UK Oil & Gas Investments PLC Operational Update - Horse Hill-1 (7081Z)

TIDMUKOG

RNS Number : 7081Z

UK Oil & Gas Investments PLC

19 December 2017

UK Oil & Gas Investments PLC

("UKOG" or the "Company")

Operational Update

Horse Hill-1 Oil Discovery, Weald Basin, UK

Highlights:

-- 150-day production flow-test and new drilling programme set to commence in late winter 2017/18

-- Programme aims to confirm commerciality of Portland and Kimmeridge oil discoveries and gear-up for first permanent oil production targeted for early 2019.

-- Drilling of HH-2 appraisal well as future producer to directly follow flow testing programme

-- Permanent production consent application underway, submission to SCC expected in spring 2018

   --      Swift and successful eviction of protesters completed at Horse Hill site on 02 December 

UK Oil & Gas Investments PLC (London AIM: UKOG) announces that it has been advised by Horse Hill Developments Ltd ("HHDL"), the operator of the Horse Hill-1 ("HH-1") oil discovery, in which the Company holds a 32.435% interest, that key contracts and the requisite funding commitments from all participants are in place to undertake the production flow testing and drilling campaign approved by Surrey County Council ("SCC") in October 2017. The 2018 programme is planned to commence directly upon the discharge of SCC's pre-commencement planning conditions, expected by the end of winter 2017/18. Environment Agency approval for the full programme was granted in September 2017.

Horse Hill Oil Discovery

The HH-1 Portland sandstone and Kimmeridge Limestone oil discoveries lie within onshore Weald Basin licences PEDL137 and PEDL246 covering an area of 55 square miles (143 km(2) ) north of Gatwick Airport. As previously reported on 21 March 2016, HH-1 flow tested at a significant commercial aggregate stable dry oil rate of 1,688 barrels of oil per day ("bopd") from the Portland, Kimmeridge Limestone 3 ("KL3") and Kimmeridge Limestone 4 ("KL4") reservoir horizons.

2018 Horse Hill Flow Test Programme

Following a short period of civil works to upgrade site facilities, a 150-day production testing programme focused upon the Portland, KL3 and KL4 reservoirs will commence. As commercially viable initial flow rates were established by the 2016 flow tests, the 2018 testing programme's goal is to confirm that HH-1's reservoirs are each connected to a commercially viable oil volume, thus enabling a declaration of commerciality to be made.

The Portland, KL3 and KL4 flow tests, each planned for around 30-40 days duration, will consist of a sequence of stabilised steady state flow and shut in periods to establish the oil in place ("OIP") directly connected to the well. A short maximum flow-rate test will also be included for each reservoir. If time permits, a further short-term test of a deeper untested Kimmeridge reservoir may be undertaken.

Testing will commence with the Portland reservoir, which in the Company's opinion, given the 323 bopd stable pumped rate achieved in 2016 and the 32 million barrels most likely OIP calculated by Xodus in 2017, is a strong candidate for commercial viability. Subject to a successful test, a Portland commercial declaration is expected to be made by mid-2018. A Kimmeridge commerciality declaration would follow programme completion and analysis of reservoir engineering data.

2018 Horse Hill Drilling Programme

Subject to a successful testing outcome in the Kimmeridge and Portland, the HH-2 well is planned as a future Portland producer, with an expected spud towards the end of Summer 2018. 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 OIP.

The HH-1z Kimmeridge sidetrack spud is now planned for 2019 following construction of a Kimmeridge reservoir model utilising HH-1 Kimmeridge production data, reservoir data from the Company's 100% owned Broadford Bridge-1 & 1z Kimmeridge discovery and any future HH-2 Kimmeridge core.

Production Planning Application

To achieve its goal of stable, long-term Horse Hill oil production by Spring 2019, HHDL now plans to submit a further production planning application to SCC in late Spring 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.

Horse Hill Eviction

On Saturday 2 December 2017, a 42-person team, including High Court bailiffs and the UK's pre-eminent specialist protester removal contractor, successfully removed around 20 activists who had illegally occupied part of the Horse Hill site since Thursday 30 November 2017. These activists intimidated, jostled and verbally abused HHDL's security staff and caused criminal damage during their illegal occupation.

An increased security presence will now remain on the site until completion of the 2018 programme.

The Company is rigorously pursuing all available legal means to seek recourse for this and any future events that prevent or obstruct its right to conduct its lawful business.

Stephen Sanderson, UKOG's Executive Chairman, commented:

"The 2018 Horse Hill programme is a key step towards delivering UKOG's goal of commercial production and significant cash flow by early 2019. The programme, geared to provide data to support a declaration of commerciality, will benefit greatly from the many significant Kimmeridge and operational learnings gained at our Broadford Bridge discovery.

Horse Hill remains a fundamental part of the Company's core portfolio and we therefore look forward to returning to the birthplace of the Kimmeridge Limestone oil play. "

Qualified Person's Statement:

Stephen Sanderson, UKOG's Executive Chairman, who has over 35 years of relevant experience in the oil industry, has approved the information contained in this announcement. Mr Sanderson is a Fellow of the Geological Society of London and is an active member of the American Association of Petroleum Geologists.

For further information, please contact:

UK Oil & Gas Investments PLC

   Stephen Sanderson / Kiran Morzaria                                     Tel: [phone] 

WH Ireland (Nominated Adviser and Broker)

   James Joyce / James Sinclair-Ford                                          Tel: [phone] 

Cenkos Securities PLC (Joint Broker)

Joe Nally / Leif Powis Tel: [phone]

Public Relations

Brian Alexander / David Bick Tel: [phone]

Glossary

 
 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 
--------------------  ----------------------------------------------------------- 
 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 
--------------------  ----------------------------------------------------------- 
 extended flow         a flow test, or extended well test, designed to 
  test or production    test the longer term production performance of 
  test                  a discovery with a view to declaring commercial 
                        viability and the establishment of permanent production. 
--------------------  ----------------------------------------------------------- 
 flow test             a test period where hydrocarbons are flowed to 
                        surface 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 
                        oil at a commercial flow rate and to recover oil 
                        in commercial quantities or volumes 
--------------------  ----------------------------------------------------------- 
 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, being made of the remains of calcareous 
                        planktonic algae called coccoliths. The Kimmeridge 
                        Limestones are comprised of fine grained coccoliths, 
                        fine grained calcium carbonate mud, clay minerals, 
                        together with dark grey organic matter 
--------------------  ----------------------------------------------------------- 
 oil in place          the quantity of oil or petroleum that is estimated 
  (OIP)                 to exist originally in naturally occurring accumulations 
                        before any extraction or production 
--------------------  ----------------------------------------------------------- 

 play                  a set of known or postulated oil and or gas accumulations 
                        sharing similar geologic, geographic, and temporal 
                        properties, such as source rock, migration pathways, 
                        timing, trapping mechanism, and hydrocarbon type 
--------------------  ----------------------------------------------------------- 
 sandstone             a clastic sedimentary rock whose grains are predominantly 
                        sand-sized. The term is commonly used to describe 
                        a consolidated and cemented rock made predominantly 
                        of quartz grains 
--------------------  ----------------------------------------------------------- 
 sidetrack             re-entry of a well from the well's surface location 
                        with drilling equipment for deviating from the 
                        existing well bore to achieve production or well 
                        data from an alternative zone or bottom hole location 
--------------------  ----------------------------------------------------------- 
 

UKOG Licence Interests

The Company has interests in the following 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 
----------------  ---------  ---------------  ---------------  ---------------  --------------  ---------------------- 
Broadford Bridge   PEDL234         100%        Kimmeridge Oil   Kimmeridge Oil       300.0        BB-1 & 1z drilling 
(3)                                            & Gas Limited    & Gas Limited                    completed, testing of 
                                                    (4)              (4)                            multiple zones 
                                                                                                       underway 
----------------  ---------  ---------------  ---------------  ---------------  --------------  ---------------------- 
Holmwood (3)       PEDL143         40%              UKOG         Europa Oil &        91.8             Holmwood-1 
                                                                Gas (Holdings)                     exploration well 
                                                                     plc                            planned in 2018 
----------------  ---------  ---------------  ---------------  ---------------  --------------  ---------------------- 
                                                 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        Planning Permission & 
                                                Developments     Developments                    EA permit granted for 
                                                    Ltd              Ltd                         production tests and 
                                                                                                       two wells 
----------------  ---------  ---------------  ---------------  ---------------  --------------  ---------------------- 
                                                 Horse Hill       Horse Hill 
                                                Developments     Developments 
Horse Hill (5)     PEDL246       32.435%            Ltd              Ltd             43.6              As above 
----------------  ---------  ---------------  ---------------  ---------------  --------------  ---------------------- 
Isle of Wight       P1916          100%         UKOG Solent      UKOG Solent         46.7        Reviewing M prospect 
(Offshore) (3)                                    Limited          Limited                        viability and well 
                                                                                                         plan 
---------------- 
Isle of Wight 
 (Onshore) (2,                                                                                    Preparing Arreton-3 
 3)                PEDL331         65%              UKOG             UKOG            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 Broadford Bridge-1 and 1z discovery well and the extension of the Godley Bridge Portland gas discovery.

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

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

This information is provided by RNS

The company news service from the London Stock Exchange

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December 19, 2017 02:00 ET (07:00 GMT)