Last checked at 7 Feb 2017 07:00
UK Oil & Gas Investments PLC
("UKOG" or the "Company")
Upgrade to Portland Oil Resources, Horse Hill Oil Discovery, PEDL137, Weald Basin, UK
Highlights
· Xodus calculate Portland sandstone P50 Oil in Place ("OIP") of 32 million barrels ("MMbbl"), a 53% increase from the 21 MMbbl previously reported prior to successful 2016 flow testing
· Gross recoverable Portland 2C Contingent Resources 1.5 MMbbl
· Net UKOG attributable Portland 2C Contingent Resources 0.5 MMbbl
· Base Case Portland initial oil-rate estimated at 350 barrels of oil per day ("bopd") per well
· Ultimate recovery could be increased by a further 8-14% of OIP via early implementation of a water re-injection scheme. If successful, this could represent a 114%-440% addition to 2C recoverable resources, equating to a further 1.7-6.6 MMbbl gross recoverable, or 0.5-2.1 MMbbl net to the Company
· Work plans now aimed towards Portland long-term production by end 2018
UK Oil & Gas Investments PLC (LSE AIM/ISDX: UKOG) announces that a new Report by Xodus calculates the Horse Hill Portland sandstone conventional oil accumulation, in which the Company holds a 31.2% interest, to contain an OIP of 32 MMbbl, an increase of 53% from the previously reported 21 MMbbl of May 2015. The upgrade results from the incorporation of Nutech's revised petrophysics, as reported in July 2016. As previously stated by the Company, OIP should not be misconstrued as recoverable Contingent Resources or reserves, which are detailed below.
In March 2016 UKOG reported the final Horse Hill-1 ("HH-1") Portland test flowed at a stable dry oil rate of 323 bopd, producing light, sweet, 35 API gravity crude. The Portland was produced at the rod-pump's maximum achievable rate and thus flow was constrained by the pump's mechanical capacity. The test data analyses show no clear indication of depletion.
As a result of further analysis of the Portland flow test data, plus a review of similar producing fields, Xodus now assess the gross recoverable Portland 2C Contingent resources at 1.5 MMbbl. As a result, Company net attributable Portland 2C resources are assessed at 0.5 MMbbl. Calculated OIP and resources reflect oil contained in the entire Portland structure, as penetrated by the HH-1 and Collendean Farm -1 wells.
The Contingent Resource volumes given are those estimated to be attributable to primary recovery from the Portland reservoir. Results utilise a base case of three wells, draining both the Horse Hill and Collendean Farm fault blocks, each well with an initial production rate of 350 bopd.
The report also details that, for a shallow but permeable reservoir, such as the Portland, should a water re-injection scheme be undertaken to provide pressure support in the field's early productive life, it is reasonable to expect a material increment in overall oil recovery. The successful implementation of such a scheme is estimated to lead to the recovery of an additional 8-14% of OIP, equivalent to a further 1.7-6.6 MMbbl of gross recoverable oil, and a further 0.5-2.1 MMbbl net to the Company.
A summary of the Report's results is shown in tables 1 and 2 below. The Report's Executive Summary is also available on the Company's website: www.ukogplc.com
As previously reported in October 2016, HHDL submitted a planning application to Surrey County Council for an extensive HH-1 appraisal programme, including long-term production testing and a new deviated well, HH-2, designed to access the Portland in both the HH-1 and Collendean Farm-1 proven oil-bearing fault blocks.
Table 1, Portland Sandstone, gross discovered OIP MMbbl:
Horse Hill Discovery | Low (P90) | Best (P50) | High (P10) | Mean |
Portland OIP MMbbl | 21.5 | 32.2 | 47.4 | 33.5 |
Table 2, Portland Sandstone, gross and net to Company Contingent Resources MMbbl
Horse Hill Portland Sandstone | Gross Field - 100% | Net to UKOG - 31.2% | ||||
Resource Category | 1C | 2C | 3C | 1C | 2C | 3C |
Recoverable Oil MMbbl (primary recovery only)¹ | 0.6 | 1.5 | 3.6 | 0.2 | 0.5 | 1.1 |
¹ Xodus Report states recovery could likely be improved by a further 8-14% of OIP via an early water re-injection scheme
HH-1 Oil Discovery, Location and Company Interest
The HH-1 oil discovery well is located within onshore exploration Licence PEDL137, on the northern side of the Weald Basin near Gatwick Airport. UKOG owns a 31.2% interest in PEDL137 via its 48% ownership of the licence's operator HHDL.
Stephen Sanderson, UKOG's Executive Chairman, commented:
"I am very encouraged by the report's conclusions, particularly with respect to the significant further oil recovery that could be obtained from a simple water re-injection scheme. Such schemes are typical practice in similar reservoirs in the US, but have not been widely utilised in the Weald Basin. We will aim to buck this trend, instigate such a programme and deliver the associated material monetary reward.
Upon the expected grant of the necessary regulatory consents, the Company is fully geared to start long term production testing at Horse Hill, commencing with the Portland. Our aim is to move towards a declaration of commerciality and stable long-term production from the Portland and Kimmeridge Limestones by the end of 2018.
Horse Hill is nicely poised to deliver a significant positive impact to the Company. The year ahead will be an exciting one. "
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.
Corporate Presentation
UKOG's latest Corporate Presentation is now available on the Company's website www.ukogplc.com
For further information, please contact:
UK Oil & Gas Investments PLC
Stephen Sanderson / Kiran Morzaria Tel: 020 7440 0640
WH Ireland (Nominated Adviser and Broker)
James Joyce / James Bavister Tel: 020 7220 1666
Square 1 Consulting (Public Relations)
Brian Alexander / David Bick Tel: 020 7929 5599
Glossary:
1C | denotes the low estimate scenario of Contingent Resources |
2C | denotes the mid or best estimate scenario of Contingent Resources |
3C | denotes the high estimate scenario of Contingent Resources |
Contingent Resources | Contingent Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations, but the applied project(s) are not yet considered mature enough for commercial development due to one or more contingencies. Contingent Resources are further categorised in accordance with the level of certainty associated with the estimates and may be sub-classified based on project maturity and/or characterised by their economic status. |
degree API | a measure of the density of crude oil, as defined by the American Petroleum Institute |
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 |
flow test | a flow test or well test involves testing a well by flowing hydrocarbons to surface, typically 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 hydrocarbons at a commercial flow rate |
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 |
mean | or expected value, is the probability-weighted average of all possible values and is a measure of the central tendency either of a probability distribution or of the random variable characterised by that distribution |
oil in place | oil in place or oil in the ground is the quantity of oil or petroleum that is estimated to exist originally in naturally occurring accumulations before any extraction or production |
P10 (high estimate) | a 10% probability that a stated volume will be equalled or exceeded |
P50 (best estimate) | a 50% probability that a stated volume will be equalled or exceeded |
P90 (low estimate) | a 90% probability that a stated volume will be equalled or exceeded |
petrophysics | the study of physical and chemical rock properties and their interactions with fluids utilising electric logs, physical rock and fluid measurements |
primary recovery | The first stage of hydrocarbon production, in which natural reservoir energy, such as gas drive, water drive or gravity drainage, displaces hydrocarbons from the reservoir, into the wellbore and up to surface. Initially, the reservoir pressure is considerably higher than the bottomhole pressure inside the wellbore. This high natural differential pressure drives hydrocarbons toward the well and up to surface. However, as the reservoir pressure declines because of production, so does the differential pressure. To reduce the bottomhole pressure or increase the differential pressure to increase hydrocarbon production, it is necessary to implement an artificial lift system, such as a rod pump, an electrical submersible pump or a gas-lift installation. Production using artificial lift is considered primary recovery. Primary recovery is also called primary production |
sandstone | a clastic sedimentary rock whose grains are predominantly sand-sized. The term is commonly used to imply consolidated sand or a rock made of predominantly quartz grains |
secondary recovery | a second stage of hydrocarbon production during which a fluid such as water or gas is injected or re-injected into the reservoir through injection wells located in rock that has fluid communication with production wells. The purpose of secondary recovery is to maintain reservoir pressure and to displace hydrocarbons toward the wellbore. The most common secondary recovery techniques are gas injection and water flooding. Normally, gas is injected into the gas cap and water is injected into the production zone to sweep oil from the reservoir |
water re-injection or water flood | a common form of secondary oil recovery in which water is injected or re-injected into the reservoir formation to maintain reservoir pressure and to displace oil towards producing wells |
About Xodus
Xodus Group Ltd. are an oil and gas focussed energy consultancy with over 500 employees providing integrated subsurface and surface solutions to a global client base. Further information can be found on Xodus' website: www.xodusgroup.com
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 well permitted, drilling planned in 2017 |
Brockham | PL235 | 1.66% | Angus Energy 6 | Angus Energy 6 | 8.9 | Well intervention programme ongoing |
Holmwood 3 | PEDL143 | 30% | UKOG | Europa Oil & Gas (Holdings) plc | 91.8 | Holmwood-1 exploration well planned in 2017 |
Horndean 1 | PL211 | 10% | UKOG (GB) Limited | IGas Energy Plc | 27.3 | Field in stable production |
Horse Hill 5 | PEDL137 | 31.2% | Horse Hill Developments Ltd 7 | Horse Hill Developments Ltd 7 | 99.3 | Submitted planning application for long term production tests and drilling of two wells |
Horse Hill 5 | PEDL246 | 31.2% | Horse Hill Developments Ltd 7 | Horse Hill Developments Ltd 7 | 43.6 | As above |
Isle of Wight (Offshore) 3 | P1916 | 100% | UKOG Solent Limited | UKOG Solent Limited | 46.7 | Preparing drilling planning submission |
Isle of Wight (Onshore) 2, 3 | PEDL331 | 65% | UKOG | TBA | 200.0 | Preparing drilling planning submission |
Lidsey | PL241 | 1.28% | Angus Energy 6 | Angus Energy 6 | 5.3 | Drilling of infill well being considered |
Markwells Wood 2 | PEDL126 | 100% | UKOG (GB) Limited | UKOG (GB) Limited | 11.2 | Submitted planning application for appraisal and field development |
Notes:
1. Oil field currently in production.
2. Oil discovery pending development and/or appraisal drilling.
3. Exploration asset with drillable prospects and leads.
4. UKOG has a 100% interest in Kimmeridge Oil & Gas Limited, which has a 100% interest in PEDL234.
5. Oil discovery with recently completed flow testing.
6. UKOG has a 2.56% interest in Angus Energy, which has a 50% interest in Lidsey and a 65% interest in Brockham; Angus hold an option to increase their Lidsey interest by a further 10% to 60%.
7. UKOG has a direct 48% interest in HHDL, which has a 65% interest in PEDL137 and PEDL246.