UK Oil & Gas PLC (UKOG.L) Convertible Loan, Opex Update and Placing

Convertible loan fully repaid, further opex reductions and new HH-1 intervention via £4.2m placing

UK Oil & Gas PLC (London AIM: UKOG) is pleased to announce that it plans to carry out the following material actions designed to further strengthen the Company’s overall financial and oil production performance during the current low oil price environment:

1. Full repayment of the convertible loan with Riverfort Global Opportunities PCC Limited and YA II PN Ltd (“Loan Note”), making the Company debt free. The repayment eliminates the uncertainty attached to Loan Note conversion timings and pricing, something the Company feels was perceived to exert a negative influence on the Company’s share price.

2. Materially reduced Horse Hill oil field operating costs (“opex”) by a further $4 per barrel via a £1.65 million purchase of currently rented surface production equipment (“Equipment”). Overall asset level opex now reduces to approximately $13/bbl at current production rates, amongst the lowest in the UK oil sector.

3. Finalised plans for a short but material intervention in the Horse Hill-1 well (“HH-1”) designed to further boost production rates this summer.

4. Raised £4.2 million at 0.2 pence per share to provide funding for the above and other key activities. To include preparations for work at the Loxley Portland gas appraisal well site, if planning approval is granted on 29 June, and follow-up of the Arreton, Isle of Wight planning application. Placing details are provided below.

The above actions will support the Company for the next stages of its development.

Stephen Sanderson, UKOG’s Chief Executive commented:

“With the lockdown rules easing and encouraging signs of recovery in the Brent oil price, the Company has acted decisively to both strengthen its financial position, target further profitability of its flagship Horse Hill asset and start preparations for its next appraisal wells at Loxley and on the Isle of Wight.”

Loan Note Repayment

The Loan Note outstanding balance of £1.75 million will be repaid via the mechanism outlined in the Company’s announcements of 27 September 2019 and 12 February 2020 with an early redemption premium of £175,000.

Horse Hill Equipment purchase

The Company has signed a binding Heads of Terms with PW Well Test Ltd (“PW”) for a £1.65 million purchase of all existing PW Equipment used to produce oil and gas at Horse Hill. The purchase is via three equal instalments of £550,000 as follows:

– Initial instalment payable upon signature of the asset purchase agreement via equal amounts of cash and UKOG shares. Full title to the Equipment will transfer to UKOG upon this initial payment.

– Two further instalments at 6-monthly intervals, or earlier at UKOG’s discretion. Each payment either wholly in cash, or wholly in shares, or part cash/part shares, each at UKOG’s sole discretion.

– In the case of payment via shares, the number of shares issued to PW shall be determined using the 5-day volume weighted average price (“VWAP”) of UKOG ordinary shares on the day prior to the instalment payment date.

Horse Hill-1 Intervention

The HH-1 intervention is planned to further improve oil production rates by a full re-perforation of the well’s Portland section using larger and more deeply penetrating perforating guns, at twice the perforation density per foot compared to the current completion. The reperforations are designed to materially increase the ability of oil to flow into the wellbore.

The work will also reconfigure the well’s production tubing set-up and deepen the downhole pump to maximise pumping efficiency and hence maximise HH-1 production. The recent installation of the new higher capacity Unico L706X linear rod pump also forms part of this production optimisation process.

Funding Details

To fund items 1-3 above and to provide further general working capital to move the Horse Hill, Loxley Portland gas appraisal and Isle of Wight oil appraisal projects forward, UKOG has raised £4,200,000 through a placing (“Placing”) of 2,100,000,000 new ordinary shares (“Placing Shares”) in the capital of the Company. The Placing is being made at an issue price of 0.2 pence per share (“Placing Price”), representing approximately a 17% discount to the closing mid-price of the Company’s ordinary shares on 2 June.

The Company entered into a placing agreement (“Placing Agreement”) with WH Ireland pursuant to which terms WH Ireland agreed to arrange the Placing. The Company has given certain customary warranties and indemnities under the Placing Agreement in favour of WH Ireland. Completion of the Placing is subject to the satisfaction of the conditions contained in the Placing Agreement including, but not limited to, Admission.

Your attention is drawn to the detailed terms and conditions of the Placing set out in the Appendix to this Announcement (which forms part of this Announcement).

The Appendix to this Announcement contains the detailed terms and conditions of the Placing and the basis on which investors agreed to participate in the Placing. The Placing has not been underwritten by WH Ireland. Placees are deemed to have read and understood this Announcement in its entirety, including the Appendix, and to have made their offer on the terms and subject to the conditions contained herein and to have given the representations, warranties, undertakings and acknowledgements contained in the Appendix to this Announcement.

The Placing Shares will be issued, credited as fully paid, and will rank pari passu with the existing Ordinary Shares in issue in the capital of the Company, including the right to receive all dividends and other distributions (if any) declared, made or paid on or in respect of such shares after the date of their issue.

Admission and Settlement

Application will be made for the admission to trading on the AIM market (“AIM”) of London Stock Exchange plc (“LSE”) of the Placing Shares (“Admission”). Admission is expected to occur on or around 10 June 2020. Following Admission, the Company will have 10,838,995,288 Ordinary Shares in issue. There are no shares held in treasury. The total voting rights in the Company is therefore 10,838,995,288 and Shareholders may use this figure as the denominator by which they are required to notify their interest in, or change to their interest in, the Company under the Disclosure Guidance and Transparency Rules.

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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horsehill 3285991b - UK Oil & Gas PLC (UKOG.L) Convertible Loan, Opex Update and Placinghorsehill 3285991b - UK Oil & Gas PLC (UKOG.L) Convertible Loan, Opex Update and Placing
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