Uk Oil & Gas Regulatory News (UKOG)

9 April 2015

UK Oil & Gas Investments PLC

("UKOG" or the "Company")

Significant upgrade of the Horse Hill discovery, UK Weald Basin

London quoted UK Oil & Gas Investments PLC (LSE AIM: UKOG) is pleased to announce that US-based Nutech Ltd ("Nutech"), one of the world's leading companies in petrophysical analysis and reservoir intelligence, estimate that the Horse Hill-1 ("HH-1") well in the Weald Basin has a total oil in place ("OIP") of 158 million barrels ("MMBO") per square mile, excluding the previously reported Upper Portland Sandstone oil discovery.

The Horse Hill licences cover 55 square miles of the Weald Basin in southern England in which the Company has a 20.36% interest.

Nutech's report to the Company states this OIP lies within a 653 feet aggregate net pay section, primarily within three argillaceous limestones and interbedded mudstones of the Kimmeridge, and the mudstones of the Oxford and Lias sections. Approximately 72% of OIP, or 114 MMBO, lies within the Upper Jurassic Kimmeridge interbedded limestone and mudstone sequence. The Executive Summary of the Nutech Report is appended in full at the end of this release and the full executive report with figures will be available on the Company's website at www.ukogplc.com.

In order to establish estimates of total OIP within the licence area, the semi-regional resource potential of the Weald Basin's eastern footprint is the subject of ongoing analysis under the contracted alliance between Nutech, UKOG and Solo Oil Plc. The results of the estimated OIP within the licence will be reported when completed.

Final assessments of the Upper Portland Sandstone and the Oxford and Lias sections are in progress, with further results expected shortly. 

Stephen Sanderson, UKOG's CEO, commented:

"Drilling the deepest well in the basin in 30 years, together with the ability to use concepts, techniques and technology unavailable in the 1980s, has provided new cutting-edge data and interpretations to comprehensively change the understanding of the area's potential oil resources."

"As a result, we believe that, in addition to the Portland Sandstone oil discovery, the Horse Hill well has discovered a possible world class potential resource in what is interpreted to be a new Upper Jurassic "hybrid play".

"With the help of Nutech's considerable global knowledge base and play library, we have identified that the Horse Hill Upper Jurassic rock sequence is analogous to known oil productive hybrid reservoir sections of the Bakken of the US Williston Basin, the Wolfcamp, Bone Springs, Clearfork, Spraberry, and Dean Formations in the US Permian Basin and the Bazhenov Formation of West Siberia."

"The US analogues have estimated recovery factors of between 3% and 15% of Oil in Place."

"The Company considers that the high pay thickness, combined with interpreted naturally fractured limestone reservoir with measurable matrix permeability, gives strong encouragement that these reservoirs can be successfully produced using conventional horizontal drilling and completion techniques."

 "Nutech's results combined with our extensive geochemical analyses strongly indicates that the Company's Horse Hill licences lie within the likely sweet spot of the identified "Weald hybrid play"."

"Appraisal drilling and well testing will be required to prove its commerciality, but this "Weald hybrid play" has the potential for significant daily oil production."

"The operator, Horse Hill Developments Ltd, with the assistance of Nutech, is now focussed on flow testing the Portland Sandstone and Kimmeridge Limestone sections of the well, to establish producibility and thereby seeking to quantify an overall net discovered resource".

UKOG's interest in Horse Hill:

The Horse Hill-1 well is located within onshore exploration License PEDL 137, on the northern side of the Weald Basin near Gatwick Airport. UKOG owns a 30% direct interest in Horse Hill Developments Ltd ("HHDL") and a 1.32% interest in HHDL via its 6% interest in Angus Energy Limited. HHDL is a special purpose company that owns a 65% participating interest and operatorship of Licence PEDL 137 and the adjacent Licence PEDL 246 in the UK Weald Basin.

Qualified Person's Statement: Stephen Sanderson, UKOG's CEO, who has over 30 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.

The oil in place hydrocarbon volumes estimated should not be considered as either contingent or prospective resources or reserves.

For further information please contact:

UK Oil & Gas Investments PLC

David Lenigas / Donald Strang Tel: 020 7440 0640

WH Ireland (Nominated Adviser and Broker)

James Joyce / Mark Leonard Tel: 020 7220 1666

Square 1 Consulting (Public Relations)

David Bick / Mark Longson Tel: 020 7929 5599

Nutech Executive Report Summary (dated: 8 April 2015):

Results and Recommendations:

NULOOK and NULIST (electric) log interpretation results, now calibrated by POROLAB's rock analyses, calculate that the Horse Hill-1 well, excluding the structurally constrained Upper Portland sandstone, has a total oil in place ("OIP") estimate of 158 million barrels of oil ("MMBO") per square mile. The 158 MMBO per square mile OIP correlates to an aggregate pay section of 653 feet, primarily from the argillaceous limestones and mudstones of the Kimmeridge, and the mudstones of the Oxford and Lias sections. Table 1 shows the calculated OIP values for the well's main stratigraphic units. It is highly recommended that conventional flow testing be undertaken in one or more of the Kimmeridge limestone units as part of the planned flow testing of the Upper Portland sandstone discovery.

From its proprietary regional well log analyses NUTECH considers that the HH-1 OIP extends significantly beyond the 55 square miles of PEDL137 and PEDL246 with strong evidence that the eastern section of the Weald Basin contains considerably larger oil potential than has been previously estimated and published. This regional potential is the subject of ongoing analysis under NUTECH's contracted alliance with UK Oil & Gas Investments PLC and Solo Oil Plc.

Table 1: HH-1 NULOOK/NULIST OIP Summary Table:

The most significant calculated OIP volumes lie within the Upper Jurassic Kimmeridge section at 115 MMBO per square mile. The total Kimmeridge section calculates at 511 feet net pay with a corresponding average TOC of 2.8 %. Table 2, below, illustrates that the Kimmeridge now contains three interbedded argillaceous limestone and mudstone hybrid reservoir sequences, which contain an aggregate OIP of 107 MMBO per square mile, or 93% of the total Kimmeridge OIP.

The Middle Kimmeridge hybrid reservoir sequence is likely the most prospective as it contains two thick circa 100 gross feet oil saturated limestone reservoir units with an aggregate limestone only net pay section of 78 feet. The Middle Kimmeridge units are encased within 593 gross feet of self-sourcing, oil-saturated organic rich mudstones, with high TOCs up to 9.4%.

Fracture analysis, together with information from offset well information, indicates that the Kimmeridge shows good evidence of natural fracturing, particularly in the Middle Kimmeridge Limestone 1 and 2 pay sections.

Table 2: Kimmeridge Total and Kimmeridge Hybrid Section OIP and Metrics:

*NUTECH flag system that shows the average pay ranking over a formation sequence (5 flags=1, 4 flags=2, 3 flags=3), where 3 is minimum pay ranking; ² Sw in generative shale assumed as ~0%, i.e. no free water; ³ TOC calculated appear underestimated at high TOC sample values >5% TOC, values up to 9.4% seen in samples.

Potential Analogue Plays and Recovery Factors:

From a geological, reservoir engineering and possible future operational perspective, the interbedded naturally fractured carbonate and mudstone reservoirs encountered in the HH-1 are analogous to the Middle Bakken limestone of the Williston Basin. Further analogues are represented by the interbedded tight clastic reservoirs and source rocks of the Three Forks Formation, the US Permian Basin (Bone Springs, Wolfcamp, Clearfork, Spraberry, and Dean Formations), and possibly the age equivalent Upper Jurassic Bazhenov Formation of Russia's Western Siberian basin.

Bakken wells analyzed by NUTECH show a contacted OIP of between 10-20 MMBO per square mile, from a formation thickness of 40-150 feet, containing one hybrid carbonate reservoir to mudstone source-rock pairing. The Kimmeridge in HH-1 now shows three carbonate reservoir-mudstone source-rock pairings. Recoveries per well to date from the Bakken range from 8-15% in identified sweet spots.

NUTECH's analyses of the Wolfcamp/Bone Springs shows a contacted OIP range of between 60-160 MMBO per sq. mile in a 300-400 feet thick section and exhibits recovery factors of 1-10%.

Table 3: Comparison Metrics of HH Kimmeridge vs. Analogous Hybrid Producing Plays:

*HH-1 uplifted by up to ~5000 feet, **within argillaceous limestone units, *** in mudstones, ² total Jurassic Weald shale prospective area, from BGS 2014, fig 47.

The Bazhenov Formation, of the same geological age and general stratigraphic, oil source rock composition and source richness as the Kimmeridge, constitutes the main oil source rock of the super-giant W. Siberian petroleum system. Some 200 conventional Soviet era vertical wells have been drilled and produced at highly variable rates and recovery factors in the last 50 years in the Bolshoi Salym field area. Production to date is primarily from a hybrid of thin naturally fractured low porosity and permeability limestone, silicite and carbonate silicite conventional tight reservoir units interbedded within the currently generative high TOC source rock (key metrics are shown in Table 3).

Recent publications show that the Upper and Lower Bazhenov mudstone oil source rock formations both contain a 10-30 feet low porosity limestone/carbonate conventional reservoirs created by the replacement of radiolarian fossils and algae or bacteria by carbonate cementation. Additional reservoirs exist in thin 5-10 feet thick naturally fractured silicites and carbonate silicites. The Bashenov constitutes a significant future hybrid reservoir target and oil resource albeit on a much larger geographical scale than the Kimmeridge. It is the focus of intense studies and horizontal drilling by Shell/Gazprom and Exxon/Rosneft. Bazhenov well economics have likely been significantly boosted by Russia's recent oil/corporation tax exemptions for tight (low poroperm i.e., under 2 milliDarcy permeability) reservoir developments.

Work in Progress:Final assessments of the Upper Portland sandstone reservoir and the Oxford and Lias sections are still being completed with the assistance of UKOG and its technical team. The overall regional potential of the Weald Basin is the subject of ongoing analysis under the contracted alliance.

Glossary: