UK Oil & Gas PLC (LON:UKOG) Dry Oil Flows to Surface- Water Shut-Off Programme

Stephen Sanderson, UKOG’s Chief Executive, commented: Such water shut-off operations are routinely undertaken in production wells. However, success, particularly in horizontal wellbores and where water ingress is via open natural fractures, is by no means guaranteed.

Consequently, this is an excellent result for the Company as it has enabled HH-2z to flow dry oil to surface at encouraging initial rates. Our operations team deserves tremendous credit for this successful outcome.

UK Oil & Gas PLC (London AIM: UKOG) is pleased to announce that the intervention to shut off significant formation water ingress into its Horse Hill-2z (“HH-2z”) horizontal production well has been successful.

Following the identification of the water ingress source via production logging, a rigid setting Thermatek® plug was set over a zone of open natural fractures clustered at the deepest part or “toe” of the wellbore. Initial testing of HH-2z post-Thermatek® has demonstrated a continuous flow of dry oil to surface, confirming that the plug has eliminated underlying formation water ingress into HH-2z.

Dry oil flow rates during the initial 48-hour “clean-up” period to date are encouraging, with metered daily rates averaging 223 barrels of oil per day (“bopd”). However, as is to be expected in the early clean-up stage of such a horizontal wellbore, both oil and associated gas rates have been very variable. Half hourly rates have thus ranged from a high of 778 bopd to a low of around 10 bopd during intermittent short periods of “slugging” (i.e. the return of discrete pockets of gas and/or completion fluids).

The water ingress problem meant that HH-2z remained shut-in for almost 3 months, with spent drilling and completion fluids within the near wellbore. Consequently, it is expected that the full clean-up process is likely to take a number of weeks of aggregate flow. As part of the clean-up process, to ensure the full remaining horizontal section contributes towards aggregate oil flow, further interventions are planned to help fine-tune and optimise flow from the well.

HH-2z clean-up operations are planned to continue over the coming week, after which essential maintenance and a planned upgrade of well test and production facilities will occur. These operations, designed primarily to enable simultaneous production from HH-1 and HH-2z, will require both HH-1 and HH-2z to be shut-in for a period of up to ten days.

Full extended well test operations with simultaneous multi-well production are planned to resume directly after the shut-in.

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.

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.

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