UK Oil & Gas PLC (LON:UKOG) Portland Oil Production Resumes at Horse Hill

Horse Hill 2018-19 EWT Oil Production Milestones:

Further details of extended well test (“EWT”) results to date are summarised below.

·     Over 30,200 barrels (“bbl”) aggregate Kimmeridge and Portland oil production to date.

·    Over 25,000 bbl total Kimmeridge oil production.

·     Over 5,100 bbl total Portland production to date, flow continues.

·     142 tankers of crude successfully exported primarily to Perenco’s Hamble oil terminal. The KL’s 40° API Brent quality crude containing no produced water, continues to be sold at prevailing Brent crude oil prices, less a small deduction for handling and marketing.

UK Oil & Gas PLC (London AIM: UKOG), is pleased to announce that its subsidiary company, Horse Hill Developments Ltd has re-established Portland oil production from the Horse Hill-1 (“HH-1”) well in which the Company has a 50.635% majority interest. The resumption of continuous Portland dry oil flow (i.e. oil with zero water content), at a stable daily rate of between 208 to 218 barrels per day (“bopd”), forms a key part of the schedule of works required to finalise the Portland field development plan and to the targeted establishment of permanent long-term Portland production, planned by end 2019.

Portland Test Production and Future Plans

For prudent reservoir management purposes, the average test production rate from the 114 ft vertical perforated Portland section has been maintained below the previously reported 362 bopd calculated optimised sustainable rate. HH-1 test production is planned to continue until the completion of the new HH-2 Portland horizontal well, scheduled to start in spring 2019, and for which planning and environmental permits are in place. Portland test production will then be switched over to HH-2.

As detailed in UKOG’s 23 January 2019 Strategic Review, the HH-2 Portland flow rate target of 720-1,080 bopd from the HH-2 horizontal well, which has been externally verified as a realistic and viable expectation by Xodus Group Ltd (“Xodus”), is designed to position Horse Hill as the Weald Basin’s leading oil producing field by year end. Subsequent planned horizontal wells in 2020 are designed to further boost gross Portland production and to position UKOG as one of the current top three oil producing companies in the UK onshore sector.

Kimmeridge Future Test Production Plans

In tandem with Portland operations, the Kimmeridge oil pool was shut-in to conduct a further long-term pressure build up test.  Pressure gauges, set within the Kimmeridge reservoir, will monitor the Kimmeridge reservoir whilst the Portland is flowed.

Resumption of continuous Kimmeridge test production is now planned to follow directly after the drilling of HH-2. Initially via a short flow test period from HH-1, then by further long term production testing of the new HH-1z Kimmeridge sidetrack, for which planning and environmental consent are in place. As the HH-1z Kimmeridge horizontal has similar flow rate targets as the Portland, there is significant potential to increase aggregate production towards the 3,500 bopd envisaged maximum detailed in the recent planning application.

Stephen Sanderson, UKOG’s Chief Executive, commented:

 After a 6-month shut in period, the continued good flow performance from the Portland further reinforces the viability of Xodus’ and the Company’s 720-1,080 bopd horizontal well production targets. We remain on course to commence the first two horizontals in Spring, with long term production testing of both wells planned to follow directly afterwards. The flow test results to date, combined with the prospect of further near term drilling, place Horse Hill in a strong position to deliver positive “free” cash flow to UKOG in the near and foreseeable future.”

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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