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UK Oil & Gas LSE:UKOG London Ordinary Share GB00B9MRZS43 ORD 0.01P
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UK Oil & Gas PLC Acquisition of Interest in Arreton Oil Discovery

12/12/2018 7:00am

UK Regulatory (RNS & others)


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RNS Number : 1731K

UK Oil & Gas PLC

12 December 2018

UK Oil & Gas PLC

("UKOG" or the "Company")

Acquisition of Further 30% Interest in Arreton Oil Discovery and Licence

PEDL331 Licence, Isle of Wight, Onshore, UK

UK Oil & Gas PLC (London AIM: UKOG) is pleased to announce that it has entered into a binding heads of terms with Solo Oil Plc ("Solo") to acquire their 30% shareholding in the PEDL331 onshore Isle of Wight licence ("the Licence"). Upon completion the Company will hold an operated 95% direct interest in the Licence.

As reported in the Company's July 2018 AIM admission document, the Arreton conventional oil discovery, a geological analogue of the Company's Horse Hill Portland oil field (UKOG net 46.735%), contains three stacked Jurassic oil pools with an aggregate gross P50 oil in place ("OIP") of 127 million barrels ("mmbbl"), over four times larger than Horse Hill's 30 mmbbl P50 OIP Portland oil pool.

The acquisition will also correspondingly increase UKOG's share of the Arreton discovery's recoverable Contingent Resource volumes by 46%, from 10.2 mmbbl to a material 14.9 mmbbl UKOG net. As detailed in Xodus's June 2018 Competent Person's Report, a further significant increase in oil recovery factor above the current estimated 12% is likely via adoption of an early stage reservoir pressure support scheme (i.e. water reinjection).

Transaction Summary

The total consideration of GBP350,000, with an effective date of 11 December 2018, will be satisfied through the payment of GBP90,450 in cash and the issue of 17,989,326 new ordinary shares in UKOG ("Consideration Shares"). The Consideration Shares are calculated based upon the 5-day volume weighted average price to market close on 10 December 2018 of 1.4428 pence.

Completion of this acquisition, which will be announced in due course, is conditional upon the usual Oil and Gas Authority consent.

Stephen Sanderson, UKOG's Chief Executive, commented:

"We are delighted to acquire this further substantial share of the Arreton oil discovery, giving the Company a material 14.9 million barrels of net attributable discovered PEDL331 recoverable resources. The first Arreton appraisal well, Arreton-3, is now scheduled to be drilled, cored and tested in the first quarter of 2020, with the drilling of the larger look-alike Arreton South exploration prospect planned to follow after completion of Arreton-3 flow testing. We look forward to starting the journey towards realising the Isle of Wight Licence's considerable conventional oil resource potential."

Qualified Person's Statement

Rob Wallace, UKOG's principal technical advisor, who has over 40 years of relevant experience in the oil industry, has approved the information contained in this announcement. Mr Wallace is a Chartered Scientist, Chartered Geologist and Fellow of the Geological Society of London, an active member of the American Association of Petroleum Geologists, a member of the Petroleum Exploration Society of Great Britain and a member of the South African Geophysical Society.

For further information, please contact:

UKOG

Stephen Sanderson / Kiran Morzaria Tel: 01483 900582

WH Ireland (Nominated Adviser and Broker)

James Joyce / James Sinclair-Ford Tel: 020 7220 1666

Cenkos Securities PLC (Joint Broker)

Joe Nally / Neil McDonald Tel: 0207 397 8919

Novum Securities (Joint Broker)

John Bellis Tel: 020 7399 9400

Public Relations

Brian Alexander / David Bick Tel: 01483 900582

Glossary

 
 appraisal well            a well designed to determine the lateral and or 
                            vertical extent of a discovered hydrocarbon accumulation 
 Contingent Resources      those quantities of petroleum estimated, as of 
                            a given date, to be potentially recoverable from 
                            known accumulations, but the applied project(s) 
                            are not yet considered mature enough for commercial 
                            development due to one or more contingencies. 
                            Contingent Resources are further categorized in 
                            accordance with the level of certainty associated 
                            with the estimates and may be sub-classified based 
                            on project maturity and/or characterized by their 
                            economic status 
                          ---------------------------------------------------------- 
 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 well             a well test, as per the permission granted by 
  test                      the Oil and Gas Authority, with an aggregate flow 
                            period duration over all zones of greater than 
                            96 hours and up to 90 days per zone 
                          ---------------------------------------------------------- 
 flow test                 a flow test or well test involves testing a well 
                            by flowing hydrocarbons to surface, typically 
                            through a test separator. Key measured parameters 
                            are oil and gas flow rates, downhole pressure 
                            and surface pressure. The overall objective is 
                            to identify the well's capacity to produce hydrocarbons 
                            at a commercial flow rate 
                          ---------------------------------------------------------- 
 oil field                 an accumulation, pool or group of pools of oil 
                            in the subsurface that produces oil to surface. 
                            An oil field consists of a reservoir in a shape 
                            that will trap hydrocarbons and that is covered 
                            by an impermeable or sealing rock 
                          ---------------------------------------------------------- 
 oil in place              the quantity of oil or petroleum that is estimated 
  ("OIP") or stock          to exist in naturally occurring accumulations 
  tank oil initially        in the ground. 
  in place ("STOIIP") 
                          ---------------------------------------------------------- 
 P50 or best               a 50% probability that a stated volume will be 
  estimate                  equalled or exceeded 
                          ---------------------------------------------------------- 
 pressure support          maintenance of reservoir pressure as close to 
  or voidage replacement    virgin reservoir pressure as possible and above 
                            bubble point via reinjection of saline formation 
                            water into the reservoir. The injected water increases 
                            oil recovery via maintaining maximum depletion 
                            drive energy (see above) and displacing oil from 
                            reservoir pores towards the wellbore. The mechanism 
                            is also referred to as voidage replacement. Full 
                            pressure support or "full voidage replacement" 
                            means that the overall volume of saline formation 
                            water injected is equal to the volume of oil extracted. 
                          ---------------------------------------------------------- 
 recovery factor           the recoverable volumes of petroleum expressed 
                            as a percentage of the oil in place or gas in 
                            place 
                          ---------------------------------------------------------- 
 recoverable               those quantities of petroleum (i.e. oil in this 
  volumes or resources      case) estimated, as of a given date, to be potentially 
                            recoverable to surface from known accumulations 
                          ---------------------------------------------------------- 
 

UKOG Licence Interests

The Company has interests in the following UK licences:

 
Asset               Licence     UKOG's        Licence          Operator         Area            Status 
                                Interest       Holder                           (km(2) 
                                                                                  ) 
                                                                                            Field currently 
Avington                                     UKOG (GB)        IGas Energy                   temporarily shut 
 (1)                PEDL070       5%          Limited             Plc           18.3               in 
-----------------             ----------  --------------  ------------------  --------  ---------------------- 
Broadford                                                                                    BB-1 & 1z oil 
 Bridge                                     UKOG (234)        UKOG (234)                  discovery, planning 
 (3)                PEDL234      100%         Ltd (4)           Ltd (4)         300.0     application approved 
-----------------             ----------  --------------  ------------------  --------  ---------------------- 
                                                                                           Seeking alternate 
                                                              Europa Oil                     sites to drill 
Holmwood                                                    & Gas (Holdings)               Holmwood and other 
 (3)                PEDL143       40%          UKOG               plc           91.8      Kimmeridge prospects 
-----------------             ----------  --------------  ------------------  --------  ---------------------- 
Horndean                                     UKOG (GB)        IGas Energy                   Field in stable 
 (1)                 PL211        10%         Limited             Plc           27.3           production 
-----------------             ----------  --------------  ------------------  --------  ---------------------- 
                                                                                           Production tests 
                                                                                          ongoing, two further 
                                            Horse Hill        Horse Hill                    appraisal wells 
Horse Hill                                  Developments      Developments                   scheduled for 
 (5)                PEDL137     46.735%         Ltd               Ltd           99.3              2019 
-----------------             ----------  --------------  ------------------  --------  ---------------------- 
                                            Horse Hill        Horse Hill 
Horse Hill                                  Developments      Developments 
 (5)                PEDL246     46.735%         Ltd               Ltd           43.6           As above 
-----------------             ----------  --------------  ------------------  --------  ---------------------- 
                                                                                          Preparing planning 
                                                                                             submission for 
                                                                                             Arreton-3 oil 
Isle of                                                                                      appraisal well 
 Wight (Onshore)                                                                           and Arreton South 
 (2, 3)             PEDL331       95%          UKOG              UKOG           200.0       exploration well 
-----------------             ----------  --------------  ------------------  --------  ---------------------- 
Markwells                                    UKOG (GB)         UKOG (GB)                     under internal 
 Wood (2)           PEDL126      100%         Limited           Limited         11.2             review 
-----------------             ----------  --------------  ------------------  --------  ---------------------- 
 

Notes:

1. Oil field currently in stable production.

2. Oil discovery pending development and/or appraisal drilling.

3. Exploration asset with drillable prospects and leads.

4. Contains the Broadford Bridge-1 /1z Kimmeridge oil discovery, the eastern extension of the Godley Bridge Portland gas discovery plus further undrilled Kimmeridge exploration prospects.

5. Oil field with three productive and commercially viable zones, EWT ongoing, two further wells HH-1z and HH-2 scheduled Q2 2019, development underway subject to grant of planning consent, expected Q3 2019.

6. UKOG has a direct 71.9% 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 news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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December 12, 2018 02:00 ET (07:00 GMT)

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