Final Results for the Year Ended 30 September 2017

RNS Number : 4085J

UK Oil & Gas Investments PLC

29 March 2018

 

The headline for the UK Oil & Gas Investments PLC announcement released on 29/03/2018 at 08:55 under RNS No 3788J should read Final Results for the Year Ended 30 September 2017'

The following amendments have been made to the 'Final Results for the year ended 31 December 2017' announcement released on 29/03/2018 at 08:55 under RNS No 3788J.

All references to year end 31 December should be read as 30 September throughout.

PELD 234 has also been amended to PEDL 234 in the heading of the third paragraph of the 'Statement From The Chairman'.

All other details remain unchanged.

The full amended text is shown below.

UK Oil & Gas Investments PLC

("UKOG" or the "Company")

Final Results for the year ended 30 September 2017  

UK Oil & Gas Investments PLC (AIM: UKOG) the oil & gas investment company, is pleased to announce its full year results for the year ended 30 September 2017.

HIGHLIGHTS

·       Broadford Bridge-1 step-out exploration well was spudded in May 2017 within UK Oil and Gas Investments PLC's ("UKOG's") 100% owned, 300 km² PEDL234 Weald Basin licence. A successful sidetrack BB-1z was drilled within 6 days.

·       Oil flowed continuously on pump from the Kimmeridge Limestone ("KL") 5 test zone together with the recovery of oil and gas to surface from multiple flow tests. Most extensive testing ever of an onshore exploration well conducted over 1000 plus feet of perforations.

·       The oil discovery provides "proof of concept" for the Kimmeridge continuous oil deposit and proves further evidence to support a regionally extensive natural-fracture network capable of delivering oil to surface from the KL without reservoir stimulation.

·       This financial year's (2018) imminent long-term Portland and KL flow testing and appraisal drilling programme at Horse Hill (operated by Horse Hill Developments Ltd) will follow up on the successful flow test results of early 2016, where an aggregate stabilised natural flow rate of 1,688 barrels of oil per day was achieved from three Portland and KL zones. 

·       The Horse Hill testing and subsequent drilling programme is geared towards delivering both conventional Portland oil production and the KL's first commercially viable stable oil production in 2019.

For further information, please contact:

UK Oil & Gas Investments PLC

Stephen Sanderson / Kiran Morzaria                                            Tel: [phone] 

WH Ireland (Nominated Adviser and Broker)

James Joyce / James Sinclair-Ford                                                 Tel: [phone]

Cenkos Securities PLC (Joint Broker)

Joe Nally / Neil McDonald                                                               Tel: [phone]

Public Relations

Brian Alexander / David Bick                                                          Tel: [phone]

STATEMENT FROM THE CHAIRMAN

2017 has been a transformational year for UKOG. We have continued to build a spread of investments, focused on UK onshore oil assets centred upon our exciting and industry-leading position in the Weald Basin's Kimmeridge Limestone ("KL") oil play. These investments are underpinned by further discovered oil resources outside the KL play contained within five low-risk undeveloped oil and gas discoveries, which alone contain recoverable resources of over 14 million barrels net to the Company. 

Our investment portfolio delivers a good balance of risk-reward between the KL's higher risk-higher reward growth potential and the lower risk-moderate reward of proven conventional oil discoveries.

PEDL234 - Broadford Bridge

The potential and further understanding of the KL oil play has been our prime focus over the past year. The Broadford Bridge-1 and 1z ("BB-1/1z") oil discovery, located in the Weald's largest single licence, the 300 km² PEDL234, 100% UKOG owned and operated by Kimmeridge Oil and Gas Limited ("KOGL"), delivered on most of  its technical objectives, namely: "proof of concept" for the existence of a continuous oil deposit within the Kimmeridge section, the determination of the deposit's lateral extent and supporting evidence for a regionally extensive natural fracture system within Kimmeridge Limestones. Importantly, the fracture system was shown to deliver oil to surface without the need for reservoir stimulation utilising massive hydraulic fracturing ("fracking").

The BB-1/1z exploration well, for which operations ceased in March 2018, was a bold 27 km step-out from HH-1, designed to provide proof of our geological concept that oil within the KL, as demonstrated at the Company's Horse Hill-1 discovery ("HH-1"), was part of a regionally extensive continuous oil deposit. Since the two prior Weald Basin wells which tested and recovered Kimmeridge oil to surface, HH-1 and Balcombe-1, were drilled within well-defined mapped conventional structural features, it was necessary to demonstrate that the BB-1/1z location, without any discernible conventional hydrocarbon trapping configuration (i.e. no structural or stratigraphic closure) contained moveable oil within the Kimmeridge.

Consequently, the multiple live, mobile oil shows seen in cuttings and drilling fluids, light oil seen in open fractures in cores, the recovery of oil and gas to surface from KL1 to KL4 flow tests, together with the light oil flowed continuously to surface from the KL5 test zone, presents further compelling evidence that the Upper Jurassic Kimmeridge of the central Weald Basin contains an extensive continuous oil accumulation. We believe that the data provided from BB-1/1z and analysed to date provides us proof of geological concept.

These live, mobile oil occurrences, together with corresponding rock and electric log data likely demonstrate a KL oil deposit of up to 1400 ft vertical extent exists at BB-1z. Geochemical analyses further support this proof of concept, as all oil samples from both BB-1z and HH-1 analysed to date are determined by Geomark Research to come from the same Upper Jurassic shale source, i.e. the oil lies within or immediately adjacent to the Upper Jurassic rocks where it was generated, one of the fundamental characteristics of a continuous oil accumulation.

The flow test campaign also contributed significantly to our understanding of the Kimmeridge play. Flow test inflows and pressure data, together with the specialist analysis of formation image log and core fractures, also demonstrated that the Kimmeridge contains both a local and regionally developed natural-fracture system, key to the future commercial viability of the KL deposit. These fractures are present in both limestones and shales.

Significantly, prior to the testing campaign these fracture-related data showed the key fracture sets to be open, i.e. likely able to transmit fluids under reservoir conditions. Consequently, neither the drilling fluid nor drilling and coring methodology appears to have "damaged" the reservoir (i.e. blocked or plugged fractures surrounding the well bore). As to whether these fractures remained fully or partly open during the necessary pressure draw-downs following acidisation used during testing is currently under investigation. 

The ability of these fractures to deliver hydrocarbons to surface at BB-1z without stimulation (i.e. without "fracking") was demonstrated by both the KL5 test and by high initial instantaneous flow-back rates from the KL4 and KL3 test zones of 466 and 719 barrels of fluid per day respectively.

The finding of near identical reservoir geology and geochemistry between HH-1 and BB-1/1z also provided a valuable understanding that the Kimmeridge oil deposit stretches around 30 km across the Weald basin from the north-east at Horse Hill to the southern edge of our 100% PEDL234 Licence, with BB-1/1z likely lying on the deposit's southernmost boundary.

It is worth noting  that since BB-1 lies in the extreme south of PEDL234, the well also demonstrates that most of the licence lies within the deposit's most prospective sweet spot. It is in this area where the Upper Jurassic shales are thickest, most deeply buried and have likely generated the most significant volumes of in-situ hydrocarbons.

Consequently, in the light of significant positive technical learnings and understanding of the wider KL deposit gained from BB-1/1z, the Company has accelerated its PEDL 234 drilling plans. We have now selected two further drilling sites in the central area of the licence, the first of which, subject to regulatory approval, should commence drilling in 2019. The required necessary planning application and Environment Agency ("EA") application are currently in preparation and are scheduled to be submitted by the summer.

Whilst the KL flow rates observed to date are likely sub-commercial, we are encouraged by the multiple occurrences of mobile oil observed in the well and their correlation with good calculated oil saturations in electric logs and core analyses. Consequently we are currently exploring new methods and technologies that might enable us to achieve higher sustainable oil rates and commercial viability from the 1400 vertical feet of oil-saturated KL reservoir rock interpreted at BB-1z.

With this in mind, serious consideration is being given to a possible future short sidetrack, BB-1y. The sidetrack's objective would include a selective re-test of the main KL units, likely utilising an alternate completion methodology, new completion fluids, the possible use of small-bore radial drilling and other reservoir stimulation techniques. Any future work at BB-1/1z would likely take place after a successful trial of such alternate methods and technologies in the next planned PEDL234 exploration well. Such future operations will require further in-depth study of the vast amount of data collected during drilling, coring, electric logging and testing before any conclusions can be finalised.

It is worth reflecting that, to date, the first two wells of UKOG's KL exploration programme, HH-1 and this year's BB-1/1z have produced Kimmeridge oil to the surface. This is no mean feat for a new play, particularly one involving both the first large-scale potential continuous oil deposit identified in the UK and one reliant on flowing oil to surface via naturally fractured reservoir rocks. Prior to these two wells, only one well (the 1986 Balcombe-1 well) within the Weald Basin's central thousand square mile area had tested the Kimmeridge reservoir, returning Kimmeridge oil to the surface.

PEDL 137 - Horse Hill

This financial year's imminent long-term KL flow testing and appraisal drilling programme at Horse Hill (operated by Horse Hill Developments Ltd) will follow up on the successful flow test results of early 2016, where an aggregate stabilised natural flow rate of 1,688 barrels of oil per day was achieved from the Portland and two KL reservoir zones, KL3 and KL4.

The Horse Hill testing programme is solely geared towards determining the commerciality of both the conventional Portland oil accumulation and the continuous oil deposit within KL3 and KL4. The subsequent drilling phase, contingent upon a successful testing outcome will prepare the way for full time production at Horse Hill. If the programme is successful it is planned that Horse Hill  will deliver stable oil production in 2019, subject to obtaining the necessary regulatory consents.  Although the HH-1 well is not intended to be an immediate producer, any oil produced from the tests will, of course, be sold. Sales volumes are not incorporated into budgetary planning, but a successful testing outcome would generate further oil sales revenues for the Company.

Other Weald Basin and SE England Investments

The significant growth potential of the overall KL play in our portfolio is also solidly underpinned by oil within five other low-risk undeveloped oil discoveries. These discoveries contain third-party audited recoverable resources of over 14 million barrels net to UKOG (excludes discovered oil in the KL play and Godley Bridge Portland gas). Of these recoverable resources over half lie within the Horse Hill and Arreton (Isle of Wight) conventional Portland discoveries, both the subject of ongoing operational activities and investment. As stated above, first-oil from the Horse Hill Portland discovery is planned in 2019.

In the light of the "KL proof of concept" by BB-1/1z, UKOG's planned forward KL programme will now see a doubling of the Weald's drilled and tested Kimmeridge wells, with three more planned exploration step-out wells over the next 18 months, at Horse Hill, in PEDL234 (subject to regulatory approvals) and the Holmwood prospect (operated by Europa Oil & Gas).

Outlook

The key to maximising UKOG's growth remains a combination of the KL oil exploration play, which will continue to be our flagship for the foreseeable future, balanced by low-risk appraisal and development projects such as the Horse Hill Portland and Arreton Portland discoveries. The importance of our conventional assets should not be underestimated. Whilst the KL offers the potential of around 1,000 barrels per day per well if Horse Hill can be widely replicated, both Arreton and Horse Hill Portland potentially offer low-risk  gross flow rates of several hundred barrels per day per well in the first year of production.

Our industry leading flagship KL programme's goal is to demonstrate that the play can generate economic returns and is repeatable over most of UKOG's 672 gross km² licence holding in the basin's "sweet spot". This is the largest KL licence holding of any company. Whilst the play is still developing, the goals of our investee companies are simple:

·       Demonstrate commercial viability from one, possibly two, wells at Horse Hill in 2018. If this is successful and funding is forthcoming, move Horse Hill into long-term commercial production in 2019.

·       Demonstrate that the KL sequence is commercially viable across three other locations in the Weald basin: Holmwood and two further wells in PEDL234. All of these will be subject to the relevant regulatory approvals and sufficient funding.

·       Define and secure a batch of new drill sites, submit 'batch' planning consent applications to ensure a "hopper" of ready to drill locations.

·       Consider submitting production planning applications immediately post-discovery and prior to commercial declaration. This will help deliver production from each well as early as regulatory permitting allows.

·       Further consolidate our holdings in discoveries and developments, where possible, and acquire further prospective acreage and opportunities.

Planning permissions are in place for the full Horse Hill long-term testing and appraisal programme and Holmwood well. At the time of writing our investee companies are forecast to be able to asses commerciality in Q2 of 2018 and 2019 respectively.

For our non-KL discoveries, our focus will be firmly upon Horse Hill Portland and Arreton on the Isle of Wight. In a similar fashion to the KL strategy, we already have Horse Hill planning permission and EA permits in place to enable us to test the Portland in HH-1 and drill the necessary HH-2 well.  At Arreton, a well site is being secured, and planning/permit application prepared. In the success case, production will be achieved as soon as the regulatory system allows, but it is envisaged that Arreton will be drilled in 2019.

We will continue to review, rank, prune and add to our investment portfolio to ensure our resources are employed only on the most technically and economically viable projects. This process was recently evidenced by the removal of the offshore Isle of Wight P1916 from the portfolio due to low technical prospectivity and the selected drill site's environmental sensitivity.

Corporate

During the financial year, UKOG raised gross proceeds of £7.46 million via the issue of equity which in addition to the £2.44 million in cash was used to fund £8.7 2 million of investment in exploration and evaluation assets, at the end of the year the Company had £1.74 million in cash and cash equivalents.

Cenkos Securities plc were appointed as UKOG's joint broker, and they were instrumental in the equity fund raise from a mix of institutional and retail investors which has partly funded Broadford Bridge. Subsequent to the year-end UKOG raised £10 million in convertible debt of which £5.25 million was outstanding at the date of the publication of this report.

Sadly, in November 2016, Jason Berry a director of the Company died suddenly following a short illness, Jason joined the Board in August 2014 and was instrumental in providing a firm financial footing for the early growth of the Company.

In March 2017, Allen Howard was appointed as Non-Executive Director of the Company. Allen has brought a wealth of technical expertise in well analysis and completions, huge experience and knowledge from the US onshore sector, plus a global network of industry and finance contacts. He is a hugely valuable addition to our team to help move our KL exploration and conventional assets into production.

The social licence obtained via our positive engagement process and good practices led to swift and unopposed grants of planning consent for BB-1/1z's flow testing extension and the extensive flow testing and appraisal programme at Horse Hill. My congratulations go to our entire team for the open, honest and professional way they have communicated with our neighbours and stakeholders.

Our operations and related technical analyses have also further demonstrated our commitment to fully understanding our assets. The extensive data acquisition programme of BB-1/1z has provided us with invaluable new insights into the key controls on the play and, consequently, represents a sound investment fundamental to our future success. We have continued to work with global experts, such as Chemostrat Inc., Geomark Research, Halliburton, Nutech, Premier Oil Field Laboratories, Schlumberger and Xodus Group, together with internationally recognised academic institutions such as Imperial College, London and the University of Utah's Exploration Geoscience International, to provide us with the best advice to help turn our ideas and oil discoveries into economic reality.

The progress made during 2017 would not have been possible without the efforts of UKOG's management team, consultants, supportive shareholders and other stakeholders. We would like to take this opportunity to thank all of them as we continue to deliver our strategy.

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR YEAR ENDED 30 SEPTEMBER 2017

	Notes	30 Sep 2017	30 Sep 2016
		£'000	£'000
Revenue	2	207	151
Cost of sales		(254)	(204)
Gross (loss)		(47)	(53)
Operating expenses
Administrative expenses		(1,785)	(2,062)
Foreign exchange losses		(15)	(20)
Depletion & impairment expense		(74)	(78)
Share based payments expense		(474)	(682)
Operating (loss)		(2,395)	(2,895)
Gain on settlements of financial instruments		204	-
Share of associate loss		(77)	(106)
Negative Goodwill		-	1,029
(Loss) before taxation		(2,268)	(1,972)
Taxation		-	-
(Loss) for the year attributable to equity holders of the parent		(2,268)	(1,972)
Other comprehensive income
Transfer to income statement		-	-
Other comprehensive income net of taxation		-	-
Total comprehensive loss attributable to equity holders of the
Parent		(2,268)	(1,972)
(Loss) per share
		Pence	Pence
Basic and diluted	3	(0.08)	(0.09)

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2017

	Notes	2017	2016
		£'000	£'000
Assets
Non-current assets
Exploration & evaluation assets		15,110	6,187
Oil & Gas properties		1,428	1,500
Property, Plant & Equipment		170	370
Investment in associate		5,003	4,757
Available for sale investments		-	368
Total non-current assets		21,711	13,182
Current assets
Inventory		4	3
Trade and other receivables		3,787	2,890
Cash and cash equivalents		1,748	2,444
Total current assets		5,539	5,337
Total Assets		27,250	18,519
Current liabilities
Trade and other payables		(3,725)	(591)
Total current liabilities		(3,725)	(591)
Non-current Liabilities
Provisions		(359)	(359)
Total non-current liabilities		(359)	(359)
Total liabilities		(4,084)	(950)
Net Assets		23,166	17,569
Shareholders' Equity
Share capital		11,938	11,842
Share premium account		46,939	39,644
Share based payment reserve		1,172	1,224
Accumulated losses		(36,883)	(35,141)
Total shareholders' equity		23,166	17,569

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 SEPTEMBER 2017

	Share capital	Share premium	Share based payment reserve	Accumulated losses	Total
	£'000	£'000	£'000	£'000	£'000
Balance at 1 October 2015	11,787	31,622	659	(33,286)	10,782
Loss for the year	-	-	-	(1,972)	(1,972)
Total comprehensive income	-	-	-	(1,972)	(1,972)
Issue of shares	55	8,262	-	-	8,317
Cost of share issue	-	(240)	-	-	(240)
Share option expired	-	-	(117)	117	-
Share based payments	-	-	682	-	682
Balance at 30 September 2016	11,842	39,644	1,224	(35,141)	17,569
Loss for the year	-	-	-	(2,268)	(2,268)
Total comprehensive income	-	-	-	(2,268)	(2,268)
Issue of shares	96	7,631	-	-	7,727
Cost of share issue	-	(336)	-	-	(336)
Share option exercised	-	-	(316)	316	-
Share option expired			(210)	210	-
Share based payments	-	-	474	-	474
Balance at 30 September 2017	11,938	46,939	1,172	(36,883)	23,166

CONSOLIDATED STATEMENT OF CASH FLOW
FOR THE YEAR ENDED 30 SEPTEMBER 2017

 

		2017	2016
		£'000	£'000
Cash flows from operating activities
Loss from operations		(2,395)	(2,895)
Foreign currency losses		-	20
Other non-cash income & expenses		-	(19)
Depletion & impairment		74	78
Share based payment charge		474	682
Increase in inventories		(1)	(1)
(Increase) / decrease in trade & other receivables		(897)	9
Increase in trade & other payables		3,134	262
Net cash (outflow) from operating activities		389	(1,864)
Cash flows from investing activities
Expenditures on exploration & evaluation assets		(8,723)	(458)
Expenditures on oil & gas properties		(2)	(266)
Payments for acquisition of associate		(55)	(1,150)
Loans advanced to investee companies		-	(1,216)
Proceeds from sale of Available for Sale Financial Assets		572	-
Acquisition of subsidiaries, net of cash acquired		-	(1,257)
Net cash (outflow) from investing activities		(8,208)	(4,347)
Cash flows from financing activities
Proceeds from issue of share capital		7,459	4,416
Share issue costs		(336)	(240)
Repayments of loan & borrowings		-	(111)
Net cash inflow from financing activities		7,123	4,065
Net change in cash and cash equivalents		(696)	(2,146)
Cash and cash equivalents at beginning of the period		2,444	4,590
Cash and cash equivalents at end of the period		1,748	2,444

 

1.   Basis of preparation of financial statements 

While the financial information included in this annual financial results announcement has been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards as endorsed for use in the European Union (IFRSs), this announcement does not contain sufficient information to comply with IFRSs.

The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 September 2017 or 2016, but is derived from those accounts. Statutory accounts for UKOG for the year ended 30 September 2017 will be delivered to the Registrar of Companies today.

The auditors have reported on those accounts; their reports were unqualified and did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports.

Their reports for the year end 30 September 2017 and 30 September 2016 did not contain statements under s498 (2) or (3) of the Companies Act 2006.

2.      Segment Reporting

All of the Group's assets and operations are located in the United Kingdom. For management purposes, the Group is organised into business units based on the main types of activities and has three reportable segments, as follows:

·      Oil exploration and production segment: includes producing business activities

·      Oil exploration and evaluation: includes non-producing activities.

·      Head Office, corporate and administrative, including parent company activities.

The Board of Directors monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss and is measured consistently with operating profit or loss in the consolidated financial statements. However, the Group's financing (including finance costs and finance income) and income taxes are managed on a group basis and are not allocated to operating segments.

The accounting policies used by the Group in reporting segments internally are the same as those used in the financial statements.

Subject to further acquisitions and/or disposals, the Group expects to further review its segmental information during the forthcoming financial year, as it begins to see the full impact of its acquisitions and/or disposals.

Group	Oil production & exploration	Oil exploration & evaluation	Corporate & Administrative	Consolidated
Year ended 30 September 2017	£'000	£'000	£'000	£'000
Revenue
External Customers	207	-	-	207
Total revenue	207	-	-	207
Results
Depletion & impairment	(74)	-	-	(74)
Share of associates loss	-	(77)	-	(77)
Profit/(loss) before& after taxation	(66)	(209)	(1,993)	(2,268)
Segment assets	2,162	21,193	4,395	27,750
Segment liabilities	(306)	(3,415)	(363)	(4,084)
Other disclosures:
Investment in associate	-	323	-	323
Capital expenditure (1)	2	8,723	-	8,725

(1) Capital expenditure consists of capitalised exploration expenditure, development expenditure, additions to oil & gas properties and to other intangible assets including expenditure on assets from the acquisition of subsidiaries.

Group	Oil production & exploration	Oil exploration & evaluation	Corporate & Administrative	Consolidated
Year ended 30 September 2016	£'000	£'000	£'000	£'000
Revenue
External Customers	151	-	-	151
Total revenue	151	-	-	151
Results
Depletion & impairment	(78)	-	-	(78)
Share of associates loss	-	(106)	-	(106)
(Loss) before & after taxation	(53)	(106)	(1,831)	(1,972)
Segment assets	2,162	10,052	6,305	18,519
Segment liabilities	(310)	(341)	(299)	(950)
Other disclosures:
Investment in associate	-	2,800	-	2,800
Capital expenditure (1)	320	4,940	-	5,260

(1) Capital expenditure consists of capitalised exploration expenditure, development expenditure, additions to oil & gas properties and to other intangible assets including expenditure on assets from the acquisition of subsidiaries.

3.      Loss per Share

The calculation of the basic loss per share is calculated by dividing the consolidated loss attributable to the equity holders of the Company by the weighted average number of ordinary shares in issue during the year.

		2017		2016
Group		£'000		£'000
(Loss) attributable to ordinary shareholders		(2,268)		(1,972)
		Number		Number
Weighted average number of ordinary shares for calculating basic loss per share		2,905,392,699		2,177,913,909
		Pence		Pence
Basic and diluted loss per share		(0.08)		(0.09)

As inclusion of the potential ordinary shares would result in a decrease in the earnings per share they are considered to be anti-dilutive, as such, a diluted earnings per share is not included.

 

4.      Annual report and accounts 

The annual report and accounts will be posted to shareholders today and will be available to members of the public at the Company's registered office at The Broadgate Tower, 8th Floor, 20 Primrose Street, London EC2A 2EW, United Kingdom and on the Company's website at http://www.ukogplc.com/page.php?pID=82.

5.      Annual General Meeting  

The Annual General Meeting of UKOG will be held on 24 April 2018 at The Broadgate Tower, 8th Floor, 20 Primrose Street, London EC2A 2EW, United Kingdom at 11:00am, notice of which will be sent to shareholders with the annual report and accounts.

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.

Glossary

casing	heavy-gauge steel pipe that is lowered into position in the open hole of a well and cemented into place. Casing is run to isolate rock formations with different pressure gradients from the well bore and to ensure that any fluids within the well are isolated from the surrounding rock and surface groundwater zone
completion, well completion, or test completion	the process of making a well ready for production. This principally involves preparing the bottom of the hole to the required specifications, running in the production tubing and its associated downhole tools as well as perforating as required, together with the appropriate completion fluid contained in the well. The process of running in and cementing the casing can also be included in this category
continuous oil deposit, continuous oil accumulation,  or resource deposit	a petroleum accumulation that is pervasive throughout a large area, which is not significantly affected by hydrodynamic influences (i.e. the buoyancy of oil in water) and is not trapped by structural or stratigraphic geological conditions. The deposit, in contrast to conventional accumulations, has therefore not accumulated by the migration of petroleum over medium to long distances. The petroleum in such deposits is found within, or immediately adjacent or close to, the pore spaces where the petroleum is generated, i.e. those pore spaces lying within petroleum source rocks containing organic rich compounds (kerogen) that, when heated over geological time, transform into petroleum. These accumulations are generally associated with organic-rich shales such as the Kimmeridge Clay Formation. Such accumulations do not generally contain significant volumes of free, mobile formation water and therefore have no observable hydrocarbon-water contacts. The extent of the accumulation is generally defined by the limit of where burial depths have been sufficient to transform organic matter within the petroleum source rock unit into petroleum
core or coring	a drilling technique that involves using a doughnut-shaped drilling bit to capture or "cut" a continuous cylinder-shaped core of undamaged in-situ rock. The core is captured in a steel pipe or "core barrel" above the bit. Core is normally cut in 30 feet lengths, or multiples of 30 feet, and normally with a diameter of 3.5 or 4 inches. Core is taken in petroleum reservoir rocks for detailed laboratory analyses of petrophysical and geomechanical parameters
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
electric log	measurements of the electrical properties of the rock and fluids in and surrounding the wellbore to determine the petrophysical and geological properties of the rock in its in-situ state. The electric logs in BB-1z include 3-dimensional images of the electrical resistivity of the rock which when processed are designed to map and characterise natural fractures, these are known as " image logs"
extended flow test or production test	a flow test, or extended well test, designed to test the longer term production performance of a discovery with a view to declaring commercial viability and the establishment of permanent production.
flow test	a test period where hydrocarbons are flowed to surface 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 oil at a commercial flow rate and to recover oil in commercial quantities or volumes
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, being made of the remains of calcareous planktonic algae called coccoliths. The Kimmeridge Limestones are comprised of fine grained coccoliths, fine grained calcium carbonate mud, clay minerals, together with dark grey organic matter
naturally fractured reservoir / fractures	a fractured reservoir contains open and usually connected cracks or fissures within the rock matrix; fractures can enhance permeability of rocks greatly by connecting pore-spaces together; naturally fractured reservoirs have been created over geological time by nature, not man-made via hydraulic fracturing
perforating, perforation	the use of tubing (typically) to convey perforating "guns" to the required well depth. Perforating guns are devices used to prepare wells for production, containing shaped explosive charges in a range of sizes and configurations to optimise the depth of penetration through the steel well casing and surrounding cement and into the adjacent reservoir rock
play	a set of known or postulated oil and or gas accumulations sharing similar geological, geographical, and temporal properties, such as source rock, migration pathways, timing, trapping mechanism, and hydrocarbon type
sidetrack	re-entry of a well from the well's surface location with drilling equipment for deviating from the existing well bore to achieve production or well data from an alternative zone or bottom hole location
thermally mature	a term applied to source rocks which have received sufficient temperature and pressure over geological time to generate hydrocarbons.

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 & 1z drilling and testing of multiple zones completed
Holmwood 3	PEDL143	40%	UKOG	Europa Oil & Gas (Holdings) plc	91.8	Holmwood-1 exploration well planned in 2018
Horndean 1	PL211	10%	UKOG (GB) Limited	IGas Energy Plc	27.3	Field in stable production
Horse Hill 5	PEDL137	32.435%	Horse Hill Developments Ltd ⁶	Horse Hill Developments Ltd ⁶	99.3	Production tests and further appraisal well(s) scheduled for 2018
Horse Hill 5	PEDL246	32.435%	Horse Hill Developments Ltd⁶	Horse Hill Developments Ltd ⁶	43.6	As above
Isle of Wight (Onshore) 2, 3	PEDL331	65%	UKOG	UKOG	200.0	Preparing Arreton-3 oil discovery appraisal well planning submission
Markwells Wood 2	PEDL126	100%	UKOG (GB) Limited	UKOG (GB) Limited	11.2	Revised drilling and testing planning application underway

Notes:

1. Oil field currently in production.

2. Oil discovery pending development and/or appraisal drilling.

3. Exploration asset with drillable prospects and leads. Contains the Broadford Bridge-1&1z discovery well, the extension of the Godley Bridge Portland gas discovery plus further exploration prospects.

4. UKOG has a 100% interest in Kimmeridge Oil & Gas Limited

5. Oil discovery with successful flow test in 3 zones, further long-term testing scheduled in 2018

6. UKOG has a direct 49.9% interest in HHDL, which has a 65% interest in PEDL137 and PEDL246

The information contained within this announcement is deemed by the Company to constitute inside information under the Market Abuse Regulation (EU) No. 596/2014.

 

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