UK Oil & Gas Inv. Plc (AIM:UKOG) £10M Financing and BB-1z Optimised Flow Testing

UK Oil & Gas Investments PLC (London AIM: UKOG) is pleased to announce that it has today entered into a £10 million loan agreement (“Loan”) with Cuart Investments PCC Ltd and YA II PN Ltd (“Investors”), an investment consortium arranged by Riverfort Global Capital Ltd.

Highlights:

· Further £10 million cash funding secured, giving a total of £16.5 MM raised to-date in 2017

· Company now fully funded to deliver planned drilling and testing programme through 2018

· Optimised sequential flow testing of up to 9 zones underway at Broadford Bridge-1z (“BB-1z”)

· Further gas flared from two short tests in Kimmeridge Limestone 1 (“KL1”), KL2 limestone and primary objective limestone horizons KL3, KL4 and KL5 to be tested shortly.

Financing:

A first tranche of £7.5 million has been drawn down by the Company, with a second tranche of £2.5 million due to be drawn down on 31 December 2017. The first and second tranches are repayable on 13 November 2019 and 31 December 2019, respectively.

The Loan attracts 0% interest and may, at the sole discretion of the Investors, be converted into new ordinary shares in the Company. The conversion price is the lower of either a share price of 8 pence, or 90% of the Company’s lowest daily volume weighted average price (“VWAP”) during the five days prior to the conversion date. The Loan is convertible in tranches of not less than £250,000, with a limit of £3 million per quarter, unless otherwise agreed by the Company.

The Loan includes a provision that, for as long as any portion of the Loan is outstanding, neither the Investors nor any of their affiliates shall hold any net short position with respect to the equity of UKOG.

UKOG can repay the principal amount of the Loan at any time for cash, provided that the 5-day VWAP of the Company’s equity is less than 8 pence and a prepayment fee equal to 10 per cent of the principal amount of the Loan then outstanding is paid by the Company to the Investors.

Use of Funds:

The Loan, as a source of general working capital, will enable the company to carry out its stated forward drilling and testing programme over the coming 12 months. This programme includes the completion of the BB-1z flow tests, the forthcoming production testing and appraisal drilling programme at Horse Hill and the drilling and testing of the Holmwood exploration prospect, a Horse Hill-1 and BB-1 geological look-alike.

BB-1z Operational Update:

Following the successful removal of the original well completion assembly, optimised sequential flow testing has commenced at the Company’s 100% owned BB-1 and 1z exploration discovery, located in licence PEDL234. The new testing programme, formulated in conjunction with the Company’s well-test consultants in Houston, Texas and in the UK, encompasses up to nine individual test zones throughout the Kimmeridge Limestone KL1-KL5 reservoir section, each of around 50-100 ft vertical extent. It should be noted with Horse Hill only testing KL3 and KL4, BB-1z will be the first Weald Basin well planned to test discrete KL1, KL2, and KL5 reservoir zones. As previously announced, the first phase of optimised testing utilises much of the well’s existing 1047 feet of perforations.

Two short initial tests over secondary shale-dominated fractured reservoir objectives within the KL1 were performed. The interbedded shale and limestone stringers returned gas to the flare. In the second test, completion fluids were returned to the well at an initial natural flow rate of over 370 barrels per day, accompanied by a wet gas blow. Although these two KL1 zones are hydrocarbon bearing, the Company concludes that sustained commercial flow rates from the shale dominated KL1 could likely only be obtained via reservoir stimulation beyond the scope of its existing regulatory permissions.

Testing will now move directly upwards into the overlying KL2 limestone, and then to the primary KL3, KL4 and KL5 limestone-dominated reservoir objectives, where hydrocarbons were recovered to surface from recent BB-1z testing and BB-1 coring operations.

Flow testing is expected to continue until the end of 2017 to establish whether the extensive connected natural fracturing seen in the oil-bearing KL2-KL5 primary objectives can deliver flow at commercial rates and volumes.

About BB-1:

As previously reported, BB-1 was purposely drilled in a location where no conventional hydrocarbon trapping mechanism within the Kimmeridge reservoir section is evident. Therefore, in the Company’s opinion, the presence of flowing, light Kimmeridge oil and associated solution gas at BB-1z provides proof that the Kimmeridge at Broadford Bridge contains a significant continuous oil deposit of around 1400 ft gross vertical thickness.

The near identical Kimmeridge reservoir parameters and geology seen at BB-1 and 1z and the Horse Hill-1 Kimmeridge oil discovery, in which the Company holds a 32.435% interest, some 27 km to the northeast, demonstrates that the Kimmeridge oil accumulation is also laterally extensive across the Central Weald Basin and, consequently, a nationally significant oil resource.

UKOG, as the largest licence holder in the Kimmeridge oil accumulation’s prospective area is well positioned to exploit this extensive oil resource.

Stephen Sanderson, UKOG’s Executive Chairman, commented:

“This £10 MM funding, the largest in the Company’s short history, ensures that our stated drilling and testing programme, spanning four wells over the next 12 months, is fully funded.

The programme has key regulatory permits in place, is designed to further appraise the wider Kimmeridge continuous oil deposit plus the Horse Hill Portland oil discovery. Its overall aim is to provide stable commercial production and cash flow by early 2019. A positive programme outcome will give the company a solid base for further drilling and development of the significant untapped Kimmeridge resource-base underlying its extensive licence interests.

The flow testing at BB-1z continues to be a key element of the Company’s wider programme and we remain highly encouraged by the natural flow of further hydrocarbons to surface.”



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