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LONDON (Alliance News) - UK Oil & Gas Investments PLC on Tuesday said it plans to continue progressing its significant portfolio of interests within the onshore oil and gas market in the UK over the next year as the company edges closer toward material levels of production.
UK Oil & Gas has built up an impressive portfolio of interests within the onshore oil and gas sector in the UK, and these have experienced significant developments over the past couple of years following some substantial testwork across the country.
The Horse Hill project near Gatwick Airport attracted a lot of attention when a string of AIM-listed firms, including UK Oil & Gas, began work on the asset, and the partners' efforts came to fruition when they managed to flow almost 1,700 barrels of oil per day from the Kimmeridge limestones and Portland sandstone earlier this year.
The results were a positive shock for the companies involved and for other firms operating in the onshore sector of the UK, as the expectation was for a production rate of only 400 barrels per day.
The test confirmed that the Kimmeridge oil play in the Weald basin and the Kimmeridge limestones could deliver substantial and, more importantly, commercially viable production levels even at oil prices as low as USD40 per barrel.
The two Kimmeridge limestones flowed at an average rate of 1,365 barrels per day using a simple vertical well whilst the Portland sandstone reservoir flowed at 323 barrels a day - and that is expected to rise as the asset is developed.
UK Oil & Gas, which owns a 27.3% net interest in Horse Hill, said a third, deeper Kimmeridge limestone will be tested over the next 12 months in tandem with longer production tests, a new horizontal well, and the acquisition of new 3D seismic study.
The Portland sandstone will also be tested further, and if successful, another well will be drilled on Portland afterwards.
Importantly, UK Oil & Gas said operations are not expected to restart at Horse Hill until "early 2017".
Unsurprisingly, UK Oil & Gas has become a leading player in the Kimmeridge oil play and acquired holdings in more licenses, including the Holmwood and Broadford Bridge licenses, where two deposits that are "similar to Horse Hill" will be tested in the hope of repeating the success near Gatwick before the end of 2017, it said.
UK Oil & Gas also is involved in Markwells Wood, where permission is being sought to drill up to four horizontal production wells before the end of September this year.
The company is expecting to be awarded the PEDL331 licence onshore the Isle of Wight after winning the block in the licensing round held in December last year, but this asset seems to be at the back of the list of priorities.
Even though the most significant activity is happening within the evaluation and development assets, UK Oil & Gas is already producing from a series of UK fields, namely Horndean, Avington, Brockham and Lidsey. It is involved in Baxters Wood, which is currently in the process of receiving a two-year licence extension before an appraisal well is considered.
However, UK Oil & Gas did not reveal the specific production levels being achieved, simply stating it was "stable" throughout the first half of the current financial year.
New production wells are, however, set to be drilled on the producing Brockham and Lidsey fields, with two set to be drilled over the next 12 months, it said.
"The company and its investments are on an exciting journey thanks to the intense efforts of our technical team and the related investment in leading edge science and technology, which has underpinned the rationale for our recent strategic acquisitions," said the company.
"As a result of the ground-breaking flow test at Horse Hill and our recent acquisitions, UKOG is now a key investor and player in the UK onshore oil and gas industry, and in pole position in the new Kimmeridge Limestone oil play. The growth in our asset base has seen corresponding rapid growth in our net recoverable oil resources across the Weald Basin and the Isle of Wight," he added.
UK Oil & Gas continued to generate insignificant amounts of revenue in the six months to the end of March, and reported a wider net loss before tax totalling GBP1.3 million in the period compared to the GBP383,000 loss booked the year before.
UK Oil & Gas shares were trading up 11% to 1.42 pence per share on Tuesday.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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