UK Oil & Gas PLC (London AIM: UKOG) is delighted to announce that the Company’s wholly-owned subsidiary, UKOG Turkey Ltd.
Has received notice that formal government consent for the Company’s acquisition of a 50% interest in the 305 km² Basur-Resan oil appraisal and exploration licence, (“Licence”), has now been granted via official decree. Forthwith, together with the operator, Aladdin Middle East Ltd (“AME”), the Company is a named party to the Licence, officially designated as AR/AME/K/M47-b1, b2.
As per the Company’s 14 October 2020 announcement, the board views the Licence’s forthcoming 2021 appraisal drilling programme, aimed initially at proving the commerciality of the Basur-Resan oil discovery, to present a compelling and potentially transformational growth opportunity for the Company.
Highlights:
· Basur-Resan oil discovery (“Discovery”) contains an estimated mean case discovered recoverable oil volume of 37 million barrels (“mmbbl”) gross and 18.5 mmbbl UKOG net 50% interest (i.e., the average case estimated volume that could be produced to surface).
· Rapid monetisation of the Discovery’s success case is possible within a year in Turkey, plus drilling and operating costs are significantly lower than the UK.
An updated Resan presentation is available on the Company’s website: https://www.ukogplc.com/ul/UKOGTurkey140121.pdf
Stephen Sanderson UKOG’s Chief Executive commented:
“It is now evident that, in the success case, the Basur-Resan appraisal project has the potential to surpass the recoverable oil and gas volumes currently assigned by Xodus to our material UK Arreton and Loxley appraisal projects. It also has the advantage of lower drilling and operating costs and, facilitated by Turkish petroleum law, the possibility to rapidly monetise the success case within a year. For these reasons success could be transformational for the Company.
Along with further optimising Horse Hill and pursuing a Loxley planning appeal, the Company will now focus its efforts in the first half of 2021 towards the design and delivery of the Basur-3 appraisal well. We also look forward to hearing the outcome of our December Turkish new licence application, which could add further similar sized potential into our growing portfolio.”
Basur-Resan: a potentially material discovered and undeveloped oil resource
As previously reported on 23 July and 14 October 2020, the Licence contains the aerially extensive and as yet undeveloped Discovery, along with two other undrilled exploration prospects.
As at UKOG’s material Loxley discovery, the Discovery was successfully tested at its north western end via the 1964 Basur-1 discovery well, which flowed 500 bbl of oil to surface over a 6-hour period from naturally fractured and dolomitised Mardin limestones, an extrapolated rate equivalent to 2,000 bbl of oil per day.
As per the Company’s 14 October RNS, Xodus’ June 2020 report estimates the Discovery to contain material aggregate gross mean and high case discovered recoverable volumes (i.e., the estimated volumes that could be produced to surface) of 37.2 mmbbl and 67 mmbbl respectively, with UKOG’s corresponding 50% net share being 18.6 mmbbl and 33.5 mmbbl.
The table below illustrates that the Discovery’s estimated mean recoverable volumes are also significantly larger than those estimated for UKOG’s other UK appraisal assets (see UKOG 2018 CPR and Loxley RNS 01 October 2020):
Rapid success case monetisation possible – months versus years in the UK
As previously stated on 14 October, AME’s nearby East Sadak field was discovered and put into production in the same year, 2014, and has seen a total of 10 wells drilled to date. Unlike the UK, which requires numerous planning and regulatory steps before production can commence, Turkish petroleum law Article 6 (10) states that licensees are obliged to develop the field and commence production following a discovery. E. Sadak thus demonstrates that licensees are able to transition a successful well test directly into long-term production with minimal delay.
Significantly lower cost operations than UK
Based upon AME’s actual costs at nearby E. Sadak, gross Basur-3 well and flow test costs are estimated by AME at $3 million (c. £2.4 million), lower than the c. $7.5 million (c. £6 million) drilling and testing costs of UKOG’s similar depth HH-2 well. General manpower, service and administration costs are also below those in the UK.
Qualified Person’s Statement
Matt Cartwright, UKOG’s Commercial Director, who has 37 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.
