UK Oil & Gas Inv PLC (AIM:UKOG) Operational and Technical Update

Operational and Technical Update

Broadford Bridge-1 & 1z Oil Discovery, Weald Basin, UK

 

Highlights

 

·      Testing of upper Kimmeridge Limestone 3 (“KL3”), KL4 and KL5 primary targets to recommence after scheduled Christmas/New Year shutdown.

·      Basal KL3 test successfully re-run following mechanical problems. Initial natural flow of approximately 300 barrels of returned completion fluids per day (“bfpd”) decreasing to a continuous rate of 30-50 bfpd during well clean-up. Gas blow and live oil traces recovered to surface. Low reservoir productivity indicates zone likely not economically viable.

·      Further KL4 and KL5 naturally fractured reservoir and potential oil pay identified from electric logs and core. Additional 80 ft of perforations in KL4 and KL5 to be shot prior to January testing resumption.  

·      38.5° API gravity oil extracted from KL5 core demonstrates that oil occupies around 6% of the total KL5 rock volume. Oil recovered to surface typed to same Upper Jurassic oil family as produced at Horse Hill

·      Core analyses demonstrate mid to basal Kimmeridge lies within early oil generative window, confirms BB-1 lies within the Kimmeridge continuous oil play. Prime Kimmeridge “sweet spot” likely covers most of PEDL234 north of BB-1

·      BB-1 core demonstrates world class oil-source potential, several Kimmeridge zones exceed 30% Total Organic Carbon (“TOC”) by weight, three times higher than equivalent section seen in Horse Hill

·      Acquisition of two further drilling sites under negotiation within PEDL234 Kimmeridge “sweet spot”, first new planning application in progress, expected submission in mid-spring 2018

 

UK Oil & Gas Investments PLC (London AIM: UKOG) announces that following the completion of test number 4 within the basal section of KL3, operations will now shutdown over the Christmas and New Year period at its 100% owned Broadford Bridge-1z (“BB-1z”) exploration discovery, located in licence PEDL234. Testing of the remaining primary uppermost KL3, the KL4 and KL5 will recommence early in the New Year. The site will remain manned and secure over the shutdown period.

 

Operational Update

 

Test 4, over the basal 50 ft section of KL3, was successfully completed following several mechanical and test completion problems. Following nitrogen lifting, the well flowed naturally at an instantaneous rate of approximately 300 bfpd declining to a steady inflow of between 30-50 bfpd over several days. Fluids returned over the duration of KL4 testing consisted primarily of completion fluids together with traces of live oil, accompanied by a gas blow during pressure build up periods. In the Company’s view this horizon, whilst containing moveable hydrocarbons, appears to be unproductive due to low reservoir permeability.

 

Test 5, within the upper 100 ft of KL3, will recommence in the New Year. Nutech’s electric log analyses indicate this zone contains around 54 ft of oil bearing limestone, similar in thickness to the Horse Hill oil discovery, with multiple open natural fractures seen on image logs and BB-1 core.

 

Dependent on remaining KL3 to KL5 results, a further naturally fractured 40 ft limestone within the deeper KL-1 may also be perforated and flow tested.

 

Petrophysical Analysis Update

 

Electric log analyses conducted to date by Premier Oilfield Laboratories and Nutech have now been integrated with available core and rock cuttings data. These data calculate a further 60 feet of naturally fractured oil-saturated limestone reservoir exist within KL4 plus an additional 20 feet in KL5. The KL5 zone corresponds to where oil was recovered to surface during BB-1 coring.

 

Consequently, a further 80 feet of Kimmeridge Limestone reservoir section will now be perforated prior to testing resumption.

 

Geochemical Analysis Update

 

Analyses undertaken by Geomark Research in Houston, Texas, using both oil produced during testing operations of the deeper KL0 to KL2 section and oil extracted from cores, demonstrate that the 38.5° API gravity low sulphur oil was generated from a limestone-rich Upper Jurassic shale source-rock, probably the Kimmeridge Clay Formation.

 

Flowing oil samples and oil extracted from BB-1 core also demonstrate near identical geochemical properties to the Kimmeridge and Portland oil produced at Horse Hill-1 (“HH-1”). It is therefore interpreted that the BB-1 and HH-1 oils are from the same family of oils representing a common Upper Jurassic stratigraphic origin.

 

The quantity of live oil extracted from the KL5 core indicates that oil within the KL5 limestone matrix occupies over 6% of the total KL5 rock volume. Calculated oil saturations from electric logs within this zone exceed 50%. The equivalent KL5 reservoir zone in BB-1z will form the basis of the forthcoming KL5 flow test.

 

Thermal maturity analysis of extracted organic material from the BB-1 core  demonstrates that the mid Kimmeridge section of the well lies at or within the early oil generative window (i.e. at or around a vitrinite reflectance equivalent, or Ro, of around 0.6). This finding confirms that Broadford Bridge lies within the Kimmeridge continuous oil play.

 

More significantly, the thermal maturity findings, representing how far within the oil generative window BB-1 Kimmeridge sediments have been buried, demonstrate that most of the 300 km² PEDL234 licence to the north of BB-1, where the Kimmeridge has been more deeply buried, falls within the prime Kimmeridge exploration “sweet spot” where significant volumes of hydrocarbons have likely been generated and retained within the Kimmeridge.

 

Core analysis also further confirms that the Kimmeridge shales in BB-1 contains world class oil-source potential, as several Kimmeridge zones exceed 30% Total Organic Carbon (“TOCs”) by weight, three times higher than the equivalent section seen in Horse Hill. The richest source potential lies within shales between KL3 and KL4, as is the case at Horse Hill.

 

Future Drilling Plans

 

Given the significant insights gained from BB-1 into the thermal maturity of the Kimmeridge source rocks, the Company has accelerated its plans for further drilling in the central and northern prime sector of PEDL234.

 

Planning Consultants have been engaged and are actively pursuing the acquisition of two further drilling sites in the central sector of the licence. An application for planning consent on the first of these planned locations has commenced and is expected to be submitted to the local council in mid-spring 2018, with drilling planned for spring 2019.

 

Further work at the BB-1 site is under consideration to target known intensely naturally fractured oil-bearing Kimmeridge limestone zones. A final decision awaits results and analysis of the remaining KL3, KL4 and KL5 tests.

 

Regulatory Update

 

While current plans envisage testing to be completed by the end of January 2018, the Oil and Gas Authority have granted their regulatory consent for BB-1z flow testing to extend until the end of February 2018.

 

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 moveable, 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 up to 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 potentially significant national oil resource.

 

UKOG, as the largest licence holder in the Kimmeridge oil accumulation’s “sweet-spot” is well positioned to exploit this extensive oil resource.  

 

Corporate Update

The Company would like to update the market as to its announcement made on 24th November 2017 ‘Loan Conversion’. This announcement stated an incorrect number of shares issued as 13,398,137. The correct number of shares issued was 13,308,137 and these have been allotted and admitted to trading. The Company also advises that, further to the announcement of 18th December 2017, 16,753,225 ordinary shares were allotted at Companies House on 13th December 2017 and as previously notified were issued on 18th November 2017. These updates do not alter the total number of ordinary shares in issue which is correct as per the latest announcement of 3,630,706,545 shares.

 

Stephen Sanderson, UKOG’s Executive Chairman, commented:

 

 “Whilst we await further test results of key importance to the commercial success of this single well, we ought, perhaps, to take the opportunity to reflect upon the wider Kimmeridge exploration picture and the positive implications of BB-1 results to date.

 

The Kimmeridge play is still in its infancy, BB-1 being one of only three wells targeted at the Kimmeridge in the history of the Weald Basin. BB-1 is therefore of paramount importance to help better understand the Weald-wide Kimmeridge play, in which the Company holds the leading acreage position.

 

Although we still have many more questions than answers, the incoming stream of new analyses from our significant investment in BB-1 data acquisition has moved the Company’s understanding of the play to new levels. Armed with this new-found knowledge, we have committed significant funds towards accelerating acquisition of two further drilling sites, located in what we now understand to be the prime “sweet spot” of the Kimmeridge oil deposit within PEDL234. These data have also opened our eyes to the possible additional ways to extract oil at commercial rates from BB-1 and future wells elsewhere in the play.

 

We therefore look forward to the resumption of BB-1z operations, the testing of those Kimmeridge reservoirs proven productive at Horse Hill, and the first ever test of the KL5, already proven to contain oil by BB-1 core. “

 

Qualified Person’s Statement:

 

Stephen Sanderson, UKOG’s Executive Chairman, who has over 35 years of relevant experience in the oil industry, has approved the information contained in this announcement. Mr Sanderson is a Fellow of the Geological Society of London and is an active member of the American Association of Petroleum Geologists.


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