UK Oil & Gas PLC (LON:UKOG) Kimmeridge Oil Production Continues at HH-1

UK Oil & Gas PLC (London AIM: UKOG) is pleased to announce that Horse Hill Developments Ltd (“HHDL”), a UKOG subsidiary company and the operator of the Horse Hill oil field, has informed the Company that sustained production continues to be maintained from the HH-1 extended well test (“EWT”) programme.

Interview first published 19 December 2018

Achieving a gross aggregate total of over 25,000 barrels (“bbl”) to date, a significant production milestone. Of the aggregate total, over 21,000 bbl has been produced to date from the Kimmeridge Limestone (“KL”) oil pool, more than doubling November’s reported Kimmeridge production total. No formation water has been returned to surface during the entire EWT. Dry oil and solution gas production continues from HH-1.

Based on the continued Kimmeridge EWT success and October’s announcement of Portland commercial viability, HHDL plans to continue HH-1 EWT production until the expiry of current permits in spring 2019 and then to move directly into the drilling and long term testing of two new horizontal wells, HH-2 and HH-1z, for which UKOG’s internal funding, planning consent and environmental permits are in place. HH-1 is located in licence PEDL137 in which UKOG holds a 46.735% beneficial interest.

Key EWT results to date are summarised below:

Horse Hill 2018-19 EWT Oil Production Milestones:

· Over 25,000 bbl total aggregate Kimmeridge and Portland oil production since early July.

· Over 21,000 bbl total Kimmeridge oil production since mid-October.

· 114 tankers of crude successfully exported to Perenco’s Hamble oil terminal. The KL’s 40° API Brent quality crude continues to be sold at prevailing Brent crude oil prices, less a small deduction for handling and marketing.

KL EWT Update:

· KL4 production from a 103 ft perforated interval commenced during late November, yielding 2,192 bbl at a maximum half-hourly metered rate of 584 barrels of oil per day (“bopd”) and at an average sustained daily continuous rate of 300 bopd over the subsequent week.

· Fluid and pressure build up data gathered from the KL4 test demonstrate that the KL3 and KL4 are one single oil pool of 358 ft vertical extent. As a result, and as previously indicated, a decision was made to commingle both KL3 and KL4 production (i.e. produce from both sets of perforations at the same time).

· Commingled KL3 and KL4 production from an aggregate 187 ft perforated interval commenced on 4th December at a maximum half-hourly rate of 426 bopd and continued throughout the Christmas and New Year period, producing 8,829 bbl of 40° API crude. The programme included several pressure build-up tests and testing of different pump configurations, settings and equipment.

· Following the installation of a new downhole pump and an optimised surface hydraulic pump unit, stable commingled production resumed on 7th January at an increased initial rate of 525 bopd. The sustained daily rate over the subsequent week averaged 303 bopd. A de-waxing treatment applied on 14th January led to an increase in hourly rate to 351 bopd. Commingled production continues.

· To date, the absence of produced formation water adds continuing support to the Company’s geological concept that KL oil lies within a significant continuous oil deposit.

· Planning and environmental permit applications for permanent oil production via a 7-well development were submitted to Surrey County Council and the Environment Agency on 7th December and 10th January, respectively. It is anticipated that all necessary permits should be in place by Autumn 2019, enabling a transition from EWT production into permanent production during winter 2019.

Stephen Sanderson, UKOG’s Chief Executive, commented:

“The continued EWT success supports the Company’s plans to establish permanent production at Horse Hill in 2019. UKOG aims to deliver near-continuous oil production throughout 2019 via a combination of long term testing of HH-1 and two new wells, followed by a smooth transition into permanent production in the winter. The potentially transformative effect of a successful programme is an exciting prospect for 2019.”

Qualified Person’s Statement

Rob Wallace, UKOG’s principal technical advisor, who has over 40 years of relevant experience in the oil industry, has approved the information contained in this announcement. Mr Wallace is a Chartered Scientist, Chartered Geologist and Fellow of the Geological Society of London, an active member of the American Association of Petroleum Geologists, a member of the Petroleum Exploration Society of Great Britain and a member of the South African Geophysical Society.


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