Update - Broadford Bridge-1

UK Oil & Gas Investments PLC

("UKOG" or the "Company")

 

Oil Flows to Surface from Kimmeridge Limestone 5

Broadford Bridge-1/1z Oil Discovery, Weald Basin, UK

 

Highlights

 

·      Oil flowed to surface from Kimmeridge Limestone 5 ("KL5") throughout 96 hours of near-continuous rod-pumping. Fluid returns, measured as half-hourly instantaneous pumped rates, currently range from around 10 to 72 barrels per day ("bpd").

·      Fluids flowed to surface consist of oil mixed with returned reactants ("spent acid") from an acid-wash programme. Associated average oil percentages ("oil-cut") exceed 30% with intermittent periods exceeding 50% by volume and continue to increase. To date, no obvious formation water has been observed in returns.

·      24-hour pumping operations will continue to enable flow to stabilise, return all spent acid and achieve 100% oil ("clean-up").

 

UK Oil & Gas Investments PLC (London AIM: UKOG) announces that oil has flowed to surface from the naturally fractured KL5 reservoir at its 100% owned BB-1/1z exploration discovery, located in licence PEDL234. Fluid returns to surface, measured as half-hourly instantaneous pumped flow-rates over a 96-hour near-continuous period, ranged between 10 to 72 barrels per day ("bpd").

 

To date, fluid returns through the test equipment consist of a mixture of oil plus returned spent-acid from an acid wash treatment, with no observed obvious formation water component. Associated oil-cut steadily increased to over 30%, with intermittent periods exceeding 50% by volume. Flow continues to clean-up with an improving oil-cut trend.

 

The artificial lift programme, which commenced last Friday, included several initial half-hour shut-downs to bleed off produced associated gas before it locked-up the pump. One short pressure build-up test was also undertaken.

 

As the KL5 zone's steel casing was not perforated during the original 2017 well completion programme, two new casing-perforation runs were undertaken prior to testing.

 

The current test, number 7, the first ever within the KL5 in the Weald's 100-year exploration history, straddles a discrete naturally fractured limestone interval close to the top of KL4, which corresponds to the previously reported occurrence of live oil in open natural fractures seen in BB-1 core.

 

General Testing Update and Future Plans

 

The KL5 24-hour rod-pumping programme is planned to continue until further notice to enable flow to stabilise and further clean-up with the aim of achieving 100% oil to surface.

 

Prior to the KL5 test, oil and associated gas were recovered to surface from tests 5 and 6 within the uppermost KL3 and KL4, but with no sustained flow. Due to the limited time remaining on the planning consent, the decision was made to spend no further time on these zones and proceed ahead to the KL5 zone which, as reported in December, was known from core and geochemical analyses to contain oil in fractures and within the limestone rock matrix.

 

In the light of results and analyses from tests 5 and 6, together with learnings from test 7 in KL5, the Company and its consultants are currently investigating the possibility that zones 5 and 6, originally perforated in summer 2017 and acidised during the original test programme, were damaged by a combination of the long residence times of spent acid within the reservoir prior to current testing and the perforating technique utilised.

 

It is now thought that both fractures and perforated channels around the wellbore of KL3 and KL4 could be partially blocked by released clay particles and cement related debris, thus preventing sustainable fluid inflow.

 

In this respect, serious consideration is being given to a possible future short sidetrack and selective re-test of KL3 and KL4 which electric logs show as oil-saturated.

 

Existing planning consent time permitting, following completion of KL5 testing, the plan remains to test a 40 ft thick limestone zone in KL1 which, as per KL5, was not perforated or acid-washed in 2017.

 

 

About BB-1/1z

 

As previously reported, BB-1 was purposely drilled in a location where no conventional hydrocarbon trapping mechanism within the Kimmeridge reservoir section is evident. Therefore, in the Company's opinion, the now proven flow to surface of moveable, light Kimmeridge oil and associated solution gas at the BB-1z sidetrack, provides further proof that the Kimmeridge at Broadford Bridge contains a continuous oil deposit of up to 1400 ft gross vertical thickness.

 

The near identical Kimmeridge reservoir parameters and geology seen at BB-1/1z and the Horse Hill-1 Kimmeridge oil discovery, in which the Company holds a 32.435% interest, some 27 km to the northeast, demonstrates that the Kimmeridge oil accumulation is also laterally extensive across the Central Weald Basin and, consequently, a potentially significant national oil resource.

 

As previously reported in December, the integration of BB-1z petrophysical analyses with Geomark Research's in-depth geochemical analyses, strongly suggests that Broadford Bridge lies within the southern flank of the Kimmeridge continuous oil deposit, with the commercially viable extent of the play, determined by the presence of significant volumes of in-situ generated mobile oil within Kimmeridge shales and fractured limestones, terminating some few kilometres to the south of PEDL234.

 

UKOG, as the largest licence holder in the Kimmeridge oil accumulation's "sweet-spot" is well positioned to exploit this extensive and likely commercially viable oil resource.  

 

 

Stephen Sanderson, UKOG's Executive Chairman, commented:

 

"These positive and encouraging initial oil flows from the first-ever Kimmeridge Limestone 5 test provide further supporting evidence for the presence and significant spatial extent of a viable Kimmeridge continuous oil deposit within the PEDL234 Licence.

 

The KL5 test results, plus the many strands of technical evidence gathered from the well, now also indicate that the BB-1 location lies towards the southern edge of a thick, naturally-fractured, oil-saturated Kimmeridge "wedge", stretching around 30 kms to the north of BB-1 across the Weald. UKOG, as the largest licence holder in the thickest part of this "wedge", is therefore ideally placed to exploit the potentially commercially viable recoverable resources that now likely underlie our Licences.

 

We look forward to further positive news from the ongoing KL5 test programme."  

 

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: 01483 243450 

 

WH Ireland (Nominated Adviser and Broker)

James Joyce / James Sinclair-Ford                                          Tel: 020 7220 1666

 

Cenkos Securities PLC (Joint Broker)

Joe Nally / Leif Powis                                                                   Tel: 0207 397 8919

 

Public Relations

Brian Alexander / David Bick                                                    Tel: 01483 900583/ 01483 243450

 

Glossary

 

casing	heavy-gauge steel pipe that is lowered into position in the open hole of a well and cemented into place. Casing is run to isolate rock formations with different pressure gradients from the well bore and to ensure that any fluids within the well are isolated from the surrounding rock and surface groundwater zone
clean-up	the process whereby stable flow and 100% oil content in fluids flowed to surface is achieved
completion, well completion, or test completion	the process of making a well ready for production. This principally involves preparing the bottom of the hole to the required specifications, running in the production tubing and its associated downhole tools as well as perforating as required, together with the appropriate completion fluid contained in the well. The process of running in and cementing the casing can also be included in this category
continuous oil deposit or resource deposit	a petroleum accumulation that is pervasive throughout a large area, which is not significantly affected by hydrodynamic influences (i.e. the buoyancy of oil in water) and is not trapped by structural or stratigraphic geological conditions. The deposit, in contrast to conventional accumulations, has therefore not accumulated by the migration of petroleum over medium to long distances. The petroleum in such deposits is found within, or immediately adjacent or close to, the pore spaces where the petroleum is generated, i.e. those pore spaces lying within petroleum source rocks containing organic rich compounds (kerogen) that, when heated over geological time, transform into petroleum. These accumulations are generally associated with organic-rich shales such as the Kimmeridge Clay Formation. Such accumulations do not generally contain significant volumes of free, mobile formation water and therefore have no observable hydrocarbon-water contacts. The extent of the accumulation is generally defined by the limit of where burial depths have been sufficient to transform organic matter within the petroleum source rock unit into petroleum
core or coring	a drilling technique that involves using a doughnut-shaped drilling bit to capture or "cut" a continuous cylinder-shaped core of undamaged in-situ rock. The core is captured in a steel pipe or "core barrel" above the bit. Core is normally cut in 30 feet lengths, or multiples of 30 feet, and normally with a diameter of 3.5 or 4 inches. Core is taken in petroleum reservoir rocks for detailed laboratory analyses of petrophysical and geomechanical parameters
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 flow test or production test	a flow test, or extended well test, designed to test the longer term production performance of a discovery with a view to declaring commercial viability and the establishment of permanent production.
flow test	a test period where hydrocarbons are flowed to surface through a test separator. Key measured parameters are oil and gas flow rates, downhole pressure and surface pressure. The overall objective is to identify the well's capacity to produce oil at a commercial flow rate and to recover oil in commercial quantities or volumes
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, being made of the remains of calcareous planktonic algae called coccoliths. The Kimmeridge Limestones are comprised of fine grained coccoliths, fine grained calcium carbonate mud, clay minerals, together with dark grey organic matter
naturally fractured reservoir	a fractured reservoir contains open and usually connected cracks or fissures within the rock matrix; fractures can enhance permeability of rocks greatly by connecting pore-spaces together; naturally fractured reservoirs have been created over geological time by nature, not man-made via hydraulic fracturing
nitrogen lifting	the injection of nitrogen into the fluid column in an oil or gas well to initiate fluid flow and production from the reservoir. Due to the low density of nitrogen, this process reduces the back pressure (known as "drawdown") on the reservoir
oil cut	the volume percentage of oil in fluids flowed to surface
perforating, perforation	the use of tubing (typically) to convey perforating "guns" to the required well depth. Perforating guns are devices used to prepare wells for production, containing shaped explosive charges in a range of sizes and configurations to optimise the depth of penetration through the steel well casing and surrounding cement and into the adjacent reservoir rock
play	a set of known or postulated oil and or gas accumulations sharing similar geological, geographical, and temporal properties, such as source rock, migration pathways, timing, trapping mechanism, and hydrocarbon type
sidetrack	re-entry of a well from the well's surface location with drilling equipment for deviating from the existing well bore to achieve production or well data from an alternative zone or bottom hole location

 

 

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	Appraisal/development well planned; licence extended to 2018
Broadford Bridge 3	PEDL234	100%	Kimmeridge Oil & Gas Limited 4	Kimmeridge Oil & Gas Limited 4	300.0	BB-1 & 1z drilling completed, testing of multiple zones underway
Holmwood 3	PEDL143	40%	UKOG	Europa Oil & Gas (Holdings) plc	91.8	Holmwood-1 exploration well planned in 2018
Horndean 1	PL211	10%	UKOG (GB) Limited	IGas Energy Plc	27.3	Field in stable production
Horse Hill 5	PEDL137	32.435%	Horse Hill Developments Ltd ⁶	Horse Hill Developments Ltd ⁶	99.3	Production tests and further appraisal well (s ) scheduled for 2018
Horse Hill 5	PEDL246	32.435%	Horse Hill Developments Ltd⁶	Horse Hill Developments Ltd ⁶	43.6	As above
Isle of Wight (Onshore) 2, 3	PEDL331	65%	UKOG	UKOG	200.0	Preparing Arreton-3 oil discovery appraisal well planning submission
Markwells Wood 2	PEDL126	100%	UKOG (GB) Limited	UKOG (GB) Limited	11.2	Revised drilling and testing planning application underway

 

Notes:

1. Oil field currently in production.

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

3. Exploration asset with drillable prospects and leads. Contains the Broadford Bridge-1&1z discovery well, the extension of the Godley Bridge Portland gas discovery plus further exploration prospects.

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

5. Oil discovery with successful flow test in 3 zones, further long-term testing scheduled in 2018

6. UKOG has a direct 49.9% interest in HHDL, which has a 65% interest in PEDL137 and PEDL246

The information contained within this announcement is deemed by the Company to constitute inside information under the Market Abuse Regulation (EU) No. 596/2014.