Alba have valued 5% of HH at £4m20 May 2021 08:22
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e) HORSE HILL OIL FIELD, ENGLAND
During the year, various interventions were made to the Horse Hill-2z ("HH-2z") horizontal well by the Operator, Horse Hill Developments Limited ("HHDL"), under the management of its major shareholder, UK Oil & Gas Plc ("UKOG"), to stop the ingress of formation water which was inhibiting oil production. However, ultimately UKOG was not able to resolve these issues sufficiently well.
While UKOG initially reported that it was reviewing a number of options for the future use of HH-2z, after the end of the year it confirmed that it planned to reconfigure HH-2z into a water re-injection well as soon as practicable, subject to regulatory consent. The reasons given for this were that it would remove the need for costly off-site water disposal and also help maximise oil recovery from HH-1 by supporting reservoir pressure.
While it is disappointing that HH-2z was not successful as an oil producer, Alba's technical team had flagged concerns from the outset as to the significant challenges that lay ahead in UKOG attempting to drill a horizontal well into this reservoir. While we would have much preferred not to be proven correct in this particular instance, it should also be said that in our view the failure of HH-2z has no bearing on the merits of drilling successive vertical wells into both the Portland and Kimmeridge oil pools, and I return to this subject below.
As for the original Horse Hill-1 well ("HH-1"), an intervention was completed to reperforate the full Portland oil-producing section, and this was followed by an ongoing series of production optimisation trials. UKOG reported after the year end that these trials are expected to continue for several months but that the early results were encouraging, with stable water influx levels achieved by the end of 2020.
During the year, the Oil and Gas Authority ("OGA") approved the Horse Hill Field Development Plan ("FDP") and consented to the start of long-term production from the field. This key consent should enable net recoverable reserves to be allocated to the field, which is important for future potential debt-based funding for the field.
In January 2021, UKOG reported that the Horse Hill Oil Field had to date produced and exported over 132,000 barrels of Brent quality crude from its Kimmeridge and Portland oil pools. It also reported that it had completed the interpretation of data from the November 2020 pressure build-up ("PBU") test sequence, confirming the HH-1 connected oil in place volumes of 7-11 million barrels previously reported in October 2018. The PBU data also helped to identify a potentially significant contribution to Portland fluid flow from a natural fracture system. UKOG reported that the integration of the PBU data, HH-2z rock data and a revised seismic interpretation has provided a far better understanding of the Portland reservoir. As a result, it reported that several significant infill drilling opportuni
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