in September 2014 and was appointed Executive Chairman and Chief Executive in July 2015. A highly-experienced petroleum geologist, oil industry veteran and upstream energy business leader, with over 30 years operating experience, Stephen is a proven oil finder and has been instrumental in the discovery of more than 10 commercial conventional fields, including the giant Norwegian Smorbuk-Midgaard field complex. Stephen held a variety of senior management roles for ARCO (which was acquired by BP in 2000), Wintershall AG (a subsidiary of German chemical giant BASF) and 3 junior start-ups. He created and ran successful new exploration businesses in Africa, Europe and South America. He has significant technical and commercial expertise in the petroleum systems of Africa, the North Sea, Norway, onshore UK and Europe, South America, the South Atlantic, Middle East, Asia, India, Australia and the USA. He is a graduate and Associate of the Royal School of Mines, Imperial College, London, a Fellow of the Geological Society of London and a member of the American Association of Petroleum Geologists. He served for 4 years in the British Army and TAVR as a platoon commander, serving in the UK and Berlin.

Kiran Caldas Morzaria, Finance Director - aged 44

Mr Morzaria holds a Bachelor of Engineering (Industrial Geology) from the Camborne School of Mines and an MBA (Finance) from CASS Business School. He has extensive experience in the mineral resource industry working in both operational and management roles. Mr Morzaria spent the first 4 years of his career in exploration, mining and civil engineering. He then obtained his MBA and became the Finance Director of Vatukoula Gold Mines Plc. He has served as a director of a number of public companies in both an executive and non-executive capacity and is currently the Chief Executive Officer for Cadence Minerals plc, and a non-executive director of European Metals Holdings Ltd.

Nicholas John Mardon-Taylor, Proposed Non-Executive Director - aged 73

Mr. Mardon-Taylor served as the Chief Financial Officer of Hurricane Energy PLC from May 2012 until January 2016. He has worked in the oil industry for over 35 years, his first involvement in the North Sea being in the early licensing rounds. He was with Hurricane from 2005 to January 2016 when he was the Group's first CFO and was subsequently responsible for the Group's Environmental Management System.

Key personnel

Matt Cartwright, Chief Operating Officer - aged 56

Mr Cartwright is a part of key management of UKOG and joined the Company as a Business Adviser in July 2014 to help close and manage the Company's successful Northern Petroleum acquisition. He has provided services as Chief Operating Officer since September 2015. Matt has worked for 35 years in the international oil & gas industry for super-majors and start-ups. He started his career with BP and ARCO in the UK before spending 13 years with Total where he made a significant contribution to Total's growth in the Canadian heavy oil sands, the UK Elgin/Franklin development and in several ultra-deep-water West Africa projects. Matt is highly experienced in the areas of executive management, business development, development planning, strategic planning, economic evaluation, asset acquisitions and deployment of new engineering technology. His international experience encompasses Canada, Norway, France, Africa and the Middle East. Matt has a first class engineering degree from the University of Cambridge.

Employees

As at the date of this Document, the Group has 6 full time employees.

   9.          CORPORATE GOVERNANCE 

From Admission, the Company is required under the AIM Rules to comply with a recognised corporate governance code to be chosen by the Board. The Board recognises the importance of sound corporate governance and intends that the Company will comply with the provisions of the QCA Code. The Company shall disclose on its website how it complies with the QCA Code and, where it departs from the QCA Code, will explain the reasons for doing so.

Following Admission, the Board will comprise 2 executive directors and 2 non-executive directors (one of whom is considered by the Board to be independent) in line with QCA guidelines.

The Board is responsible for formulating, reviewing and approving the Group's strategy, budgets and corporate actions.

The Group has established properly constituted audit and remuneration committees of the Board with formally delegated duties and responsibilities.

Audit Committee

The Audit Committee has primary responsibility for monitoring the quality of internal controls, ensuring that the financial performance of the Group is properly measured and reported on. It will receive and review reports from the Group's management and auditors relating to the interim and annual accounts and the accounting and internal control systems in use throughout the Group. The Audit Committee will meet no less than 3 times each year and will have unrestricted access to the Group's auditors. The Audit Committee comprises a minimum of 2 directors including, at least, 1 independent Non-Executive Director and 1 member with recent and relevant financial experience. At Admission, the members of the Audit Committee shall be Allen Howard and Nicholas Mardon-Taylor.

Remuneration Committee

The Remuneration Committee reviews the performance of executive directors and makes recommendations to the Board on matters relating to their remuneration and terms of employment. The committee also makes recommendations to the Board on proposals for the granting of share options and other equity incentives pursuant to any share option scheme or equity incentive scheme in operation from time to time. The Remuneration will meet at least twice each year. The Remuneration Committee comprises a minimum of 2 directors all of whom shall be independent Non-Executive Directors. At Admission, the members of the Remuneration Committee shall be Allen Howard and Nicholas Mardon-Taylor.

AIM Rules Compliance Code

The Company has also adopted an AIM rules compliance code to ensure that they have in place sufficient procedures for ensuring compliance with the AIM Rules.

   10.         SHARE DEALING POLICY 

The Board has adopted the Share Dealing Policy in order to comply with Rule 21 of the AIM Rules relating to directors' and applicable employees' (as defined in the AIM Rules) and key personnel dealings in Shares. It also complies with the requirements of MAR.

The Share Dealing Policy applies to the Directors, other relevant employees and key personnel of the Group. The Share Dealing Policy provides that there are certain periods during which dealing in Ordinary Shares cannot be made. Such periods include the periods leading up to the publication of the Company's financial results, including interim results, and any periods in which the Directors and other relevant employees and key personnel may be in possession of unpublished price sensitive information.

In addition, a clearance procedure must be followed before any dealings by persons subject to the Share Dealing Policy can take place (including dealings by their families and other associates).

   11.         ANTI-BRIBERY AND CORRUPTION POLICY 

The Company has implemented an anti-bribery and corruption policy and also implemented appropriate procedures to ensure that, inter alia, the Board, employees, key personnel, agency staff and consultants comply with the Bribery Act 2010.

   12.         SOCIAL MEDIA POLICY 

The Company has implemented a Social Media Policy which details the ways in which all employees, officers, consultants, contractors, volunteers, interns, casual workers and agency workers interact with social media in relation to UKOG. This policy deals with the use of all forms of social media, including Facebook, LinkedIn, Twitter, Google+, Wikipedia, Whisper, Instagram, Vine, Tumblr, ADVFN bulletin board, London South East bulletin board, iii bulletin board and all other social networking sites, internet postings, bulletin boards and blogs. It applies to use of social media for business purposes as well as personal use that may affect the business in any way. It is designed to ensure that there is no unauthorised release of potentially price sensitive information regarding the Company so that all such information is released in the first instance through the correct authorised regulatory news services and that no misleading information is contained in unauthorised media channels. The Policy is also designed to mitigate the risk of use of terminology in the media being inconsistent with the Company's authorised regulatory announcements. The Policy has been implemented following events in 2015 when UKOG was forced to provide clarifications on its earlier RNS statements following media reports of the Company's announcements and associated interviews with the Company's management. Risks associated with Social Media details can also be found within Part II of this Document.

   13.         SHARE OPTIONS, INCENTIVES AND WARRANTS 

The Directors believe it is important for the success and growth of the Company to employ highly motivated personnel and that equity incentives are available to attract, retain and reward staff. On Admission, the following directors and key personnel/employees have the following shares and options:

 
 Name                 Number of         Number of    Current shareholding 
                       shares options    options      excluding 
                                                      unexercised 
 Stephen Sanderson                  -   85,000,000                      - 
 Kiran Morzaria             4,508,178   20,000,000                   0.1% 
 Allen Howard                       -   10,000,000                      - 
 Matt Cartwright                    -   40,000,000                      - 
 

As at the date of this Document, Warrants and Options for a total of 251,055,555 Ordinary Shares are outstanding. Further details on the outstanding Warrants are set out in Part V of this Document. The Company does not intend to apply for the Warrants to be admitted to trading on AIM.

   14.         FINANCIAL REPORTING 

The Company operates a September year end. It is anticipated that the preliminary statement of results for each year will be announced by the end of March and that an interim statement of the results for the first half-year will be announced in June each year. It is intended to hold the Company's Annual General Meeting during April of each year.

In accordance with Rule 28 of the AIM Rules, this Document does not contain historical financial information on the Company, which would otherwise be required under Section 20 of Annex I of the Prospectus Rules. The Group's published financial information can be located on the Company's website under AIM Rule 26 at the following link:

http://www.ukogplc.com/page.php?pID=82

The most recently published Annual Report and Accounts for the Year Ended 30 September 2017 and most recent interim results for the period ended 31 March 2018 are contained within the Appendix to this Document.

   15.         DIVID POLICY 

The Directors do not intend to declare a dividend at the current time.

   16.         ADMISSION AND DEALINGS IN SHARES 

Application has been made to the London Stock Exchange for the Existing Ordinary Shares to be admitted to trading on AIM. It is expected that Admission will be effective and that dealings on AIM will commence at 8.00 a.m. on 1 August 2018.

   17.         TAXATION 

Your attention is drawn to the further information regarding taxation set out in Part V of this Document. These details are, however, intended only as a general guide to the current tax position for UK resident Shareholders under UK taxation law and you should seek independent advice if you are in any doubt as to your tax position and/or if you are subject to tax in a jurisdiction other than in the UK.

   18.         THE TAKEOVER CODE 

The Company is incorporated in England and its Ordinary Shares are admitted to trading on AIM. Accordingly, the Takeover Code applies to the Company.

   19.         GENERAL MEETING 

As described above, the change of status of the Company from an Investing Company to an Operating Company is classified as a fundamental change of the Company under the AIM Rules and therefore is conditional upon the approval of Shareholders at the General Meeting. Accordingly, set out at the end of this Document, is a notice convening the General Meeting at which the following resolutions will be proposed:

l Resolution 1 seeks to approve the change of the status of the Company from an Investing Company to an Operating Company with a material trading activity for the purposes of the AIM Rules and to approve the Admission;

l Resolution 2 seeks to authorise the Directors to issue up to GBP170,000 in nominal value of Ordinary Shares following Admission; and

l Resolution 3 seeks to disapply pre-emption rights in connection with the issue of up to

GBP170,000 in nominal value of Ordinary Shares following Admission.

The attention of Shareholders is also drawn to the voting intentions of the Directors set out in paragraph 23 below.

   20.         COMPETENT PERSON'S REPORT 

A technical report prepared in accordance with the 2011 Petroleum Resources Management System (as defined by the Society of Petroleum Engineers, American Association of Petroleum Geologists, World Petroleum Council and the Society of Petroleum Evaluation Engineers), and the "AIM Note for Mining and Oil & Gas Companies" as published in June 2009 by the London Stock Exchange that is effective 1 July 2018 (the "Competent Person's Report") prepared by Xodus Group is available in this document, and on the Company's website.

A competent person's report had been published by the Company on 6 June 2018 which has not been used in this Document. The reason for this is that PEDL233 has expired since this competent person's report had been prepared and accordingly that report no longer complies with the AIM Note for Oil & Gas Companies as it does not accurately detail the oil and gas interests of the Company as at the date of this Document. The Competent Person's Report used is an updated version of the

6 June 2018 report and reaches the same conclusions included therein save for any changes required as a result of the expiry of PEDL233.

   21.         FURTHER INFORMATION 

Your attention is drawn to the further information set out in Parts III and V of this Document, and the "Risk Factors" set out in Part II. You are advised to read the whole of this Document rather than relying on the summary information set out in Part I of this Document before making any decision to invest in the Company.

   22.         ACTION TO BE TAKEN 

Shareholders will find enclosed with this Document a Form of Proxy for use at the General Meeting. Whether or not you intend to be present at the General Meeting, you are requested to complete, sign and return your Form of Proxy to Share Registrars Limited at The Courtyard, 17 West Street, Farnham, Surrey GU9 7DR or sent by email to [e-mail], as soon as possible but, in any event, so as to arrive no later than 10.00 a.m. BST on 27 July 2018.

Completion of a Form of Proxy will not preclude a Shareholder from attending and voting at the General Meeting in person save that in each case the Shareholder should contact Share Registrars Limited in advance to confirm what identity documents they should bring with them and to complete a form of representation (available on request from Share Registrars Limited) if necessary.

   23.         RECOMMENDATION 

The Board believes that the Proposal is in the best interest of the Company and its Shareholders and therefore recommends that Shareholders vote in favour of resolutions to be proposed at the General Meeting as they intend to do so in respect of their own beneficial holding of Ordinary Shares which in aggregate amounts to 4,508,178 Ordinary Shares representing 0.1% of the Existing Share Capital.

Yours faithfully,

Stephen Sanderson

Executive Chairman and CEO

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 [e-mail] or visit www.rns.com.

END

MSCUOORRWOABAAR

(END) Dow Jones Newswires

July 13, 2018 07:36 ET (11:36 GMT)