UK Oil & Gas PLC EWT Update, Portland & Kimmeridge Oil Discovery (4007H)

TIDMUKOG

RNS Number : 4007H

UK Oil & Gas PLC

15 November 2018

UK Oil & Gas PLC

("UKOG" or the "Company")

Extended Well Test ("EWT") Hits Significant Production Milestone, KL3 Exceeds 10,000 Barrels

Horse Hill-1 ("HH-1") Portland and Kimmeridge Oil Discovery, Weald Basin, UK

UK Oil & Gas PLC (London AIM: UKOG) announces that Horse Hill Developments Ltd ("HHDL"), a UKOG subsidiary company and the operator of the HH-1 Kimmeridge Limestone and conventional Portland Sandstone oil discovery, has informed the Company that total oil production from the 2018 EWT has reached 13,920 barrels ("bbl") approximately 2.21 million litres, with gross oil sales revenues of approximately US$1.1 million.

2018 HH-1 oil production comprises 10,248 bbl (1.63 million litres) of 40deg API oil from the Kimmeridge Limestone 3 ("KL3") and 3,672 bbl (c. 584,000 litres) of 35deg API oil from the Portland. No formation water was returned to surface from either the KL3 or Portland. The KL4 EWT programme is planned to commence shortly following the ongoing final KL3 pressure build up test. HH-1 is located in licence PEDL137 in which UKOG holds a 46.735% beneficial interest. Key points and further details are summarised below.

2018 EWT Milestones to date:

-- Approximately US$1.1 million gross 2018 HH-1 oil sales achieved to date from the KL3 and Portland (this figure excludes the KL4 oil reservoir, which will be tested shortly).

   --    13,920 bbl (2.21 million litres) total KL3 and Portland production as of 0700 14 November. 

-- 10,248 bbl (1.63 million litres) of 40deg API produced solely from the KL3 as of 0700 14 November.

   --    15,860 bbl (2.52 million litres) aggregate total oil production from the 2016 and 2018 tests. 

KL3 EWT Update:

-- 10,248 bbl of KL3 oil was produced over 30 days of sustained daily natural and pumped flow from an 83 ft perforated interval. The programme included 9 days of pressure build-ups (or "shut-ins") and downhole sampling. Production was achieved via a variety of choke sizes whilst maintaining stable bottom hole pressures. No formation water was returned to surface; however, small intermittent slugs of completion brine were recorded.

-- KL3 produced at an initial metered sustained natural flow rate of 771 barrels of oil per day ("bopd"), with a maximum recorded half hourly rate of 902 bopd. The average sustained daily rate over the full test period was 342 bopd. Prior to the final shut-in period the well was producing oil at a stable bottom hole pressure of around 800 psi.

-- Total KL3 gas production to date is 3.5 million cubic feet ("cu ft"), with daily produced amounts through the enclosed flare falling within the Environment Agency's permitted limits and parameters.

-- EWT results to date indicate that the KL3 oil pool "seen" by HH-1 is commercially viable. Consequently, following completion of the KL4 EWT, continued test production of a commingled KL3 and KL4 oil stream is planned.

-- Other than at weekends, when planning restrictions apply, over 40 road tankers (of 220 barrels crude oil capacity) have exported KL3 crude oil to BP's Hamble oil terminal, with around 500 barrels of stock tank oil remaining at the site for subsequent export. The KL3's Brent quality crude has been sold at prevailing Brent crude oil prices less a small deduction for handling.

-- KL4, which flowed at a reported stable dry oil rate of 901 barrels of oil per day over a 4-hour period in 2016, will be flow tested after completion of the current KL3 pressure build-up.

Stephen Sanderson, UKOG's Chief Executive, commented:

"The 2018 EWT's total test production of almost 14,000 barrels of oil, with over 10,000 barrels to date from the single Kimmeridge KL3 horizon, firmly establishes Horse Hill as a commercially viable oil field. These "hard fact" production numbers, together with the million dollar sales revenues, undoubtedly mark the most significant milestone in the Company's short history. The Company will spare no effort to push Horse Hill towards full time production in late 2019/early 2020.

We now look forward to the forthcoming KL4 EWT programme and the prospect of KL3 and KL4 commingled test production that will take us up to the spud of the HH-2 and HH-1z production wells in 2019."

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:

 
 UK Oil & Gas 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] 
 
 Novum Securities (Joint Broker) 
 John Bellis                          Tel: [phone] 
 
 Public Relations 
 Brian Alexander / David Bick         Tel: [phone] 
 

Glossary

 
 degAPI          a measure of the density of crude oil, as defined 
                  by the American Petroleum Institute 
 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 maximum 
                --------------------------------------------------------- 
 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 
                --------------------------------------------------------- 
 

UKOG Licence Interests

The Company has interests in the following UK licences:

 
Asset               Licence      UKOG         Licence          Operator         Area            Status 
                                Interest       Holder                           (km(2) 
                                                                                  ) 
Avington                                     UKOG (GB)        IGas Energy                   Field currently 
 (1)                PEDL070       5%          Limited             Plc           18.3            shut in 
-----------------             ----------  --------------  ------------------  --------  ---------------------- 
Broadford                                                                                    BB-1 & 1z oil 
 Bridge                                     UKOG (234)        UKOG (234)                  discovery, planning 
 (4)                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, 2 further 
                                            Horse Hill        Horse Hill                    appraisal wells 
Horse Hill                                  Developments      Developments                   scheduled for 
 (5)                PEDL137     46.735%         Ltd               Ltd           99.3            2018/19 
-----------------             ----------  --------------  ------------------  --------  ---------------------- 
                                            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       65%          UKOG              UKOG           200.0       exploration well 
-----------------             ----------  --------------  ------------------  --------  ---------------------- 
Markwells                                    UKOG (GB)         UKOG (GB) 
 Wood (2)           PEDL126      100%         Limited           Limited         11.2 
-----------------             ----------  --------------  ------------------  --------  ---------------------- 
 

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

oil discovery well, the extension of the Godley Bridge Portland gas discovery plus further exploration

prospects.

4. UKOG has a 100% interest in UKOG (234) Ltd, which has a 100% interest in PEDL234.

5. Oil discovery in 3 zones, EWT ongoing, two further wells HH-1z and HH-2 planned in early 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

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November 15, 2018 02:00 ET (07:00 GMT)