UK Oil & Gas Investments PLC Update - Broadford Bridge-1 (4285F)

TIDMUKOG

RNS Number : 4285F

UK Oil & Gas Investments PLC

20 February 2018

UK Oil & Gas Investments PLC

("UKOG" or the "Company")

Oil Flows to Surface from Kimmeridge Limestone 5

Broadford Bridge-1/1z Oil Discovery, Weald Basin, UK

Highlights

-- Oil flowed to surface from Kimmeridge Limestone 5 ("KL5") throughout 96 hours of near-continuous rod-pumping. Fluid returns, measured as half-hourly instantaneous pumped rates, currently range from around 10 to 72 barrels per day ("bpd").

-- Fluids flowed to surface consist of oil mixed with returned reactants ("spent acid") from an acid-wash programme. Associated average oil percentages ("oil-cut") exceed 30% with intermittent periods exceeding 50% by volume and continue to increase. To date, no obvious formation water has been observed in returns.

-- 24-hour pumping operations will continue to enable flow to stabilise, return all spent acid and achieve 100% oil ("clean-up").

UK Oil & Gas Investments PLC (London AIM: UKOG) announces that oil has flowed to surface from the naturally fractured KL5 reservoir at its 100% owned BB-1/1z exploration discovery, located in licence PEDL234. Fluid returns to surface, measured as half-hourly instantaneous pumped flow-rates over a 96-hour near-continuous period, ranged between 10 to 72 barrels per day ("bpd").

To date, fluid returns through the test equipment consist of a mixture of oil plus returned spent-acid from an acid wash treatment, with no observed obvious formation water component. Associated oil-cut steadily increased to over 30%, with intermittent periods exceeding 50% by volume. Flow continues to clean-up with an improving oil-cut trend.

The artificial lift programme, which commenced last Friday, included several initial half-hour shut-downs to bleed off produced associated gas before it locked-up the pump. One short pressure build-up test was also undertaken.

As the KL5 zone's steel casing was not perforated during the original 2017 well completion programme, two new casing-perforation runs were undertaken prior to testing.

The current test, number 7, the first ever within the KL5 in the Weald's 100-year exploration history, straddles a discrete naturally fractured limestone interval close to the top of KL4, which corresponds to the previously reported occurrence of live oil in open natural fractures seen in BB-1 core.

General Testing Update and Future Plans

The KL5 24-hour rod-pumping programme is planned to continue until further notice to enable flow to stabilise and further clean-up with the aim of achieving 100% oil to surface.

Prior to the KL5 test, oil and associated gas were recovered to surface from tests 5 and 6 within the uppermost KL3 and KL4, but with no sustained flow. Due to the limited time remaining on the planning consent, the decision was made to spend no further time on these zones and proceed ahead to the KL5 zone which, as reported in December, was known from core and geochemical analyses to contain oil in fractures and within the limestone rock matrix.

In the light of results and analyses from tests 5 and 6, together with learnings from test 7 in KL5, the Company and its consultants are currently investigating the possibility that zones 5 and 6, originally perforated in summer 2017 and acidised during the original test programme, were damaged by a combination of the long residence times of spent acid within the reservoir prior to current testing and the perforating technique utilised.

It is now thought that both fractures and perforated channels around the wellbore of KL3 and KL4 could be partially blocked by released clay particles and cement related debris, thus preventing sustainable fluid inflow.

In this respect, serious consideration is being given to a possible future short sidetrack and selective re-test of KL3 and KL4 which electric logs show as oil-saturated.

Existing planning consent time permitting, following completion of KL5 testing, the plan remains to test a 40 ft thick limestone zone in KL1 which, as per KL5, was not perforated or acid-washed in 2017.

About BB-1/1z

As previously reported, BB-1 was purposely drilled in a location where no conventional hydrocarbon trapping mechanism within the Kimmeridge reservoir section is evident. Therefore, in the Company's opinion, the now proven flow to surface of moveable, light Kimmeridge oil and associated solution gas at the BB-1z sidetrack, provides further proof that the Kimmeridge at Broadford Bridge contains a continuous oil deposit of up to 1400 ft gross vertical thickness.

The near identical Kimmeridge reservoir parameters and geology seen at BB-1/1z and the Horse Hill-1 Kimmeridge oil discovery, in which the Company holds a 32.435% interest, some 27 km to the northeast, demonstrates that the Kimmeridge oil accumulation is also laterally extensive across the Central Weald Basin and, consequently, a potentially significant national oil resource.

As previously reported in December, the integration of BB-1z petrophysical analyses with Geomark Research's in-depth geochemical analyses, strongly suggests that Broadford Bridge lies within the southern flank of the Kimmeridge continuous oil deposit, with the commercially viable extent of the play, determined by the presence of significant volumes of in-situ generated mobile oil within Kimmeridge shales and fractured limestones, terminating some few kilometres to the south of PEDL234.

UKOG, as the largest licence holder in the Kimmeridge oil accumulation's "sweet-spot" is well positioned to exploit this extensive and likely commercially viable oil resource.

Stephen Sanderson, UKOG's Executive Chairman, commented:

"These positive and encouraging initial oil flows from the first-ever Kimmeridge Limestone 5 test provide further supporting evidence for the presence and significant spatial extent of a viable Kimmeridge continuous oil deposit within the PEDL234 Licence.

The KL5 test results, plus the many strands of technical evidence gathered from the well, now also indicate that the BB-1 location lies towards the southern edge of a thick, naturally-fractured, oil-saturated Kimmeridge "wedge", stretching around 30 kms to the north of BB-1 across the Weald. UKOG, as the largest licence holder in the thickest part of this "wedge", is therefore ideally placed to exploit the potentially commercially viable recoverable resources that now likely underlie our Licences.

We look forward to further positive news from the ongoing KL5 test programme."

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

 
 casing                 heavy-gauge steel pipe that is lowered into 
                         position in the open hole of a well and cemented 
                         into place. Casing is run to isolate rock formations 
                         with different pressure gradients from the well 
                         bore and to ensure that any fluids within the 
                         well are isolated from the surrounding rock 
                         and surface groundwater zone 
---------------------  ----------------------------------------------------------- 
 clean-up               the process whereby stable flow and 100% oil 
                         content in fluids flowed to surface is achieved 
---------------------  ----------------------------------------------------------- 
 completion,            the process of making a well ready for production. 
  well completion,       This principally involves preparing the bottom 
  or test completion     of the hole to the required specifications, 
                         running in the production tubing and its associated 
                         downhole tools as well as perforating as required, 
                         together with the appropriate completion fluid 
                         contained in the well. The process of running 
                         in and cementing the casing can also be included 
                         in this category 
---------------------  ----------------------------------------------------------- 
 continuous oil         a petroleum accumulation that is pervasive throughout 
  deposit or resource    a large area, which is not significantly affected 
  deposit                by hydrodynamic influences (i.e. the buoyancy 
                         of oil in water) and is not trapped by structural 
                         or stratigraphic geological conditions. The 
                         deposit, in contrast to conventional accumulations, 
                         has therefore not accumulated by the migration 
                         of petroleum over medium to long distances. 
                         The petroleum in such deposits is found within, 
                         or immediately adjacent or close to, the pore 
                         spaces where the petroleum is generated, i.e. 
                         those pore spaces lying within petroleum source 
                         rocks containing organic rich compounds (kerogen) 
                         that, when heated over geological time, transform 
                         into petroleum. These accumulations are generally 

                         associated with organic-rich shales such as 
                         the Kimmeridge Clay Formation. Such accumulations 
                         do not generally contain significant volumes 
                         of free, mobile formation water and therefore 
                         have no observable hydrocarbon-water contacts. 
                         The extent of the accumulation is generally 
                         defined by the limit of where burial depths 
                         have been sufficient to transform organic matter 
                         within the petroleum source rock unit into petroleum 
---------------------  ----------------------------------------------------------- 
 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 
  test or production     to test the longer term production performance 
  test                   of 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 
---------------------  ----------------------------------------------------------- 
 naturally fractured    a fractured reservoir contains open and usually 
  reservoir              connected cracks or fissures within the rock 
                         matrix; fractures can enhance permeability of 
                         rocks greatly by connecting pore-spaces together; 
                         naturally fractured reservoirs have been created 
                         over geological time by nature, not man-made 
                         via hydraulic fracturing 
---------------------  ----------------------------------------------------------- 
 nitrogen lifting       the injection of nitrogen into the fluid column 
                         in an oil or gas well to initiate fluid flow 
                         and production from the reservoir. Due to the 
                         low density of nitrogen, this process reduces 
                         the back pressure (known as "drawdown") on the 
                         reservoir 
---------------------  ----------------------------------------------------------- 
 oil cut                the volume percentage of oil in fluids flowed 
                         to surface 
---------------------  ----------------------------------------------------------- 
 perforating,           the use of tubing (typically) to convey perforating 
  perforation            "guns" to the required well depth. Perforating 
                         guns are devices used to prepare wells for production, 
                         containing shaped explosive charges in a range 
                         of sizes and configurations to optimise the 
                         depth of penetration through the steel well 
                         casing and surrounding cement and into the adjacent 
                         reservoir rock 
---------------------  ----------------------------------------------------------- 
 play                   a set of known or postulated oil and or gas 
                         accumulations sharing similar geological, geographical, 
                         and temporal properties, such as source rock, 
                         migration pathways, timing, trapping mechanism, 
                         and hydrocarbon type 
---------------------  ----------------------------------------------------------- 
 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 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        Production tests and 
                                                Developments     Developments                      further appraisal 
                                                    Ltd              Ltd                          well (s ) scheduled 
                                                                                                       for 2018 
----------------  ---------  ---------------  ---------------  ---------------  --------------  ---------------------- 
                                                 Horse Hill       Horse Hill 
                                                Developments     Developments 
Horse Hill (5)     PEDL246       32.435%            Ltd              Ltd             43.6              As above 
----------------  ---------  ---------------  ---------------  ---------------  --------------  ---------------------- 

Isle of Wight      PEDL331         65%              UKOG             UKOG            200.0        Preparing Arreton-3 
 (Onshore) (2,                                                                                       oil discovery 
 3)                                                                                                 appraisal well 
                                                                                                  planning submission 
----------------  ---------  ---------------  ---------------  ---------------  --------------  ---------------------- 
Markwells Wood     PEDL126         100%          UKOG (GB)        UKOG (GB)          11.2        Revised drilling and 
 (2)                                              Limited          Limited                         testing planning 
                                                                                                 application 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. Contains the Broadford Bridge-1&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

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

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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February 20, 2018 09:50 ET (14:50 GMT)