Operational Update

RNS Number : 6747N

UK Oil & Gas Investments PLC

10 August 2017

 

UK Oil & Gas Investments PLC

("UKOG" or the "Company")

Operational Update,

Successful Broadford Bridge-1z Sidetrack Drilled to Optimise Flow Test Potential

Broadford Bridge-1 Exploration Well, Weald Basin, UK

Highlights

·      To deliver optimal Kimmeridge flow test potential, a sidetrack, designated Broadford Bridge-1z ("BB-1z"), has been successfully drilled, logged and cased over the entire 1,480 ft thick Kimmeridge reservoir section.

·      BB-1z delivers a fresh, fractured oil-bearing Kimmeridge reservoir section identical to BB-1, with minimal formation damage and an in-gauge 8.5-inch borehole optimal for well completion and flow testing.

·      The sidetrack, from 2,613-5,757 ft measured depth ("MD"), runs parallel to BB-1, some 200 ft to the south, mirroring the original BB-1 trajectory. All necessary regulatory permissions to drill BB-1z were obtained.  BB-1 plugged and abandoned over entire Kimmeridge section.

·      Significant oil traces in drilling fluid seen throughout 1,400 ft vertical thickness of BB-1z Kimmeridge section. Wet gas shows near identical to BB-1. Southerly trajectory aimed at possible more intensely natural fractured zones than BB-1.

·      Completion of BB-1z as a potential oil producer is now underway and on track. All permissions in place for a comprehensive multiple zone extended flow test, comprising 926 ft total aggregate perforated section.

UK Oil & Gas Investments PLC (London AIM and ISDX: UKOG) is pleased to announce that, to optimise well completion and subsequent flow test performance, it has successfully drilled, logged and cased a mechanical sidetrack, BB-1z, at its 100% owned Broadford Bridge-1 ("BB-1") exploration well located in licence PEDL234. The sidetrack has fulfilled its objective of replicating the geological success of BB-1, via a mirror-image borehole within the Kimmeridge. The new borehole delivers a fresh, identical section of heavily-fractured oil-bearing Kimmeridge reservoir, with minimal formation damage and an in-gauge, cased-off, 8.5-inch borehole optimal for well completion and flow testing.

A mechanical sidetrack was included as a provision in the Oil and Gas Authority's ("OGA") permission to drill BB-1, being a normal contingency during drilling operations.

Following the month-long coring and electric logging programme it became apparent that the duration and difficulty of coring such highly-fractured rocks in an inclined well led to potential plugging of some intensely fractured Kimmeridge zones likely jeopardising flow test performance.  Sections of the overlying Purbeck also exhibited washout zones making both optimal casing-setting in the full 8.5-inch open hole section and resultant Kimmeridge well completion problematic. Using lessons learnt from BB-1, the short-duration sidetrack was drilled using the same non-toxic drilling fluid but with a lower density and higher viscosity mixture to minimise reservoir formation damage via possible plugging of oil-filled fractures. The sidetrack's in-gauge 8.5-inch borehole was cased-off successfully without problem and will now be completed for flow testing.

The sidetrack, drilled in five days, was drilled out from BB-1's existing 9 ⅝-inch casing and extends from 2,613-5,757 ft measured depth ("MD"), from within the Purbeck Limestones to below the base of the Kimmeridge Limestone Zero ("KL0") fracture zone. The sidetrack's surface trace runs parallel to BB-1, some 200 ft to the south, mirroring the original BB-1 trajectory.

Significant oil traces were recovered from drilling fluid throughout the Kimmeridge section from 3,622 ft MD to below 5,562 ft MD, a vertical thickness of around 1,400 ft, greater than seen in BB-1. Wet gas shows were at near identical levels to that seen in the original BB-1 borehole.

The more southerly BB-1z trajectory was designed to encounter a potentially higher degree of natural fracturing associated with a nearby significant fault within the Kimmeridge. Initial CMI/MMI log quick-look interpretations indicate that this strategy was successful.

Additionally, BB-1z delivers a unique opportunity to map the lateral connectivity of the natural fracture system between BB-1 and BB-1z. This is a key piece of reservoir information, which along with the analysis of 554 ft of core and electric logs, will greatly aid the placement of future wells and ultimately help optimise any potential production from the reservoir at Broadford Bridge.

Prior to operations start, the original borehole, BB-1, was permanently abandoned with three continuous cement plugs over the entire oil-bearing Kimmeridge section, in full accordance with current required safety and well abandonment regulations.

All necessary regulatory permissions to drill the mechanical sidetrack, BB-1z, were obtained from the Environment Agency, Health and Safety Executive and OGA. The sidetrack's surface trace also lies within the approved "zone of deviation" as specified under West Sussex County Council's ("WSCC") planning consent. The completion of the sidetrack as a potential oil-producing well will constitute the end of the permitted "well construction phase" as defined under WSCC's planning consent.

Operations at site continue to prepare and complete BB-1z as a potential oil producing well from multiple zones over a gross perforated interval of 926 ft. Flow testing will commence after the rig has vacated the site, which will be announced in due course.

The extended flow test programme, to be conducted over a maximum 14-week period, is specifically designed to gather further supportive evidence that the Kimmeridge contains a continuous oil deposit, with mobile light oil and which can flow to surface at commercial rates and in commercial volumes.

The BB-1 and BB-1z technical learnings also have clear positive implications for the forthcoming Horse Hill flow test, which is now being technically reviewed to include further zones and an increased perforated section.

About BB-1

BB-1 and BB-1z, an exploration step-out, is located south of Billingshurst, West Sussex, within the 300 km² PEDL234 licence, in which the Company has a 100% interest via its ownership of the licence's operator, Kimmeridge Oil & Gas Limited ("KOGL").

As previously reported, in the Company's opinion, the multiple positive indications of mobile light oil observed throughout the entire naturally fractured Kimmeridge Limestone 0 ("KL0") to KL4 and shale target section are supportive that a significant continuous oil deposit, with a vertical extent of around 1,400 ft has been demonstrated by BB-1 and 1z. The uppermost two units of this zone, KL4 and KL3, flowed oil at a stable aggregate rate of 1,365 barrels per day in the Horse Hill-1 discovery near Gatwick Airport in 2016.

This continuous oil deposit therefore likely underlies the entire PEDL234 licence and a significant area of the wider Weald Basin, including the Horse Hill-1 Kimmeridge oil discovery some 27 km to the north east. The Company has the largest licence holding in the Weald Basin and within the prospective area of the Kimmeridge play.

Stephen Sanderson, UKOG's Executive Chairman, commented:

"Although BB-1 drilling and coring results were highly successful, proving our geological concept, it became clear that the duration and difficulty of coring such highly-fractured rocks in an inclined hole put the borehole in a less than optimal condition, ultimately jeopardising Kimmeridge flow-test performance. Consequently, using the drilling knowledge gained from BB-1, we have delivered BB-1z, consisting of a fresh, undamaged, 1,480 ft thick, intensely fractured Kimmeridge oil-bearing reservoir in optimal condition for flow testing.

The sidetrack's comprehensive image log data also presents an opportunity to unravel the extent and connectivity of natural fracturing within the Kimmeridge reservoir between BB-1 and BB-1z. This will greatly assist our understanding of flow test behaviour and the optimal placement of potential future Kimmeridge production wells at the site.

The sidetrack, BB-1z, is thus a solid investment in the future of the flagship Broadford Bridge discovery and the wider Kimmeridge play that underlies UKOG's significant licence holdings."

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.

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 Bavister                                                   Tel: [phone]

Cenkos Securities PLC (Joint Broker)

Nick Tulloch / Neil McDonald                                                   Tel: [phone]

BPA Media/Square 1 Consulting (Public Relations)

Brian Alexander / David Bick                                                    Tel: [phone]

 Glossary:

casing	heavy gauge steel tubing designed to line the wall of a well. The casing provides a safe controlled space in which the drill pipe and bit can operate in isolation from conditions in overlying rock units. The steel tubing is bonded to the surrounding rock by impermeable concrete, known as "cement"
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
completion or well 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 down hole tools as well as perforating as required, together with the selection of 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 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
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 logs	tools which measure 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 logging equipment is lowered into the borehole on a steel cable through which a wire conveys data to be recorded at surface. The logging at BB-1 also includes tools which record 3-dimensional images and ultrasound scans of the rock designed to map and characterise natural fractures, known as " image logs"
formation damage	the presence of residual drilling fluid and/or lost circulation materials across the reservoir which acts as a barrier or restriction to the subsequent flow of fluids (hydrocarbons) into the wellbore. Damage can be created to plug or block pore-spaces and/or fractures via three mechanisms directly related to the composition, density and viscosity of the drilling and lost circulation material, namely; solid particles and precipitates, swelling clay reactions with water, chemical reactions forming chemical precipitates
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
lost circulation zone (LCZ)	a zone of highly porous and permeable rock or voids directly intersecting the wellbore into which drilling fluid can escape. Commonly LCZs occur in extensive open fracture networks, voids or vugs within limestones and highly porous and permeable sandstones
naturally fractured reservoir	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
shale	a fissile rock that is formed by the consolidation of clay, mud, or silt particles, and that has a finely stratified or laminated structure. Certain shales, such as those of the Kimmeridge Clay, often contain a significant proportion of organic material, which when subject to increasing temperature and pressure over geological time transform into petroleum (known as petroleum "source rocks")
sidetrack	re-entry of a well from the well's surface location with drilling equipment for the purpose of deviating from the existing well bore to achieve production or well data from an alternative zone or bottom hole location, or to remedy an engineering problem encountered in the existing well bore
step-out well	a well specifically designed to determine the lateral extent of a discovered hydrocarbon accumulation or play
well "zone of deviation"	an arc or "cheese wedge" within which the surface trace of a deviated well is permitted to travel under planning consent. The apex of the arc being the well's surface location
wet gas	natural gas, predominantly consisting of methane (C1), ethane (C2) and propane (C3) but also containing the longer molecular chain natural gases butane and iso-butane (C4), pentane and iso-pentane (C5). The C4 and C5 gases are created during oil-generation within a petroleum source rock unit when oil is thermally cracked. At Horse Hill these natural gases lie in solution within the oil in the KL3 and KL4 Kimmeridge Limestone reservoirs (i.e. solution or associated gas and not as a separate free-gas phase).

UKOG Licence Interests

The Company has interests in the following ten 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 drilling underway
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	32.435%	Horse Hill Developments Ltd ⁶	Horse Hill Developments Ltd ⁶	99.3	Submitted planning application for long term production tests and drilling of two wells
Horse Hill 5	PEDL246	32.435%	Horse Hill Developments Ltd⁶	Horse Hill Developments Ltd ⁶	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
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. Contains the extension of the Godley Bridge Portland gas discovery and the site of the forthcoming Broadford Bridge-1 well.

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 direct 48% 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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