UK Oil & Gas provides UK onshore operational update

UK Oil & Gas Investments PLC (London AIM: UKOG) is pleased to announce that it has recovered measurable volumes of light oil and solution hydrocarbon gas to surface from the Kimmeridge reservoir section during well clean-up operations, at its 100% owned Broadford Bridge-1z ("BB-1z") exploration well, located in licence PEDL234.  The well has also free flowed for short periods during the well clean-up sequence in which spent completion fluids mixed with hydrocarbons were returned to surface. Well clean-up operations, utilising a high capacity linear rod pump, continue. Further developments will be reported in due course

To ensure that the flow testing of Kimmeridge reservoir zones is fully optimised, the Company will proceed ahead to workover the well and implement a revised testing programme.  The well clean-up operation will continue, then the current multi-zone completion assembly will be retrieved, the well worked over and flow tested sequentially over multiple, individual reservoir zones. Additional perforated zones will be added to the existing 1064 ft aggregate perforated section.

This operationally more flexible test operation will utilise a similar methodology to that successfully undertaken at the  Horse Hill oil discovery, albeit with a much-increased initial lifting capability. The rig-less test will involve both nitrogen lifting and pumping as permitted under BB-1z's current regulatory consents.

The decision to workover the well follows receipt of two independent cement-bond analyses by Premier Oilfield Laboratories in Houston, USA and Xodus in the UK. These analyses, together with the Company's own internal evaluation, demonstrate that the quality of the cement-bond over some of the reservoir zones within the current BB-1z well is less than optimal. The findings conclude that, due to the cement-bond condition over segments of the reservoir section, the current completion programme has not effectively connected the wellbore to much of the best open natural fractures. Therefore, the testing to date has not properly evaluated the full flow potential of the overall Kimmeridge reservoir sequence.

Rectifying poor cement bonding in a wellbore is standard oilfield practice and is carried out by squeezing further fresh cement slurry through new or existing perforations in the well's heavy-gauge steel casing. Consequently, following the removal of the current BB-1z well completion assembly, the Company plans to carry out a short sequence of cement-squeezes through the 7-inch casing to rectify sections of the reservoir zone's cement-bond.

Ongoing analysis of electric logs has also revealed further Kimmeridge reservoir zones of interest and these will be perforated and included in the new forward testing programme.

The cement-squeeze and new flow test programme is planned to commence upon the completion of well clean-up operations and delivery of the necessary equipment. The commencement of the programme will be announced in due course.

Stephen Sanderson, UKOG's Executive Chairman, commented:
"The recovery of free, mobile light oil and solution gas to surface is significant and encouraging news and testament to the Kimmeridge Limestone reservoir's ability to deliver hydrocarbons even from a less than optimal completion.  The periods of good natural flow and identification of additional prospective reservoir zones to flow test add further positive outcomes.

Although the forthcoming workover presents additional unplanned work, the reservoir zone's cement-bond integrity is readily rectifiable by the planned short cement-squeeze phase, a common-place and routine oilfield practice. The well will then be restored to an optimal condition for further testing.

I am confident that the revised forward testing plan will be able to deliver the results that will help demonstrate BB-1z's near term commercial viability."

UKOG at a glance

UK Oil & Gas Investments plc (“UKOG”) is specifically focused on investments in the UK onshore oil and gas sector, utilising conventional extraction technologies.

UKOG are the company behind the exploration well at Broadford Bridge in West Sussex and Horse Hill, dubbed the Gatwick Gusher.

The company are listed and trade on London’s Alternative Investment Market (AIM) and NEX Exchange (formerly the ISDX Growth Market) and have a portfolio of direct and indirect investments in 10 UK onshore exploration, appraisal, development and production assets.

These assets cover 928 sq km in the Weald and Purbeck-Wight basins of Southern England. UKOG are generating investment cash from their interests in producing oil fields in the region: Horndean and Avington, as well as developing their flagship Broadford Bridge and Horse Hill projects.

UKOG is also working to advance their Markwells Wood, Baxters Copse, Holmwood and Isle of Wight licences.

By making use of the world’s latest oil and gas technologies, UKOG are endeavouring to turn their discoveries into commercially viable solutions for the benefit of the UK.

UK OPERATIONS

UKOG’s assets are focussed in the Weald Basin in southern England where oil and gas drilling has been taking place for well over 100 years.

Horse Hill
UKOG has an indirect interest of 31.2% in two Horse Hill area licences: PEDL137 and PEDL246. The operator of the licences is Horse Hill Developments Limited (HHDL) in which UKOG has a 42% shareholding.

Horse Hill-1 (HH-1) was drilled by HHDL in 2014. The well discovered oil in the Portland Sandstone, as well as in deeper formations including the Kimmeridge Clay, Oxford Clay and Liassic Shale. The well has penetrated and flow tested a significant new oil play in the Kimmeridge Limestone section, together with a potential shale oil play in the Kimmeridge Clay, Oxford Clay and Lias shales.

The Company’s focus for future activities in the licences will be to carry out further extended well tests in the Kimmeridge Limestones and appraise the Portland oil discovery.

HH-1 is located within PEDL137, on the northern side of the Weald Basin near Gatwick Airport. HHDL is a special purpose company that owns a 65% participating interest and operatorship of PEDL137 and the adjacent PEDL246.

Portland Discovery
The HH-1 Portland Sandstone discovery lies within an approximately 100-ft gross thick conventional Jurassic Upper Portland sandstone reservoir, within a 6km by 3km Late Cimmerian age tilted fault block structure and trap, as defined by 2D seismic. The crest of the Upper Portland oil discovery lies at approximately 1760ft true vertical depth subsea and most likely extends over a mapped maximum areal closure of approximately 2000 acres. The Upper Portland reservoir is productive at the nearby Brockham field, some 9km NNW, in which UKOG has an indirect interest of 3.6%, by virtue of UKOG’s 6% shareholding in Angus Energy.

A CPR conducted by Xodus in June 2015 indicates a Best estimate or P50 stock tank oil initially in place (STOIIP) of 21 million barrels (MMbbl).

Flow Testing: In February and March 2016, HHDL carried out flow testing of the Portland and Kimmeridge limestone intervals of the HH-1 discovery well.

On 21 March 2016, UKOG reported that the final total aggregate stable dry oil flow rate from the two Kimmeridge Limestones plus the overlying Portland Sandstone was 1688 bopd.

Horndean
The Horndean oil field, located in Hampshire, was discovered in 1983 and has produced 2.4 MMbbl of oil in stable production since 1987. The operator is IGas Energy. UKOG acquired its 10% interest from Northern Petroleum in 2014. As with UKOG’s neighbouring Markwells Wood discovery, its reservoir is the conventional Jurassic Great Oolite limestone.

Seven wells and sidetracks have been drilled in total including the initial discovery well. The light oil production (39 degrees API) is from four wells, with a fifth well used for disposal of produced water.

Horndean production peaked in 1993 at 670 bbl/d. Currently, production is very stable at a rate of around 150 bbl/d (15 bbl/d net to UKOG).

UKOG believes there is upside potential from further infill drilling via horizontal sidetrack wells at the Horndean field, subject to the appropriate permitting and consents. Northern’s 2009 CPR estimated Horndean STOIIP as 56.1 MMbbl (P50).

Avington
The Avington oil field is located in Hampshire, close to the Stockbridge oil field. It was discovered in 1987 and commenced production in 2007. The operator is IGas Energy. UKOG acquired its 5% interest from Northern Petroleum in 2014. It is a conventional field producing from the Jurassic Great Oolite limestone reservoir.

A total of five wells and sidetracks have been drilled. The light oil production (38 degrees API) is from two wells, with produced water transported to Stockbridge for treatment and disposal. Oil is exported by road tanker to Stockbridge.

Avington production peaked in 2007 at over 600 bbl/d. Current production is around 60 bbl/d (3 bbl/d net to UKOG).

Markwells Wood
The Markwells Wood-1 discovery well was drilled in 2010. It is operated by UKOG’s fully-owned subsidiary UKOG (GB) Limited. The discovery is a conventional Jurassic Great Oolite limestone reservoir, the same as in the Horndean producing oil field (UKOG 10%), which is located 3 km to the west.

The well was tested over a 6-month period in 2011-12, producing 3,931 bbl of oil.

Xodus completed a Competent Person’s Report for Markwells Wood, estimating Best Case (P50) STOIIP of 45.6 MMbbl and 2C Contingent Resources of 1.25 MMbbl. These Contingent Resources are based on a 5-well, multi-phase potential development.

Baxters Copse
The Baxters Copse oil discovery is located in Hampshire, adjacent to the Singleton oil field. It was discovered in 1983 and is again a conventional Jurassic Great Oolite limestone reservoir. Again, IGas is the operator and UKOG acquired its 50% interest from Northern Petroleum.

Isle of Wight
UKOG is the operator and holds a 100% interest in offshore licence P1916, containing the undrilled M Prospect, through its fully-owned subsidiary, UKOG Solent Limited.

UKOG also has been offered by the Oil and Gas Authority (“OGA”) the UK onshore 14th Licensing Round (14th Round) for 200 km2 of adjacent onshore Isle of Wight acreage. The Licence contains the onshore Arreton undeveloped oil discovery.

Both P1916 and the onshore acreage contain other leads and prospects. In addition, UKOG believes there is a “missed oil pay opportunity” in the onshore acreage: a previously drilled “unrecognised” conventional oil discovery that potentially presents an opportunity for near term development and production.

Holmwood
UKOG holds a 30% interest in PEDL143, located immediately to the west of the Horse Hill licence PEDL137. PEDL143 is operated by Europa Oil & Gas (Holdings) plc and contains the undrilled Holmwood prospect. PEDL143 lies immediately to the west of UKOG’s PEDL137 Horse Hill licence.

Gross mean unrisked prospective resources of 5.6 MMbbl of oil were estimated in a CPR published by Europa in June 2012. If successful, this would make Holmwood the UK’s fifth largest onshore field. Combined with a one in three chance of success, Holmwood is considered by Europa as “one of the best undrilled conventional prospects in onshore UK”.

In addition, Holmwood-1 will provide a further valuable “proof of concept” step in UKOG’s Kimmeridge tight oil play.

Broadford Bridge
UKOG holds a 100% interest in licence PEDL 234, Broadford Bridge, located in the Weald Basin.

On the 7th July 2017 the Environment Agency granted the necessary permits to allow UKOG to flow test the Broadford Bridge-1 well.

The Licence is situated to the south west of UKOG’s main Kimmeridge oil interests in Horse Hill (PEDL137, PEDL246) and Holmwood (PEDL143) and straddles the centre of the Weald Basin.

Previous analyses by Nutech and the Company, of wells and seismic within and immediately surrounding the Licence, strongly suggest that the Licence presents look-alike Kimmeridge Limestone oil potential to that seen at Horse Hill. The BB-1 structure is very similar in UKOG’s view to both the HH-1 oil discovery and the nearby Balcombe-1 oil discovery, following the same overall structural trends.

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