HH-1 and HH-2z Extended Well Test Update

RNS Number : 7435X

UK Oil & Gas PLC

23 December 2019

 

UK Oil & Gas PLC

("UKOG" or the "Company")

Horse Hill Oil Field: HH-1 and HH-2z Extended Well Test ("EWT") Update

UK Oil & Gas PLC (London AIM: UKOG) is pleased to announce the successful completion of the first phase of open hole EWT and associated well clean-up at its Horse Hill-2z ("HH-2z") horizontal well, in which the Company has an 85.635% net controlling interest. During the initial clean-up phase, HH-2z achieved initial rates of up to 1,087 barrels of fluids per day and oil cuts of up to 60%, demonstrating the horizontal's ability to flow at rates significantly greater than the HH-1 vertical well. Produced oil, brought to surface via an electronic submersible pump or "ESP", has been exported to Perenco's Hamble oil terminal for onward sale at market price.

HH-2z is currently shut-in for a scheduled long duration pressure build-up test ("PBU"), during which time preparations will be finalised for a series of planned interventions to further optimise flow rates from the Portland reservoir's sweet-spot.

Whilst HH-2z continued to clean-up prior to the current shut-in, returning oil, completion and drilling fluids to surface, evidence of formation water ingress was also recorded. Consequently, an additional routine intervention is planned to shut-off the water source, currently interpreted to be from an open natural fracture in the "toe" (or far end) of the horizontal trajectory. During the "long-term production" phase, which will follow after the EWT, formation water will likely be reinjected to maintain reservoir pressure and to minimise water disposal costs.

The HH-2z interventions are planned to commence in the New Year following completion of the ongoing HH-2z PBU and will be reported in due course.

Downhole pressure gauges also confirmed that HH-2z penetrated a near virgin pressure section of the Portland oil pool. This finding has likely positive implications for the magnitude of connected oil in place and recoverable reserves seen by the field's two wells. Determining the oil volume connected to HH-2z remains a key EWT objective.

Immediately following the current HH-2z shut-in, flow lines were reconnected to HH-1 and dry Kimmeridge oil flow was resumed on 18 December at an initial half-hourly rate of 354 barrels of oil per day ("bopd") with an average daily rate of 301 bopd.

A further test spread will now be connected to permit EWT production from both HH-1 and HH-2z.

Furthermore, upon establishment of stable oil flow from HH-2z, a short HH-1 intervention is also planned to further optimise both Kimmeridge and Portland test production from the vertical wellbore.

A field development plan ("FDP") was also submitted to the Oil and Gas Authority, seeking consent for the field's planned first "long-term production" phase which will follow the conclusion of the EWT. This phase will consist of two producing wells, HH-1 and HH-2z. Subsequent phases, involving further infill production wells and a possible water reinjection well, are planned to be submitted as FDP addenda in the coming year once longer-term well behaviour is more comprehensively understood.   

UKOG holds a controlling 85.635% interest in the Horse Hill oil field and surrounding highly prospective PEDL137 and PEDL246 licences, which are operated by UKOG's subsidiary company, Horse Hill Developments Ltd.

Stephen Sanderson, UKOG's Chief Executive, commented:

"Although it's still early days in the EWT campaign, we are very encouraged by the magnitude of the initial flow rates. These confirm that HH-2z's horizontal trajectory can deliver flow rates from the Portland sweet-spot that significantly exceed those delivered by the HH-1 vertical discovery well.

Our team's efforts are now firmly focused upon the routine elimination of water ingress and the continued optimisation of HH-2z's near-wellbore, both of which are designed to ensure HH-2z can deliver the best possible stable oil production rates over the coming year.  

Whilst there is still much to be done, these early results, together with the timely submission of the FDP to the OGA, mean we are well on the way to delivering significant production at Horse Hill."

Qualified Person's Statement

Matt Cartwright, UKOG's Commercial Director, who has over 36 years of relevant experience in the global oil industry, has approved the information contained in this announcement. Mr Cartwright is a Chartered Engineer and member of the Society of Petroleum Engineers.

For further information, please contact:

UK Oil & Gas PLC

Stephen Sanderson / Kiran Morzaria                                                      Tel: [phone]

WH Ireland Ltd (Nominated Adviser and Broker)

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

Cenkos Securities PLC (Joint Broker)

Joe Nally / Neil McDonald                                                                         Tel: [phone]

Novum Securities (Joint Broker)                                                                                                              

John Bellis                                                                                                     Tel: [phone]

Public Relations

Brian Alexander                                                                                           Tel: [phone]

Glossary

horizontal well	a well that during drilling is steered so as to follow and remain within a particular geological stratum or reservoir unit having a trajectory that runs approximately parallel to the top and or base of the target horizon
long-term production	stable oil production over the life of the well and or field during the 25 year Prodcution phase of the licence. The establishment of such production is subject to the OGA's consent of the Field Development Plan
oil field	an accumulation, pool or group of pools of oil in the subsurface that produces oil to surface
well test	or flow 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 and volumes.

UKOG Licence Interests

The Company has interests in the following UK licences:

Asset	Licence	UKOG Interest	Licence Holder	Operator	Area (km2)	Status
Avington 1	PEDL070	5%	UKOG (GB) Limited	IGas Energy Plc	18.3	Field currently temporarily shut in
Broadford Bridge/Loxley/Godley Bridge 2, 3, 8	PEDL234	100%	UKOG (234) Ltd 4	UKOG (234) Ltd 4	300.0	BB-1/1z oil discovery, Loxley-1 gas appraisal well planning application submitted
A24 3	PEDL143	67.5%	UKOG	UKOG 7	91.8	Finalising new site selection to drill Portland and Kimmeridge prospects
Horndean 1	PL211	10%	UKOG (GB) Limited	IGas Energy Plc	27.3	Field in stable production
Horse Hill 5	PEDL137	85.635%	Horse Hill Developments Ltd ⁶	Horse Hill Developments Ltd ⁶	99.3	Production tests ongoing, HH-2/2z drilling completed
Horse Hill 5	PEDL246	85.635%	Horse Hill Developments Ltd ⁶	Horse Hill Developments Ltd ⁶	43.6	As above
Isle of Wight (Onshore) 2, 3	PEDL331	95%	UKOG	UKOG	200.0	Preparing planning submission for Arreton-3 oil appraisal well and Godshill exploration well
Markwells Wood	PEDL126	100%	UKOG (GB) Limited	UKOG (GB) Limited	11.2	MW-1 P&A

Notes:

1.  Oil field currently in stable production.

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

3.  Exploration asset with drillable prospects and leads.

4.  Contains the Broadford Bridge-1/1z Kimmeridge oil discovery, the eastern extension of the Godley Bridge Portland gas discovery, plus further undrilled Kimmeridge exploration prospects.

5.  Portland and Kimmeridge Oil field with productive and commercially viable zones, EWT ongoing, production planning consent granted in September 2019, appraisal/development drilling campaign completed. Long term production start expected late 2019.

6.  UKOG has a direct 77.9% interest in HHDL, which has a 65% interest in PEDL137 and PEDL246.

7.  OGA consent received for the transfer of operatorship from Europa to UKOG

8.  Gas discovery pending appraisal drilling and development with underlying Kimmeridge potential

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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