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Bridgedogg,

current planning is for one new well and a sidetrack, it probably wouldn't be an issue to use HH-1 for the Portland but the wording 'will likely follow the start of full scale Portland production from Horse Hill.' suggests more than just producing from HH-2, which is why I think they mean following the site upgrade (perhaps partially to begin with).

Why does 2 or more mean 3 or more? previous wording was even more bullish, (May RNS) 'has the potential to achieve a rate of 2-3 or more times the HH-1's vertical rate of 362 bopd.'

Note they didn't even use the word 'calculated' for the 362 bopd in May - perhaps Xodus thought that statement over the top.

Without a CPR it's impossible to know what the real thinking and justification for these numbers is.

Pboo,

you need to read the RNS, not post what you'd like it to say.

You posted:- 'Todays RNS says we are going to drill HH2 as a horizontal Portland well and get approx 3 times the rate of oil from HH1 Portland, which is approx 2 tankers per day, so 6 per day'

What it actually says is:-
The well's performance in the Portland has also underscored Xodus' and the Company's predictions that future horizontal well performance could achieve two or more times that of the single vertical HH-1 well.

So you are instantly assuming 3 times which is now mysteriously omitted. Surely you should use maybe a bit more than 2 times, and times what as the calculated 362 bopd is also mysteriously omitted.

You also assume this means just HH-2 will be drilled before HH-1z:-

'we now plan that the Kimmeridge development, commencing with HH-1z, will likely follow the start of full scale Portland production from Horse Hill.'

I would think full scale production is the 2 Portland wells and possibly the injector, with the site upgrade so PP required, but again no clarity in this release. Any interpretation suggests they won't be drilling HH-1z immediately after HH-2. They may even do interference tests between the two wells once HH-2 is in the Kimmeridge so maybe a delay caused by doing that as well.

Haven't listened to SS so just based on the RNS, but has he elaborated on the well sequence?

Lots of posts today so here's my take, sorry if they've already been covered.

Portland test production remained robust, continuing at a stable 220 barrels of oil per day

So 2 tankers a day – obviously a few days of no tankers, and still Portland testing.

This is more interesting though: from the half year report:-

'The well's performance in the Portland has also underscored Xodus' and the Company's predictions that future horizontal well performance could achieve two or more times that of the single vertical HH-1 well.'

Spot the difference:- As previously stated, based upon well-established reservoir engineering metrics, it is expected that HH-2 has the potential to achieve a rate of 2-3 or more times the HH-1's vertical rate of 362 bopd.

Spot the difference, and the last time 720 to 1080 was mentioned was 11 April RNS, and where was the 362bopd calculated sustainable flow?

I flagged the likelihood that PP would be needed for reserves in October 2018

And on 10th May 2019:-
‘Is the issue that without planning permission and OGA approval for the development that only resources could be assessed. An economic run assuming that the resources are reserves (as it isn't a technical problem) could be made but these would not carry the weight of reserves based economics.’

and actually no CPRs until planning permission and the development is complete? :- ‘it is preferential to wait until long-term production has been fully established rather than simply upgrade the current Contingent Resources’.

But the plan seems to be to only drill the Portland horizontals before drilling the Kimmeridge horizontal:- ‘we have assessed that, for risk mitigation purposes, we now plan that the Kimmeridge development, commencing with HH-1z, will likely follow the start of full scale Portland production from Horse Hill.’

Though it isn't actually stated as such.

So probably a Portland CPR first.

As for the money, Looks like the testing costs about £3.5mm for 6 months ~ £600,000 per month and UKOG costs £1.6mm for 6 months ~ £250,000 per month – and possibly more depending on when the new staff were recruited. So expenditure since March 31 could be £2.5mm, income from testing about £800,000.

Work is now ramping up on site so costs will be increasing and with no reserves based lending available until the CPR is there enough cash for 2 x Portland horizontals + injector (if that's what is happening) and the site upgrade.

Ninetails,

Not just on here.

Idespair, I really do,

If you read the posts its production costs - when the development is underway, so no don't have to pay the 6% during testing.

Perhaps not so long ago - the 15/11/2018 UKOG corporate presentation has approximately (~) $21 / £17 (slide 15).

But until they are actually producing this has to be an educated guess - the cost per barrel will vary depending on production as some costs are fixed regardless of volume produced and other costs they won't have control over, they are also giving 6% of gross revenues away to local causes, though any business rates paid are included in the 6%.

Probably have to wait until 2021 to see how right that figure is so it isn't worth arguing over though, just another estimate in a sea of estimates.

Otherwise the other variable is OP and anyone believing it only goes up needs to look at an historic price graph, and even a more recent one. They may hedge once production is in full swing which should iron out the highs and lows.

btw - Where did you read $18?

leewayne
,
Xodus will be working the data. It may be a very complex reservoir model. There is water present throughout the Portland reservoir which has not been produced so that needs to be explained.

This 720 - 1080 has been around a long time (since at least 10 September) and has not been altered since so pre dates all the recent testing.

So no, Xodus haven't just had a quick look - as for bending the truth I'd look at posters making claims that are outside the parameters dictated by UKOG RNS.

Bridgedogg,

read what you said, and then read what I said:-

You said 'Independent analysis'

I said:- 'The estimates for the horizontal aren't really independent analysis they are just rule of thumb multiples of the vertical well, with caveats'

You are now saying independently verified (not analysed) - well Xodus have agreed that given certain circumstances it is reasonable to use an industry benchmark of the multiples used (2 to 3 times), not that they have analysed all the data and come up with that figure.

Of course they have never flowed the Portland for a long period at 362 bopd so that actually remains a calculated sustainable flow, not an actual.

So a benchmark range off a calculated possible flow rate.

You may think it pedantic but what you are now saying and what you said previously are very different things.

I'd also point out that UKOG have targeted 2000 bopd HH production by year end (currently just over 50% UKOG) - but we shall see.

Wizard,

Hi, absolutely, nobody knows, probably even UKOG, but the rule of thumb range is about 720 to 1080 but even that seems to be dependant on a couple of things..

But Bridgedogg saying 5,000 bopd by year end is a target (which is where this started) is not supported by any information and HHDL don't have permission to export those sort of quantities.

Bridgedogg,

The estimates for the horizontal aren't really independent analysis they are just rule of thumb multiples of the vertical well, with caveats - optimally placed, reasonable vertical permeability - from 23 Jan RNS:-

'These targets are deemed by the Company's 3rd party reserve auditor and principal reservoir engineering advisor, Xodus, to be viable and realistic, conforming with the established petroleum engineering benchmark that an optimally placed horizontal well within a reservoir with reasonable vertical permeability can be expected to deliver 2 to 3 times the flow rate of a vertical wellbore from the same reservoir.'

So as you say until the horizontal is drilled and tested (and preferably CPR'd) nobody really knows what is possible, but the caution flowing HH is not made up so your 5000 bopd by year end with probably only 2 horizontal wells drilled looks a little optimistic especially as the 3500 bopd certainly is a target and enshrined in the planning application for the development:-

'Production could exceed 500 tonnes of oil per day which will require a peak flow of up to 16 two-way oil tanker movements per day but this will reduce with reservoir depletion.'

Jmhy,

Choked back, maybe but probably more to do with the pump rate. But why?

Apparently it is to ensure that there will be no detrimental effect on the horizontal well test rates, or as previously stated prudent reservoir management..

So they are not producing at the calculated 362bopd sustainable rate so as to not produce about 1000 barrels a week or 4000 barrels in a month that the horizontal is said to be capable of producing in 4 to 5 days.

As the horizontal will be some distance from HH-1 the few thousand barrels of oil being preserved in place by not producing at this calculated sustainable rate vs the millions of barrels of connected oil should be insignificant, yet it is being done.

If they are wary of producing at 362bopd from HH-1 what restrictions might they impose on the horizontal.

Bridgedogg - where do UKOG say they are targeting 5000 bopd by year end. Max production from the field given currently as 3,500 bopd from 6 wells, with 25% decline in the first 4 months.

If you are trying to inform at least read the planning application and other materials.

HH Portland is planned to be produced by 2 wells (HH-2 and HH-3) with one injector.

Estimates of recovery from the Portland vary and depend on number of wells, contacted oil per well (previously stated as 7 to 11mmbbls) and efficiency of pressure support water injector/s.

Estimates of recoveries up to 45% were envisaged although at that time the plan was 3 producers and 2 injectors (RNS 18/10/18). UKOG has said that the results so far of the Portland ewt have shown that there is a potential positive impact on connected oil in place which will therefore be thoroughly evaluated and reported in due course. CPR awaited.

The Kimmeridge is planned to be produced by 4 wells (HH-1z & HH-4 to 6).

Recovery from each Kimmeridge well has been stated as 1mmbbls but CPR also awaited.

The Godley Bridge (Loxley) and Arreton wells are appraisals of structures previously tested by wells that either didn't flow (Arreton) or flowed but reserves were calculated to be small (Godley Bridge) in the primary target. These wells will also test the Kimmeridge.

Various reasons were previously cited for the poor performance of Broadford Bridge (Cement job, shaley limestones, mechanical problems) but the matrix acidising is now blamed. UKOG has previously stated that production methods will be tested elsewhere (Loxley presumably) prior to returning to BB.

The A24 prospect appears to be Holmwood resurrected.

Sting,

posters are moaning (as you characterise it) because UKOG habitually fails to meet it's own targets. Maybe the rig being a couple of months late is neither here nor there in the grand scheme of things but I was looking at a post of yours (30 July) last year which I assume was based on UKOG information and practically every item you quoted had missed the stated timing.

I won't repeat the whole post but here are the relevant bits:-

'Commence in late 2018/early 2019, comprising a Portland appraisal well, HH-2, plus a Kimmeridge sidetrack, HH-1z ……….... A planning application to convert the site to a permanent producing site is underway with a submission expected in late summer/early autumn.'

SO no wells late 2018/early 2019. Planning application submitted late November.

'PEDL234 licence. Two drilling sites have now been confirmed, with lease terms on the first site agreed and a planning application planned for admission this summer.'

Planning application only recently submitted.

'An 18-month planning consent extension was submitted to West Sussex County Council on 14 June 2018 and, if granted, the extension to 31 March 2020, will provide sufficient time to enable a BB-1y sidetrack to be drilled and tested...'.

Extension was granted but no planning application yet for new well.

'Sites for the Arreton-3 appraisal well and an Arreton South exploration well have now been finalised. and the plan is to submit a planning application by the end of Summer 2018 for drilling targeted towards the end of 2019.'

No planning application yet submitted for Arreton.

'MARKWELLS WOOD: (PEDL126 UKOG interest 100%)UKOG is preparing to re-submit a revised planning application for further extended flow testing...…'

Site going to be restored.

One just hopes missed targets are confined to timings and not to the promised production expectations.

So whilst you may be happy many aren't and please don't demean yourself by claiming anyone with a different view to yours is a deramper swampy, shorter etc. when you actually have no idea.

As for traders - we all are, it's when we trade that may differ.

Anselmo,

Sadly the formations being tested at HH (Portland, Kimmeridge) are not the same as the main producing reservoirs at Wytch Farm (Sherwood and Bridport Sandstones).

The Kimmeridge Field is to the south of Wytch Farm and is so named because of its location (above Kimmeridge Bay) not the reservoir it produces from. In fact the Kimmeridge is at surface in Kimmeridge Bay.

The Kimmeridge is a completely new play, poorly understood, and the Portland although produced elsewhere in the Weald is an enigma and in the 2018 CPR no explanation was offered for the very different flow characteristics to other fields in the Weald.

There is no similarity between HH and Wytch Farm to justify using it as an analogue.

Mirasol,

There is no water leg in the Kimmeridge. The water that is there is locked in the apparemtly extremely tight limestones (where also some of the oil will be), hence Nutech calculated from logs about 50% water saturation in the Kimmeridge limestones, ie about 50% of the space (pores and fractures) is filled with oil and about 50% water. Because of the way oil displaces water it seems all the unbound water in the fractures has been displaced leaving water presumably in the rock matrix.

The Portland also has high water saturations and would usually also be producing water. Xodus just acknowledged no water was being produced but didn't surmise why.

Jason,

You sure have 'cherry picked' from the last sentence, you seem to have missed out one bit that would exclude the drilling of Dunsfold (or as it's named Loxley) - assessment ...….and acquisition ...….....of new opportunities

If a company says it's to assess something to acquire it (the bit of the sentence you haven't 'cherry picked') then that's what I'd expect, especially as it also mentions 'new opportunities'. Godley/Dunsfold/Loxley is not an acquisition nor a new opportunity - it's a well that's been in the plan for at least a year.

If the cash is used for that drill then it definitely isn't what UKOG claimed it was going to be used for.

Tony,

In which presentation did it state that Dunsfold was funded already?

The November 2018 Corporate Presentation certainly doesn't, and there isn't anything else I could see that had Godley Bridge (Dunsfold) and Arreton included in a recent presentation. Mind you that same presentation had both HH-1z and HH-2 being drilled in Q2 2019 which would be difficult to achieve now - with the possibility of being drilled in Q1 mentioned, but not Q3.

I would also question the desirability of being 100%.

This has drawbacks. One is UKOG takes on 100% of the risk and secondly there are no partners looking at what they are doing and having an opinion. Maybe if there had been a partner when BB was being drilled and tested there would have been more oversight as to what UKOG were doing?

Anyway I suggest a read of the (short) review of Godley Bridge / Dunsfold in the 2018 CPR (page 100 & 101). Here's the Xodus summary:-

The dataset available, therefore, gives significant uncertainty in the assessment of in place volumes, the main issues are:

> The Alfold-1 well reportedly penetrates the reservoir at a shallower depth than the discovery well but is calculated to have no gas pay only some likely residual oil shows
> As mapped Alfold-1 is on structure and above the contact
> The precise location of Alfold-1 and its penetration of the Portland is unknown
> The structure does not close at the depth of the contact to the north east

So no risk there.

Wizard

It's very unlikely that the drilling of 3 to 6 will follow without a break from 2 and 1z. The cellars for 3 to 6 haven't been built and the civils required would be where a lot of the kit for drilling would be needed to be placed.

It also seems the new layout will be built before this drilling:- from the environmental statement:-

'Year 1: 1st Quarter Phase 1 commences on the existing well site with the construction of new drilling cellars followed by the installation of new conductor casings for HH-3 to HH-7. Construction of the new oil process and storage area runs in parallel on land to the east of the existing well site. The duration of the construction activity will be approximately 14 weeks with the majority of the work being completed within Quarter 1.'

• Year 1: 2nd Quarter Phase 3 commences with the installation of plant and machinery within the new oil process and storage area. The duration of the installation activity will be approximately 12 weeks with the majority of the work being completed within Quarter 2.

They do state that during Year 1 Q2 the water injection well might be drilled whilst works continue.

The planning applications for Godley Bridge, Arreton or Broadford Bridge haven't eve been submitted - and you wouldn't contract a rig without planning permission in place - which currently includes HH-3 to 7.

Warik,

I do wonder if there ought to be a knowledge test before allowing anyone to invest, especially in AIM.

I don't know where your shares are held but mine are in a nominee account with an ISA with II and a SIPP with AJBell - that's a nominee account

There's an important word in all those 'shareholdings' - Nominees.

Have you guessed yet.......

Mirasol,

Apologies for being pedantic but Alba is a shareholder in HHDL, not a partner in the licence, which makes them subject to the HHDL Articles of Association, not the JOA..

HHDL and Magellan/Tellurian are the parties to the JOA, with HHDL as Operator

So whether Alba have the cash is an issue for HHDL to sort out before going to Tellurian with proposals.

When the licence extension was agreed with the additional obligation work programme it may be that Tellurian only agreed with conditions attached to enable them to control their expenditure - who knows.

Given the sort of guarantees a drilling company would want the contract wouldn't be signed until it was clear the money to pay for the work planned was there, and possibly in escrow. HHDL funding is essentially underwritten by UKOG for HHDL's share of cost, but they might not be willing to stump up the additional 35% for Tellurian if they are prevaricating and there's uncertainty as to what the outcome might be.

So maybe the supposed delay is because of Tellurian, but maybe it's just rig availability and for whatever reason signing up the number one choice rig was thwarted and they are leaving options open to sign another rig if one becomes available sooner (hence still in final stages), I doubt it's HHDL shareholders but it may even be an ongoing technical discussion of where exactly to place the Portland producer.