UK Oil & Gas PLC Kimmeridge Oil Production Continues at HH-1 (1919N)

TIDMUKOG

RNS Number : 1919N

UK Oil & Gas PLC

16 January 2019

UK Oil & Gas PLC

("UKOG" or the "Company")

Kimmeridge Oil Production Continues at Horse Hill-1 ("HH-1")

UK Oil & Gas PLC (London AIM: UKOG) is pleased to announce that Horse Hill Developments Ltd ("HHDL"), a UKOG subsidiary company and the operator of the Horse Hill oil field, has informed the Company that sustained production continues to be maintained from the HH-1 extended well test ("EWT") programme, achieving a gross aggregate total of over 25,000 barrels ("bbl") to date, a significant production milestone. Of the aggregate total, over 21,000 bbl has been produced to date from the Kimmeridge Limestone ("KL") oil pool, more than doubling November's reported Kimmeridge production total. No formation water has been returned to surface during the entire EWT. Dry oil and solution gas production continues from HH-1.

Based on the continued Kimmeridge EWT success and October's announcement of Portland commercial viability, HHDL plans to continue HH-1 EWT production until the expiry of current permits in spring 2019 and then to move directly into the drilling and long term testing of two new horizontal wells, HH-2 and HH-1z, for which UKOG's internal funding, planning consent and environmental permits are in place. HH-1 is located in licence PEDL137 in which UKOG holds a 46.735% beneficial interest.

Key EWT results to date are summarised below:

Horse Hill 2018-19 EWT Oil Production Milestones:

   --     Over 25,000 bbl total aggregate Kimmeridge and Portland oil production since early July. 
   --    Over 21,000 bbl total Kimmeridge oil production since mid-October. 

-- 114 tankers of crude successfully exported to Perenco's Hamble oil terminal. The KL's 40deg API Brent quality crude continues to be sold at prevailing Brent crude oil prices, less a small deduction for handling and marketing.

KL EWT Update:

-- KL4 production from a 103 ft perforated interval commenced during late November, yielding 2,192 bbl at a maximum half-hourly metered rate of 584 barrels of oil per day ("bopd") and at an average sustained daily continuous rate of 300 bopd over the subsequent week.

-- Fluid and pressure build up data gathered from the KL4 test demonstrate that the KL3 and KL4 are one single oil pool of 358 ft vertical extent. As a result, and as previously indicated, a decision was made to commingle both KL3 and KL4 production (i.e. produce from both sets of perforations at the same time).

-- Commingled KL3 and KL4 production from an aggregate 187 ft perforated interval commenced on 4(th) December at a maximum half-hourly rate of 426 bopd and continued throughout the Christmas and New Year period, producing 8,829 bbl of 40deg API crude. The programme included several pressure build-up tests and testing of different pump configurations, settings and equipment.

-- Following the installation of a new downhole pump and an optimised surface hydraulic pump unit, stable commingled production resumed on 7(th) January at an increased initial rate of 525 bopd. The sustained daily rate over the subsequent week averaged 303 bopd. A de-waxing treatment applied on 14(th) January led to an increase in hourly rate to 351 bopd. Commingled production continues.

-- To date, the absence of produced formation water adds continuing support to the Company's geological concept that KL oil lies within a significant continuous oil deposit.

-- Planning and environmental permit applications for permanent oil production via a 7-well development were submitted to Surrey County Council and the Environment Agency on 7(th) December and 10(th) January, respectively. It is anticipated that all necessary permits should be in place by Autumn 2019, enabling a transition from EWT production into permanent production during winter 2019.

Stephen Sanderson, UKOG's Chief Executive, commented:

"The continued EWT success supports the Company's plans to establish permanent production at Horse Hill in 2019. UKOG aims to deliver near-continuous oil production throughout 2019 via a combination of long term testing of HH-1 and two new wells, followed by a smooth transition into permanent production in the winter. The potentially transformative effect of a successful programme is an exciting prospect for 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:

UKOG

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 
 oil field       an accumulation, pool or group of pools of oil 
                  in the subsurface that produces oil to surface. 
                --------------------------------------------------------- 
 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'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 discovery, 
 Bridge                                     UKOG (234)        UKOG (234)                   planning application 
 (3)                PEDL234      100%         Ltd (4)           Ltd (4)         300.0            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 
                                            Horse Hill        Horse Hill                   ongoing, two further 
Horse Hill                                  Developments      Developments                    appraisal wells 
 (5)                PEDL137     46.735%         Ltd               Ltd           99.3        scheduled for 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 appraisal 
Isle of                                                                                      well and Arreton 
 Wight (Onshore)                                                                             South exploration 
 (2, 3)             PEDL331       95%          UKOG              UKOG           200.0              well 
-----------------             ----------  --------------  ------------------  --------  ------------------------- 
Markwells                                    UKOG (GB)         UKOG (GB) 
 Wood               PEDL126      100%         Limited           Limited         11.2 
-----------------             ----------  --------------  ------------------  --------  ------------------------- 
 

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

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January 16, 2019 02:00 ET (07:00 GMT)