TIDMUKOG

RNS Number : 9998L

UK Oil & Gas PLC

11 September 2019

UK Oil & Gas PLC

("UKOG" or the "Company")

Horse Hill Oil Field Granted Long-term Production Consent by Surrey County Council

UK Oil & Gas PLC (London AIM: UKOG) is pleased to announce that, earlier today, Surrey County Council's ("SCC") Planning and Regulatory Committee granted full planning consent for long-term oil production at the Company's flagship Horse Hill oil field near Gatwick Airport. Following yesterday's acquisition of Tellurian's 35% stake in Horse Hill, the Company now holds a significant and controlling 85.635% interest in the field and the highly prospective surrounding PEDL137 and PEDL246 licences. The field is operated by the Company's subsidiary, Horse Hill Developments Ltd (HHDL), in which it holds a 77.9% controlling interest.

Planning Consent Summary

The planning consent gives permission to produce oil over a period of 25 years at up to 3,500 barrels of oil per day from a total of six wells within the Portland and Kimmeridge oil pools, including the existing Horse Hill-1 ("HH-1") and the forthcoming HH-2/2z horizontal well. Consent also includes permission to drill one water reinjection well to help maximise oil recovery. All existing and future wells will be drilled from within the existing 20 x 15 metre concrete pad. No further drilling sites beyond Horse Hill are required.

What Does the Consent Mean to UKOG and Horse Hill?

Critically, this consent means that the field's immediate oil production from HH-1 and HH-2/2z will no longer be limited to existing extended well test planning consents. The ability to produce over the field's economic lifespan also enables the transfer of current and future assigned recoverable resource volumes into the category of Reserves, which, by definition, conveys with more certainty that a known volume of petroleum can be produced commercially over a given time.

The commercial certainty associated with the allocation of Reserves at Horse Hill is therefore a critical step necessary to help facilitate the potential use of debt-based funding for field development and other Company working capital requirements. It is planned to commission a new Competent Persons Report to establish the Company's net Reserves following completion of HH-2z production testing in the Autumn.

The permission also enables the Company to finalise its Field Development Plan and submit it to the Oil and Gas Authority ("OGA") for the necessary regulatory and technical consent. Meetings in this respect have been scheduled with OGA in the coming weeks.

The field's environmental permit application, covering the four new wells and production activities, was submitted to the Environment Agency ("EA") in January and is under review. Drilling of the four new production and reinjection wells will require the usual drilling regulatory consents from the HSE and OGA.

Forward Operational Plans at Horse Hill

The first new horizontal production well, Horse Hill-2/2z ("HH-2/2z"), designed to produce at rates potentially of up to 2-3 times the rate of the vertical HH-1 well, is scheduled to start drilling before the end of this month, with a further new Portland production well and Portland water reinjection well planned to follow upon completion of production testing in early 2020. During HH-2/2z drilling, the Kimmeridge oil pool will continue to be production tested to provide further key technical data and associated sales revenues to partially offset drilling and testing costs. Planning approval also exists to sidetrack the HH-1 well horizontally into either the Kimmeridge or Portland oil pools.

Stephen Sanderson, UKOG's Chief Executive, commented:

"This landmark milestone, perhaps the most significant event at Horse Hill since the HH-1 oil discovery, paves the way for the Company to realise the full value of future long-term production from the Horse Hill oil field, our flagship asset. It is also a key enabler that will help us achieve our goal of long-term oil production and related cash flow by year end.

The decision's timing fits hand in glove with yesterday's completion of the acquisition of Tellurian's 35% interest in Horse Hill. It fully justifies the price paid to boost our share of oil sales revenues, net Reserves and recoverable resources by over 69%.

Now that we are firmly in control of the forward Horse Hill drilling programme and development schedule, the Company is well placed to deliver its stated goals. We look forward to maintaining the considerable forward momentum of the past weeks during the forthcoming simultaneous drilling and production testing campaign."

Qualified Person's Statement

Matt Cartwright, UKOG's Commercial Director, who has over 35 years of relevant experience in the global 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 900582

WH Ireland Ltd (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 Tel: 01483 900582

Glossary

 
 flow test            or well or production 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 and to assess the volume 
                       of oil in the ground accessed by the well 
 horizontal           a well that during drilling is steered so as to 
  well                 follow and remain within a particular geological 
                       stratum or reservoir unit having a trajectory that 
                       runs approximately parallel to the top and or base 
                       of the target horizon 
                     --------------------------------------------------------- 
 oil field            an accumulation, pool or group of pools of oil 
                       in the subsurface that produces oil to surface 
                     --------------------------------------------------------- 
 Probable Reserves    or 2P, denotes the best estimate scenario of Reserves 
                     --------------------------------------------------------- 
 Proven Reserves      or 1P, denotes the low estimate scenario of Reserves 
                     --------------------------------------------------------- 
 recovery factor      the recoverable volume of oil expressed as a percentage 
                       of the oil in place or in the ground before extraction 
                     --------------------------------------------------------- 
 recoverable          those quantities of petroleum (i.e. oil or gas) 
  resources/volumes    estimated, as of a given date, to be potentially 
                       recoverable to surface 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 (i.e. Proven, Probable and Possible) 
                       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 (km(2) )          Status 
                                     Interest       Holder 
                                                    UKOG            IGas                          Field currently 
Avington                                             (GB)           Energy                           temporarily 
 (1)                     PEDL070       5%          Limited           Plc            18.3               shut in 
----------------------             ----------  --------------  --------------  --------------  --------------------- 
                                                                                                    BB-1/1z oil 
                                                                                                     discovery, 
Broadford                                                                                           Loxley-1 gas 
 Bridge/Loxley/Godley                                                                                 appraisal 
 Bridge                                             UKOG            UKOG                            well planning 
 (2, 3,                                             (234)           (234)                            application 
 8)                      PEDL234      100%         Ltd (4)         Ltd (4)          300.0             submitted 
----------------------             ----------  --------------  --------------  --------------  --------------------- 
                                                                                                     Finalising 
                                                                                                 new site selection 
                                                                                                  to drill Portland 
                                                                    UKOG                           and Kimmeridge 
A24 (3)                  PEDL143      67.5%         UKOG             (7)            91.8              prospects 
----------------------             ----------  --------------  --------------  --------------  --------------------- 
                                                    UKOG            IGas 
Horndean                                             (GB)           Energy                        Field in stable 
 (1)                      PL211        10%         Limited           Plc            27.3             production 
----------------------             ----------  --------------  --------------  --------------  --------------------- 
                                                                                                     Production 
                                                                                                   tests ongoing, 
                                                    Horse           Horse                            two further 
                                                     Hill            Hill                             appraisal 
Horse Hill                                       Developments    Developments                      wells scheduled 
 (5)                     PEDL137     85.635%         Ltd             Ltd            99.3              for 2019 
----------------------             ----------  --------------  --------------  --------------  --------------------- 
                                                    Horse           Horse 
                                                     Hill            Hill 
Horse Hill                                       Developments    Developments 
 (5)                     PEDL246     85.635%         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 
----------------------             ----------  --------------  --------------  --------------  --------------------- 
                                                    UKOG            UKOG 
Markwells                                            (GB)            (GB) 
 Wood                    PEDL126      100%         Limited         Limited          11.2              MW-1 P&A 
----------------------             ----------  --------------  --------------  --------------  --------------------- 
 

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, further drilling campaign scheduled and development underway.

6. UKOG has a direct 77.9% interest in HHDL, which has a 65% interest in PEDL137 and PEDL246.

7. OGA consent received for the transfer of operatorship from Europa to UKOG

8. Gas discovery pending appraisal drilling and development with underlying Kimmeridge potential

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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September 11, 2019 07:36 ET (11:36 GMT)

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