TIDMUKOG
RNS Number : 4111E
UK Oil & Gas PLC
18 October 2018
UK Oil & Gas PLC
("UKOG" or the "Company")
Horse Hill Portland Oil Field Declared Commercially Viable
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 ("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, following
the successful Portland Extended Well Test ("EWT") programme, it
now considers the Portland oil field to be commercially viable.
HHDL now targets the start-up of long term Portland oil
production during 2019, subject to the grant of necessary
regulatory consents. The first future horizontal production well,
HH-2, for which planning and Environment Agency consents are in
place, is planned to be drilled in early 2019. HH-1 is located in
licence PEDL137 in which UKOG holds a 46.735% beneficial interest.
Key points and further details are summarised below:
Key Points:
-- Following analysis of EWT results and economic modelling of
HHDL's and Xodus Group's ("Xodus") forecast oil production
profiles, HHDL now considers the Portland oil field to be
commercially viable. Work is now underway towards a targeted
long-term production start-up in 2019.
-- HHDL currently envisages the Portland field development plan
to consist of up to 3 production wells and up to 2 pressure support
wells.
-- A planning application for Portland and Kimmeridge field
development is nearing completion and is targeted for submission to
Surrey County Council ("SCC") before year-end.
-- Xodus' calculated future Portland oil production profiles,
based upon observed pressure and volumetric data from the EWT, show
that oil recoveries of up to 45% of connected Oil in Place could be
attained if a successful full voidage replacement pressure support
scheme is incorporated into the field's development.
-- The Portland field's first new horizontal production well,
HH-2, which has SCC planning and Environment Agency consents, is
planned to spud in early 2019 following completion of the
Kimmeridge Limestone 4 EWT.
-- As reported on 10 September, the HH-2 horizontal well has a
targeted* sustainable daily Portland production rate of 720 to
1,080 bopd, 2 to 3 times the calculated* sustainable vertical well
rate of 362 bopd derived from the EWT programme.
-- Following submission of the planning application, Xodus' 2018
Portland Competent Persons Report will be updated to include
recoverable reserves and net present values of cash flows
associated with the envisaged Portland oil field development.
Note: * There can be no absolute guarantee that forecast,
targeted or calculated rates of production will be achieved.
Stephen Sanderson, UKOG's Chief Executive, commented:
"HHDL's declaration of Portland commercial viability is a
significant milestone for the Company. It transforms Horse Hill
from solely exploration into a fully-fledged field development with
a full-scale oil production start-up targeted in 2019.
The better than expected EWT results have robustly demonstrated
that the Portland has significant daily production potential in its
own right, which could see the first planned horizontal producer
attain sustained oil rates of 720-1,080 bopd. If realised, these
rates could make the Horse Hill Portland oil field one of the UK
onshore's top producers.
We also eagerly anticipate the possibility of combined long-term
production from both the Portland and Kimmeridge, an exciting and
potentially transformational prospect for Horse Hill and the
Company."
About Xodus
Xodus is an international, globally recognised consultancy group
providing engineering and advisory services to clients in the oil
& gas, LNG, renewables and utilities industries worldwide. They
are certified as Competent Persons for the purposes of oil and gas
resource and reserve assessments. More details can be found at
www.xodusgroup.com
Qualified Person's Statement
Matt Cartwright, UKOG's Chief Operating Officer, who has over 35
years of relevant experience in the oil industry, has approved the
information contained in this announcement. Mr Cartwright is a
Chartered Engineer and member of the Society of Petroleum
Engineers.
For further information, please contact:
UK Oil & Gas PLC
Stephen Sanderson / Kiran Morzaria Tel: 01483 243450
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 243450
Glossary
depletion-drive a natural mechanism whereby the differential pressure
between the wellbore and reservoir permits dissolved
solution gas to expand and become an energy support
to create oil flow into a well. It is also known
as solution gas drive or dissolved gas drive.
connected oil a volume of OIP that is demonstrated by collected
in place pressure and flow data to be directly accessed
and drained by a well during production. Only
part (or a fraction) of the volume, known as the
recoverable volume, will normally be recovered
to surface during oil production. The percentage
of the recoverable volume compared to the total
connected OIP is known as the recovery factor.
---------------------------------------------------------
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
---------------------------------------------------------
horizontal well a well that during drilling is steered so as to
be at or close to 90 degrees from the vertical
to follow a particular geological stratum or reservoir
unit
---------------------------------------------------------
oil in place the quantity of oil or petroleum that is estimated
("OIP") to exist in naturally occurring accumulations.
---------------------------------------------------------
pressure support maintenance of reservoir pressure as close to
or voidage replacement virgin reservoir pressure as possible and above
bubble point via injection 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.
---------------------------------------------------------
recoverable those quantities of petroleum (oil in this case)
volumes or resources estimated, as of a given date, to be potentially
recoverable from known accumulations
---------------------------------------------------------
reserves those quantities of petroleum anticipated to be
commercially recoverable by application of development
projects to known accumulations from a given date
forward under defined conditions. Reserves must
further satisfy four criteria: they must be discovered,
recoverable, commercial, and remaining (as of
the evaluation date) based on the development
project(s) applied. Reserves are further categorised
in accordance with the level of certainty associated
with the estimates and may be sub-classified based
on project maturity and/or characterised by development
and production status
---------------------------------------------------------
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
----------------- ---------- -------------- ------------------ -------- ----------------------
Revised drilling
Markwells UKOG (GB) UKOG (GB) and testing planning
Wood (2) PEDL126 100% Limited Limited 11.2 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. 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
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
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contact rns@lseg.com or visit www.rns.com.
END
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