Drilling Plans & Oil in Place Update

5 December 2016                                            

UK Oil & Gas Investments PLC

("UKOG" or the "Company")

 

 PEDL234 Licence, Drilling Plans & Oil in Place Update, Central Weald Basin, UK

 

Highlights

 

·      Kimmeridge Oil & Gas Limited plans first-half 2017 Broadford Bridge-1 exploratory well to test naturally-fractured Kimmeridge Limestone reservoirs as proven at Horse Hill-1

 

·      Within PEDL234, Nutech calculates a P50 Kimmeridge Clay Formation ("KCF") oil in place ("OIP") of 7.12 billion barrels ("BBO"), of which 1.71 BBO lies within Kimmeridge Limestones  

 

 

·      PEDL234 increases gross attributable P50 KCF OIP within UKOG's licence interests in the Weald by 72%, from 9.95 BBO to 17.10 BBO, representing  approximately 21% of Nutech's calculated Weald Basin-wide P50 KCF OIP of 81.95 BBO as announced in October 2015

 

·      PEDL234 significantly increases net attributable P50 Kimmeridge Limestone OIP within UKOG's licence interests in the Weald Basin by 348%, from 0.54 BBO to 2.41 BB

 

UK Oil & Gas Investments PLC (LSE AIM/ISDX: UKOG) announces that Kimmeridge Oil & Gas Limited ("KOGL"), has informed the Company that analysis by US petrophysical specialists Nutech, calculates that a most likely or P50 OIP value of 1.713 BBO lies within the Kimmeridge Limestone ("KL") reservoirs underlying its 300 sq km Weald Basin licence PEDL234 ("Licence"). As previously reported, these naturally-fractured limestones flowed oil at an aggregate stabilised flow rate of 1,365 barrels per day ("bopd") from the Horse Hill-1 ("HH-1") well, in which the Company has a 31.2% interest. HH-1 is located 17 km to the north-west of the Licence. The entire KCF within the Licence is calculated to contain a total gross P50 OIP of 7.120 BBO. The Company, via its ownership of KOGL, holds a 100% interest in the Licence.

 

With the acquisition of the Licence, together with the purchase of increased ownership in Horse Hill (PEDL137 & PEDL246) and Holmwood (PEDL143), the Company's estimated net attributable P50 total KL OIP within its licence interests in the Weald Basin, has increased by 348% since October 2015, from 0.539 BBO to 2.414 BBO.  Similarly, the Company's estimated net attributable P50 KF OIP has increased by 315% from 2.368 BBO reported in October 2015 to 9.831 BBO.

 

The gross P50 KL OIP contained within the Company's licence interests in the Weald Basin  increased by 82%, from 2.098 BBO reported in October 2015 to 3.811 BBO. Similarly the gross KCF OIP increases by 72%, from 9.952 BBO reported in October 2015 to 17.072 BBO. As illustrated in Table 2, below, this gross P50 KCF represents approximately 21% of Nutech's Weald Basin-wide KCF P50 of 81.915 BBO  as estimated and announced on 21 October 2015.

 

The results of Nutech's analysis are illustrated in Tables 1 and 2 below.

 

Nutech's OIP numbers should be regarded as Total Petroleum-Initially-in-Place, as defined by the Society of Petroleum Engineer's Petroleum Resource Management System of resource reporting (see glossary).

As previously stated by the Company, it is emphasised that the above estimated OIP volumes should not be construed as recoverable resources, contingent or prospective resources, or reserves.

 

Table 1: PEDL234 Kimmeridge OIP in Billions of Barrels

 

Geological Unit	P90 OIP (BBO)	P50 OIP (BBO)	P10 OIP (BBO)
Kimmeridge Limestones	0.710	1.713	3.382
Kimmeridge Shales	2.448	5.406	10.335
TOTAL KIMMERIDGE CLAY FM	3.158	7.120	13.717

 

 

Table 2: Company Licence interests in the Weald Basin, Kimmeridge Oil in Place in Billions of Barrels

 

Geological Unit	Company Net Attributable Licence holding OIP ² BBO			Company Gross Licence Holding OIP ¹ BBO			Total Weald Basin-wide OIP ³ BBO
	P90	P50	P10	P90	P50	P10	P50
Kimmeridge Limestones	1.078	2.414	4.555	1.811	3.811	6.918	19.476
Kimmeridge Shales	3.155	7.417	12.529	6.252	13.261	23.439	62.439
TOTAL KIMMERIDGE CLAY FM	4.233	9.831	17.084	8.063	17.072	30.357	81.915

 

Notes:

¹ total aggregate OIP within 9 UKOG interest Weald Basin licences covering 672 sq km, namely: PEDL137, PEDL246, PEDL234, PEDL143, PEDL233, PEDL126, PEDL070, PL235, PL211, within which UKOG has varying economic interests (see notes to editors for details). These 9 licences represent the Company's total licence and economic interests within the AOI detailed in note ³ below. Note that with the exception of PEDL234, the gross OIP utilised is as calculated and reported by Nutech in October 2015

² net attributable equals the calculated gross OIP in each licence multiplied by % working interest in that licence and aggregated over the 9 Licences specified in note ¹ above.

³ as calculated by Nutech and reported in October 2015 covering a 1261 sq mile Weald-wide Area of Interest (AOI) which includes the 9 licences detailed in ¹ above and areas in which the Company has no licence or economic interests

 

Nutech Analysis

 

The calculated OIP values, shown in the tables above, were derived and extracted from a comprehensive revision to the Weald Basin-wide regional petrophysical and OIP model previously reported in October 2015. The model, utilising 85 wells over 1,261 sq miles of the Weald Basin, now incorporates a seismic-derived geological framework, plus a revised petrophysical analysis of key wells. Key learnings from the successful Horse Hill Portland and KL flow tests, reported in February and March 2016, have been incorporated.

PEDL234 Drilling Plans

 

KOGL now plan to drill the BB-1 well, located in the southern sector of the Licence during the first half of 2017. BB-1 is a deviated well designed to test naturally fractured conventional KL reservoirs within a "mirror-image" of the geological feature containing the proven Horse Hill Kimmeridge oil accumulation. As previously reported, the well site is constructed and the necessary planning and Environment Agency consents to drill are in place.

A further well is also planned, subject to normal regulatory approvals, before mid-2018, to test the eastern extension of the Godley Bridge Portland Sandstone gas discovery and an underlying KL oil prospect which is geologically analogous to the Company's Holmwood prospect, due to be drilled in 2017.

KOGL and the Licence

 

KOGL, a wholly owned subsidiary of UKOG, is the operator and 100% working interest holder of the Licence. As reported in June and August 2016, the Licence, the drilling site and regulatory permissions to drill, were acquired by the Company via the acquisition of the interests of Celtique Energie Weald Limited and Magellan Petroleum (UK) Limited.

 

The Licence straddles the Weald's Upper Jurassic basin centre and contains a thicker overall Kimmeridge section than seen underlying the Horse Hill licences. Numerous undrilled structural closures at Portland, Kimmeridge, Great Oolite and Triassic reservoir levels are mapped within the Licence.

The BB-1 target is, in UKOG's view, a lookalike to both the HH-1 oil discovery and the nearby Balcombe-1 oil discovery ("BC-1"), following the same overall structural trends. The BC-1, drilled in 1986, recovered 48 barrels of oil in one day from what the Company interprets to be the same naturally fractured KL reservoir unit which, as reported in February 2015, flowed at a stable rate of 901 bopd from HH-1. The recovered BC-1 KL oil was typed to a KCF shale source rock by Burwood et al in 1991^⁴.

KOGL also map an extension into PEDL234 of the 1983 Godley Bridge-1 Portland sandstone gas discovery. Nutech's analysis of GB-1 indicates that the KL underlying the Portland gas accumulation are naturally fractured and contain a calculated OIP of the same magnitude as HH-1. As previously stated, KOGL now plans to commence drilling an exploration well prior to mid-2018 to test both the KL and further appraise the Portland gas discovery.

 

The results of Xodus' evaluation of the Godley Bridge Portland gas in place and recoverable resources are expected in due course.

 

Stephen Sanderson, UKOG's Executive Chairman, commented:

"The Nutech analysis securely underpins our rationale for the Licence acquisition and BB-1 drilling plans in 2017. This study, and the resultant four-fold increase in the Company's net Kimmeridge oil in the ground, clearly highlights PEDL234 as a potential flagship asset to sit alongside Horse Hill.

 

The BB-1 well is designed not only to test a geological mirror-image of the Horse Hill Kimmeridge oil discovery, but, more significantly, to also seek to establish whether Kimmeridge Limestone oil is truly an extensive resource play. If so proven, given the sheer size of the PEDL234 Licence, our 100% interest, and the existence of further multiple identified drilling targets, the impact of BB-1 success would likely be transformational.

 

Our wider strategy over the forthcoming 18-24 months aims to de-risk the overall Kimmeridge Limestone oil play, both commercially and geographically. Through the planned extended production testing, sidetrack and new well at Horse Hill, the goal is to establish that the Kimmeridge can be brought into commercial production. In parallel, our three-well exploration programme of BB-1, Holmwood-1 and an additional PEDL234 well, also aims to demonstrate that Horse Hill success can be replicated over the central "sweet-spot" of the Weald Basin. We look forward to this journey and eagerly await the start of BB-1 in the first half of 2017."

 

Qualified Person's Statement:

 

Stephen Sanderson, UKOG's Executive Chairman, who has over 35 years of relevant experience in the oil industry, has approved the information contained in this announcement. Mr Sanderson is a Fellow of the Geological Society of London and is an active member of the American Association of Petroleum Geologists.

 

For further information, please contact:

UK Oil & Gas Investments PLC

Stephen Sanderson / Kiran Morzaria                                                      Tel: 020 7440 0640

 

WH Ireland (Nominated Adviser and Broker)

James Joyce / James Bavister                                                                     Tel: 020 7220 1666

 

Square 1 Consulting (Public Relations)

Brian Alexander / David Bick                                                                      Tel: 020 7929 5599

 

Glossary:

deviated well	a well that during drilling is steered away from the vertical
discovery	a discovery is a petroleum accumulation for which one or several exploratory wells have established through testing, sampling and/or logging the existence of a significant quantity of potentially moveable hydrocarbons
extended production test	a flow test, or extended well test, as per the permission granted by the Oil and Gas Authority, with an aggregate flow period duration over all zones of greater than 96 hours and up to 90 days maximum
gas in place	the quantity of gas that is estimated to exist originally in naturally occurring accumulations in the ground before any extraction or production
gross oil in place	100% of oil in place, without taking into account the Company's ownership interest
limestone	a sedimentary rock predominantly composed of calcite (a crystalline mineral form of calcium carbonate) of organic, chemical or detrital origin. Minor amounts of dolomite, chert and clay are common in limestones. Chalk is a form of fine-grained limestone
naturally fractured reservoirs	a petroleum reservoir rock containing tectonically induced open fractures, joints and fissures which are filled with petroleum. The petroleum filled fractures can provide essential reservoir porosity and permeability, essential permeability only, or provide a permeability enhancement alone. Such reservoirs have been created over geological time by nature, not man-made via hydraulic fracturing
oil (or petroleum) in the ground or oil (or petroleum) in place	the quantity of oil (or petroleum) that is estimated to exist originally in naturally occurring accumulations in the ground before any extraction or production
P10 (high estimate)	a 10% probability that a stated volume will be equalled or exceeded
P50 (best estimate)	a 50% probability that a stated volume will be equalled or exceeded
P90 (low estimate)	a 90% probability that a stated volume will be equalled or exceeded
petrophysics	the study of physical and chemical rock properties and their interactions with fluids utilising electric logs, physical rock and fluid measurements
play	a set of known or postulated oil and or gas accumulations sharing similar geologic, geographic, and temporal properties, such as source rock, migration pathways, timing, trapping mechanism, and hydrocarbon type
prospect	a project associated with a potential accumulation that is sufficiently well defined to represent a viable drilling target
recoverable resources	those quantities of petroleum (oil in this case) estimated, as of a given date, to be potentially recoverable from known accumulations
reserves	those quantities of petroleum anticipated to be commercially recoverable by application of development projects to known accumulations from a given date forward under defined conditions; reserves must further satisfy four criteria: they must be discovered, recoverable, commercial and remaining (as of the evaluation date) based on the development project(s) applied; reserves are further categorized in accordance with the level of certainty associated with the estimates and may be sub-classified based on project maturity and/or characterised by development and production status
resource play	a play where trapped petroleum accumulations are expected to be pervasive throughout a large area and that are not significantly affected by hydrodynamic influences (also called "continuous-type deposits")
sandstone	a clastic sedimentary rock whose grains are predominantly sand-sized. The term is commonly used to imply consolidated sand or a rock made of predominantly quartz sand
seismic	a method utilising the common mid-point technique, by which the reflections of sound waves transmitted into the earth are collected and processed into an image which can be interpreted into a cross section of the earth's crust.
shale	a laminated and fissile very fine-grained sedimentary rock, consisting of compacted silt and clay-size mineral particles. Can contain high proportions of organic material, which if subjected to heat and pressure over geological time can generate petroleum (a petroleum source rock)
sidetrack	re-entry of a well from the well's surface location with drilling equipment for the purpose of deviating from the existing well bore to achieve production or well data from an alternative zone or bottom hole location, or to remedy an engineering problem encountered in the existing well bore.
source rock	a laminated and fissile very fine-grained sedimentary rock, consisting of compacted silt and clay-size mineral particles. Can contain high proportions of organic material, which if subjected to heat and pressure over geological time can generate petroleum (a petroleum source rock).
Total Petroleum-initially-in-place	is that quantity of petroleum which is estimated to exist originally in naturally occurring accumulations. Total Petroleum-initially-in-place is, therefore, that quantity of petroleum which is estimated, on a given date, to be contained in known accumulations, plus those quantities already produced therefrom, plus those estimated quantities in accumulations yet to be discovered. Total Petroleum-initially-in-place may be subdivided into Discovered Petroleum-initially-in-place and Undiscovered Petroleum-initially-in-place, with Discovered Petroleum-initially-in-place being limited to known accumulations. It is recognized that all Petroleum-initially-in-place quantities may constitute potentially recoverable resources since the estimation of the proportion which may be recoverable can be subject to significant uncertainty and will change with variations in commercial circumstances, technological developments and data availability. A portion of those quantities classified as Unrecoverable may become recoverable resources in the future as commercial circumstances change, technological developments occur, or additional data are acquired.

 

Notes to Editors:

 

⁴ R. Burwood, J. Staffurth, L. de Walque and S.M. De Witte 1991. Petroleum geochemistry of the Weald-Wessex Basin of southern England: a problem in source-oil correlation.

 

About Nutech

 

Nutech (www.nutechenergy.com) is a global oil services company specialising in petrophysics, reservoir evaluation and reservoir optimisation at all stages of the exploration and production life-cycle. 

Company Shareholding in Angus Energy

 

Further to Angus Energy PLC's admission to AIM and the associated issue of equity the Company's shareholding in Angus is now 2.79%.

UKOG Licence Interests

The Company has interests in the following UK licences:

Asset	Licence	UKOG's Interest	Licence Holder	Operator	Area (km2)	Status
Avington 1	PEDL070	5%	UKOG (GB) Limited	IGas Energy Plc	18.3	Field in stable production
Baxters Copse 2	PEDL233	50%	UKOG Weald Limited	IGas Energy Plc	89.6	Reviewing economics of appraisal/development well. Licence extended to 2018
Broadford Bridge 3	PEDL234	100%	Kimmeridge Oil & Gas Limited 4	Kimmeridge Oil & Gas Limited 4	300.0	BB-1 well permitted, expected 2017 spud date.
Brockham 1	PL235	1.5%	Angus Energy 6	Angus Energy 6	8.9	EA permission obtained to drill B-4x sidetrack, HSE, OGA approval pending
Holmwood 3	PEDL143	30%	UKOG	Europa Oil & Gas (Holdings) plc	91.8	Holmwood-1 exploration well spud expected 2017
Horndean 1	PL211	10%	UKOG (GB) Limited	IGas Energy Plc	27.3	Field in stable production
Horse Hill 5	PEDL137	31.2%	Horse Hill Developments Ltd 7	Horse Hill Developments Ltd 7	99.3	Submitted planning application for long term production tests and 2 wells
Horse Hill 5	PEDL246	31.2%	Horse Hill Developments Ltd 7	Horse Hill Developments Ltd 7	43.6	As above
Isle of Wight (Offshore) 3	P1916	100%	UKOG Solent Limited	UKOG Solent Limited	46.7	Preparing drilling planning submission
Isle of Wight (Onshore) 2, 3	PEDL331	65%	UKOG	TBA	200.0	Preparing drilling planning submission
Lidsey 1	PL241	1.4%	Angus Energy 6	Angus Energy 6	5.3	Drilling of infill well being considered
Markwells Wood 2	PEDL126	100%	UKOG (GB) Limited	UKOG (GB) Limited	11.2	Submitted planning application for appraisal and field development

 

Notes:

1. Oil field currently in production.

2. Oil discovery pending development and/or appraisal drilling.

3. Exploration asset with drillable prospects and leads.

4. UKOG has a 100% interest in Kimmeridge Oil & Gas Limited, which has a 100% interest in PEDL234.

5. Oil discovery with recently completed flow testing.

6. UKOG has a 2.79% interest in Angus Energy, which has a 50% interest in Lidsey and a 55% interest in Brockham.

7. UKOG has a direct 48% interest in HHDL, which has a 65% interest in PEDL137 and PEDL246.