TIDMUKOG
RNS Number : 0589B
UK Oil & Gas PLC
28 January 2020
UK Oil & Gas PLC
("UKOG" or the "Company")
Horse Hill Oil Field Update, PEDL234 Loxley Update and General
Meeting Notice
Horse Hill Oil Field EWT and Field Development Update (UKOG
85.635% interest)
UK Oil & Gas PLC (London AIM: UKOG) is pleased to announce
that as a result of a successful reservoir pressure "interference"
testing campaign, undertaken to assess the degree of communication
between Horse Hill-1 ("HH-1") and the new HH-2z horizontal, the
Company now intends to accelerate the start of up to 25 years of
continuous long-term production ("Production") by 6 months.
Production is now planned to commence by bringing HH-1 into
Production during Spring 2020 and to be followed by HH-2z upon
completion of the current extended well test ("EWT").
Following recent discussions with the Oil and Gas Authority
("OGA"), a revised Horse Hill Field Development Plan ("FDP") has
been submitted which, subject to OGA's final consent, will see the
field's overall Production volumes grow in two initial phases
compared to the single phase of the original FDP. It is planned to
convert HH-2z from its current EWT status to Production in 3(rd)
quarter 2020.
Necessary additional surface facilities, including generators to
produce electric power from associated gas, will be installed prior
to Production start. Further possible infill wells, water injection
and additional gas utilisation will be addressed via subsequent FDP
addenda and submitted to the OGA for consent at the appropriate
time.
The establishment of Production at Horse Hill is a significant
and key milestone for the Company as it will enable recoverable
Reserves to be allocated to the project. This is a key first step
to help access debt-based funding, which, if secured, would help
meet the cost of current and future projects designed to grow the
Company's asset base. Production will also enable oil sales to be
booked directly as income, rather than simply netting off the
revenues against EWT costs.
Further to the Company's announcement of 23 December 2019, the
planned routine intervention to shut-off water ingress into the
HH-2z horizontal is now scheduled for February. Whilst the Company
wished to act more rapidly, no suitable slim-hole production
logging tool ("PLT"), essential to identify the exact source of
water ingress into HH-2z, was available within the UK or Europe
until this time. It is planned to resume the HH-2z EWT immediately
following a successful intervention.
In order to conduct interference testing, HH-1 Portland EWT
production was resumed on 16 January 2020, at an initial rate of
435 barrels of oil per day ("bopd") over a 6-hour period. Over the
past 24 hours, stable dry-oil EWT production has averaged 293 bopd
at a modest drawdown, demonstrating the Portland perforated
interval has remained in good condition since the last June 2019
shut-in. A short routine intervention on HH-1 is now underway,
which aims to further optimise and increase the Portland production
capability of the well.
The HH-1 Kimmeridge interval will now remain shut in for a
further long duration pressure build-up test. Plans to install a
dual completion to enable HH-1 to produce from both the Portland
and Kimmeridge oil pools are being formulated. A future Kimmeridge
appraisal/production well is also planned, once full Portland
Production and positive cash flow has been established from the
field.
Progress of the above Horse Hill activities will be reported in
due course.
UKOG holds a controlling 85.635% interest in the Horse Hill oil
field and surrounding highly prospective PEDL137 and PEDL246
licences, which are operated by UKOG's subsidiary company, Horse
Hill Developments Ltd.
PEDL234 Loxley-1 Portland Gas Field Appraisal Update (UKOG 100%
interest)
The OGA has granted a two-year extension to the current PEDL234
Retention Area work programme, which now requires Loxley-1 to be
drilled by 31 December 2021. However, as we understand that the
Loxley-1 planning application will be heard by Surrey County
Council at the end of February, if approved, the Company still
plans to commence drilling as per its original schedule in the
winter of 2020/21.
General Meeting Notice
As announced by the Company on 11 September 2019, the Company
completed the acquisition of Magellan Petroleum (UK) Investment
Holdings Limited ("Magellan") from Tellurian Investments LLC for
total consideration of GBP12 million in cash and shares in the
Company (the "Acquisition"). Magellan (now known as UKOG (137/246)
Ltd) holds a 35% direct interest in the Horse Hill oil field (the
Company's flagship asset) and the surrounding highly prospective
PEDL137 and PEDL246 licences.
The GBP12 million consideration is payable in three
tranches:
-- An GBP8 million initial consideration which was satisfied
through the payment of GBP5 million in cash and the issue of an
aggregate total of 275,988,960 new Ordinary Shares in the Company.
The number of consideration shares issued was calculated by the
payment amount divided by the 10-day average mid-price of the
Company's Ordinary Shares prior to the completion date;
-- A GBP3 million deferred payment which was satisfied through
the issue of 331,125,828 new Ordinary Shares in the Company. The
number of consideration shares issued was calculated by the payment
amount divided by the 10-day average mid-price of the Company's
Ordinary Shares prior to 31 December 2019; and
-- A GBP1 million second deferred payment ("Second Deferred
Payment") which is to be satisfied on or before 31 March 2020,
either in cash or through the issue of Ordinary Shares in the
Company (the Directors intend on satisfying the Second Deferred
Payment through the issue of Ordinary Shares in the Company).
The Company (as announced on 2 December 2019) has also raised
GBP2 million from a single institutional investor through a placing
of 235,294,117 new Ordinary Shares in the capital of the
Company.
Following the successful conclusion of those arrangements
detailed above and as the Second Deferred Payment must be satisfied
on or before 31 March 2020, it is now necessary to update the
relevant authorities of the Company in order for the Company to
satisfy its obligations under the Acquisition as existing
authorities have been largely utilised.
Therefore, the Board seeks approval to increase its authority to
allot and issue shares so that it can act swiftly to establish
Production via an ability to fund the Company's Horse Hill FDP and
to ensure that the Second Deferred Payment can be satisfied.
It has today posted a notice of General Meeting which is to be
held at 10 a.m. on 12 February 2020 at 8th Floor, The Broadgate
Tower, 20 Primrose Street, London EC2A 2EW. Copies of the notice of
General Meeting are available from the Company's website,
https://www.ukogplc.com/page.php?pID=81 and from the Company's
registered office, 8th Floor, The Broadgate Tower, 20 Primrose
Street, London EC2A 2EW.
Stephen Sanderson, UKOG's Chief Executive, commented:
"We are pleased that the necessary production logging tool
equipment is now available and secured, enabling the HH-2z water
shut-off intervention to proceed ahead in February.
During the past few weeks we have also re-established good
Portland dry oil flow from HH-1 and have determined that both HH-1
and HH-2z can be produced from the Portland at the same time,
without any detrimental effect to the reservoir's overall
performance. This key finding means we can accelerate the start of
up to 25 years of continuous Production via HH-1, whilst HH-2z
continues to be tested.
The immediate future therefore promises to be a hive of
operational activity both at HH-1 and HH-2z, with each operation
geared to deliver the best possible Production stream from the
field as early as possible."
Qualified Person's Statement
Matt Cartwright, UKOG's Commercial Director, who has over 36
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
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
Production/long-term stable oil production over the life of the well
production and or field during the 20-year Production phase
of the licence. The establishment of such production
is subject to the OGA's consent of the Field Development
Plan
------------------------------------------------------------
oil field an accumulation, pool or group of pools of oil
in the subsurface that produces oil to surface
------------------------------------------------------------
production PLTs measure flowing fluid parameters on a zone-by-zone
logging tool basis within a producing well. It provides diagnostic
(PLT) information, pinpoints where fluids such as water,
oil and gas are entering a well and gives an indication
about the efficiency of the perforations. PLTs
normally measure four parameters: flow (via a series
of spinners which rotate in the flow), density,
temperature and pressure. The flow and density
readings are used in traditional quantitative production
logging analysis, whilst temperature and pressure
data are used in more of a qualitative way to compute
in-situ flow properties and locate zones of entry
of fluids into a well
------------------------------------------------------------
Reserves Reserves are 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 (i.e. proven, probable
and possible) with the estimates and may be sub-classified
based on project maturity and/or characterised
by development and production status
------------------------------------------------------------
well test or flow test involves testing a well by flowing
/EWT hydrocarbons to surface, typically through a test
separator over a flowing period of up to 96 hours;
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 volumes. An Extended well test or EWT is a
well test with duration of over 96 hours and up
to 90 or 180 flowing days aimed at assessing longer
term production viability and the connected oil
in place seen by the well
------------------------------------------------------------
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
---------------------- ---------- -------------- -------------- -------------- ---------------------
Horse Horse Production
Hill Hill tests ongoing,
Horse Hill Developments Developments HH-2/2z drilling
(5) PEDL137 85.635% Ltd Ltd 99.3 completed
---------------------- ---------- -------------- -------------- -------------- ---------------------
Horse Horse
Hill Hill
Horse Hill Developments Developments
(5) PEDL246 85.635% Ltd Ltd 43.6 As above
---------------------- ---------- -------------- -------------- -------------- ---------------------
Preparing
planning submission
for Arreton
oil appraisal
Isle of well and Godshill
Wight (Onshore) 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. Portland and Kimmeridge Oil field with productive and
commercially viable zones, EWT ongoing, production planning consent
granted in September 2019, appraisal/development drilling campaign
completed. Long term Production start expected Spring 2020.
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
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END
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