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DJ UK Oil & Gas Investments PLC Drilling Plans & Oil in Place Update

TIDMUKOG

RNS Number : 8908Q

UK Oil & Gas Investments PLC

05 December 2016

5 December 2016

UK Oil & Gas Investments PLC

("UKOG" or the "Company")

PEDL234 Licence, Drilling Plans & Oil in Place Update, Central Weald Basin, UK

Highlights

-- Kimmeridge Oil & Gas Limited plans first-half 2017 Broadford Bridge-1 exploratory well to test naturally-fractured Kimmeridge Limestone reservoirs as proven at Horse Hill-1

-- Within PEDL234, Nutech calculates a P50 Kimmeridge Clay Formation ("KCF") oil in place ("OIP") of 7.12 billion barrels ("BBO"), of which 1.71 BBO lies within Kimmeridge Limestones

-- PEDL234 increases gross attributable P50 KCF OIP within UKOG's licence interests in the Weald by 72%, from 9.95 BBO to 17.10 BBO, representing approximately 21% of Nutech's calculated Weald Basin-wide P50 KCF OIP of 81.95 BBO as announced in October 2015

-- PEDL234 significantly increases net attributable P50 Kimmeridge Limestone OIP within UKOG's licence interests in the Weald Basin by 348%, from 0.54 BBO to 2.41 BB

UK Oil & Gas Investments PLC (LSE AIM/ISDX: UKOG) announces that Kimmeridge Oil & Gas Limited ("KOGL"), has informed the Company that analysis by US petrophysical specialists Nutech, calculates that a most likely or P50 OIP value of 1.713 BBO lies within the Kimmeridge Limestone ("KL") reservoirs underlying its 300 sq km Weald Basin licence PEDL234 ("Licence"). As previously reported, these naturally-fractured limestones flowed oil at an aggregate stabilised flow rate of 1,365 barrels per day ("bopd") from the Horse Hill-1 ("HH-1") well, in which the Company has a 31.2% interest. HH-1 is located 17 km to the north-west of the Licence. The entire KCF within the Licence is calculated to contain a total gross P50 OIP of 7.120 BBO. The Company, via its ownership of KOGL, holds a 100% interest in the Licence.

With the acquisition of the Licence, together with the purchase of increased ownership in Horse Hill (PEDL137 & PEDL246) and Holmwood (PEDL143), the Company's estimated net attributable P50 total KL OIP within its licence interests in the Weald Basin, has increased by 348% since October 2015, from 0.539 BBO to 2.414 BBO. Similarly, the Company's estimated net attributable P50 KF OIP has increased by 315% from 2.368 BBO reported in October 2015 to 9.831 BBO.

The gross P50 KL OIP contained within the Company's licence interests in the Weald Basin increased by 82%, from 2.098 BBO reported in October 2015 to 3.811 BBO. Similarly the gross KCF OIP increases by 72%, from 9.952 BBO reported in October 2015 to 17.072 BBO. As illustrated in Table 2, below, this gross P50 KCF represents approximately 21% of Nutech's Weald Basin-wide KCF P50 of 81.915 BBO as estimated and announced on 21 October 2015.

The results of Nutech's analysis are illustrated in Tables 1 and 2 below.

Nutech's OIP numbers should be regarded as Total Petroleum-Initially-in-Place, as defined by the Society of Petroleum Engineer's Petroleum Resource Management System of resource reporting (see glossary).

As previously stated by the Company, it is emphasised that the above estimated OIP volumes should not be construed as recoverable resources, contingent or prospective resources, or reserves.

Table 1: PEDL234 Kimmeridge OIP in Billions of Barrels

 
    Geological       P90 OIP   P50 OIP (BBO)   P10 OIP (BBO) 
        Unit          (BBO) 
------------------  --------  --------------  -------------- 
    Kimmeridge 
     Limestones       0.710        1.713           3.382 
------------------  --------  --------------  -------------- 
    Kimmeridge 
       Shales         2.448        5.406          10.335 
------------------  --------  --------------  -------------- 
 TOTAL KIMMERIDGE 
      CLAY FM         3.158        7.120          13.717 
------------------  --------  --------------  -------------- 
 

Table 2: Company Licence interests in the Weald Basin, Kimmeridge Oil in Place in Billions of Barrels

 
    Geological            Company Net              Company Gross           Total 
        Unit              Attributable            Licence Holding          Weald 
                         Licence holding            OIP (1) BBO          Basin-wide 
                           OIP (2) BBO                                    OIP (3) 
                                                                            BBO 
------------------  -----------------------  ------------------------  ------------ 
                      P90     P50     P10      P90     P50      P10         P50 
------------------  ------  ------  -------  ------  -------  -------  ------------ 
    Kimmeridge 
     Limestones      1.078   2.414   4.555    1.811   3.811    6.918      19.476 
------------------  ------  ------  -------  ------  -------  -------  ------------ 
    Kimmeridge 
       Shales        3.155   7.417   12.529   6.252   13.261   23.439     62.439 
------------------  ------  ------  -------  ------  -------  -------  ------------ 
 TOTAL KIMMERIDGE 
      CLAY FM        4.233   9.831   17.084   8.063   17.072   30.357     81.915 
------------------  ------  ------  -------  ------  -------  -------  ------------ 
 

Notes:

(1) total aggregate OIP within 9 UKOG interest Weald Basin licences covering 672 sq km, namely: PEDL137, PEDL246, PEDL234, PEDL143, PEDL233, PEDL126, PEDL070, PL235, PL211, within which UKOG has varying economic interests (see notes to editors for details). These 9 licences represent the Company's total licence and economic interests within the AOI detailed in note (3) below. Note that with the exception of PEDL234, the gross OIP utilised is as calculated and reported by Nutech in October 2015

(2) net attributable equals the calculated gross OIP in each licence multiplied by % working interest in that licence and aggregated over the 9 Licences specified in note (1) above.

(3) as calculated by Nutech and reported in October 2015 covering a 1261 sq mile Weald-wide Area of Interest (AOI) which includes the 9 licences detailed in (1) above and areas in which the Company has no licence or economic interests

Nutech Analysis

The calculated OIP values, shown in the tables above, were derived and extracted from a comprehensive revision to the Weald Basin-wide regional petrophysical and OIP model previously reported in October 2015. The model, utilising 85 wells over 1,261 sq miles of the Weald Basin, now incorporates a seismic-derived geological framework, plus a revised petrophysical analysis of key wells. Key learnings from the successful Horse Hill Portland and KL flow tests, reported in February and March 2016, have been incorporated.

PEDL234 Drilling Plans

KOGL now plan to drill the BB-1 well, located in the southern sector of the Licence during the first half of 2017. BB-1 is a deviated well designed to test naturally fractured conventional KL reservoirs within a "mirror-image" of the geological feature containing the proven Horse Hill Kimmeridge oil accumulation. As previously reported, the well site is constructed and the necessary planning and Environment Agency consents to drill are in place.

A further well is also planned, subject to normal regulatory approvals, before mid-2018, to test the eastern extension of the Godley Bridge Portland Sandstone gas discovery and an underlying KL oil prospect which is geologically analogous to the Company's Holmwood prospect, due to be drilled in 2017.

KOGL and the Licence

KOGL, a wholly owned subsidiary of UKOG, is the operator and 100% working interest holder of the Licence. As reported in June and August 2016, the Licence, the drilling site and regulatory permissions to drill, were acquired by the Company via the acquisition of the interests of Celtique Energie Weald Limited and Magellan Petroleum (UK) Limited.

The Licence straddles the Weald's Upper Jurassic basin centre and contains a thicker overall Kimmeridge section than seen underlying the Horse Hill licences. Numerous undrilled structural closures at Portland, Kimmeridge, Great Oolite and Triassic reservoir levels are mapped within the Licence.

The BB-1 target is, in UKOG's view, a lookalike to both the HH-1 oil discovery and the nearby Balcombe-1 oil discovery ("BC-1"), following the same overall structural trends. The BC-1, drilled in 1986, recovered 48 barrels of oil in one day from what the Company interprets to be the same naturally fractured KL reservoir unit which, as reported in February 2015, flowed at a stable rate of 901 bopd from HH-1. The recovered BC-1 KL oil was typed to a KCF shale source rock by Burwood et al in 1991 .

KOGL also map an extension into PEDL234 of the 1983 Godley Bridge-1 Portland sandstone gas discovery. Nutech's analysis of GB-1 indicates that the KL underlying the Portland gas accumulation are naturally fractured and contain a calculated OIP of the same magnitude as HH-1. As previously stated, KOGL now plans to commence drilling an exploration well prior to mid-2018 to test both the KL and further appraise the Portland gas discovery.

The results of Xodus' evaluation of the Godley Bridge Portland gas in place and recoverable resources are expected in due course.

Stephen Sanderson, UKOG's Executive Chairman, commented:

"The Nutech analysis securely underpins our rationale for the Licence acquisition and BB-1 drilling plans in 2017. This study, and the resultant four-fold increase in the Company's net Kimmeridge oil in the ground, clearly highlights PEDL234 as a potential flagship asset to sit alongside Horse Hill.

The BB-1 well is designed not only to test a geological mirror-image of the Horse Hill Kimmeridge oil discovery, but, more significantly, to also seek to establish whether Kimmeridge Limestone oil is truly an extensive resource play. If so proven, given the sheer size of the PEDL234 Licence, our 100% interest, and the existence of further multiple identified drilling targets, the impact of BB-1 success would likely be transformational.

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DJ UK Oil & Gas Investments PLC Drilling Plans & Oil -2-

Our wider strategy over the forthcoming 18-24 months aims to de-risk the overall Kimmeridge Limestone oil play, both commercially and geographically. Through the planned extended production testing, sidetrack and new well at Horse Hill, the goal is to establish that the Kimmeridge can be brought into commercial production. In parallel, our three-well exploration programme of BB-1, Holmwood-1 and an additional PEDL234 well, also aims to demonstrate that Horse Hill success can be replicated over the central "sweet-spot" of the Weald Basin. We look forward to this journey and eagerly await the start of BB-1 in the first half of 2017."

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: 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:

 
 deviated well                        a well that during drilling is steered 
                                       away from the vertical 
-----------------------------------  -------------------------------------------------------- 
 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 
-----------------------------------  -------------------------------------------------------- 
 extended production                  a flow test, or extended well test, 
  test                                 as per the permission granted by 
                                       the Oil and Gas Authority, with 
                                       an aggregate flow period duration 
                                       over all zones of greater than 96 
                                       hours and up to 90 days maximum 
-----------------------------------  -------------------------------------------------------- 
 gas in place                         the quantity of gas that is estimated 
                                       to exist originally in naturally 
                                       occurring accumulations in the ground 
                                       before any extraction or production 
-----------------------------------  -------------------------------------------------------- 
 gross oil                            100% of oil in place, without taking 
  in place                             into account the Company's ownership 
                                       interest 
-----------------------------------  -------------------------------------------------------- 
 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 
-----------------------------------  -------------------------------------------------------- 
 naturally                            a petroleum reservoir rock containing 
  fractured                            tectonically induced open fractures, 
  reservoirs                           joints and fissures which are filled 
                                       with petroleum. The petroleum filled 
                                       fractures can provide essential 
                                       reservoir porosity and permeability, 
                                       essential permeability only, or 
                                       provide a permeability enhancement 
                                       alone. Such reservoirs have been 
                                       created over geological time by 
                                       nature, not man-made via hydraulic 
                                       fracturing 
-----------------------------------  -------------------------------------------------------- 
 oil (or petroleum)                   the quantity of oil (or petroleum) 
  in the ground                        that is estimated to exist originally 
  or oil (or                           in naturally occurring accumulations 
  petroleum)                           in the ground before any extraction 
  in place                             or production 
-----------------------------------  -------------------------------------------------------- 
 P10 (high                            a 10% probability that a stated 
  estimate)                            volume will be equalled or exceeded 
-----------------------------------  -------------------------------------------------------- 
 P50 (best                            a 50% probability that a stated 
  estimate)                            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 
-----------------------------------  -------------------------------------------------------- 
 play                                 a set of known or postulated oil 
                                       and or gas accumulations sharing 
                                       similar 
                                       geologic, geographic, and temporal 
                                       properties, such as source rock, 
                                       migration pathways, timing, trapping 
                                       mechanism, and hydrocarbon type 
-----------------------------------  -------------------------------------------------------- 
 prospect                             a project associated with a potential 
                                       accumulation that is sufficiently 
                                       well defined to represent a viable 
                                       drilling target 
-----------------------------------  -------------------------------------------------------- 
 recoverable                          those quantities of petroleum (oil 
  resources                            in this case) estimated, as of a 
                                       given date, to be potentially recoverable 
                                       from known accumulations 
-----------------------------------  -------------------------------------------------------- 
 reserves                             those quantities of petroleum anticipated 
                                       to be commercially recoverable by 
                                       application of development projects 
                                       to known accumulations from a given 
                                       date forward under defined conditions; 
                                       reserves must further satisfy four 
                                       criteria: they must be discovered, 
                                       recoverable, commercial and remaining 
                                       (as of the evaluation date) based 
                                       on the development project(s) applied; 
                                       reserves are further categorized 
                                       in accordance with the level of 
                                       certainty associated with the estimates 
                                       and may be sub-classified based 
                                       on project maturity and/or characterised 
                                       by development and production status 
-----------------------------------  -------------------------------------------------------- 
 resource play                        a play where trapped petroleum accumulations 
                                       are expected to be pervasive throughout 
                                       a large area and that are not significantly 
                                       affected by hydrodynamic influences 
                                       (also called "continuous-type deposits") 
-----------------------------------  -------------------------------------------------------- 
 sandstone                            a clastic sedimentary rock whose 
                                       grains are predominantly sand-sized. 
                                       The term is commonly used to imply 

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DJ UK Oil & Gas Investments PLC Drilling Plans & Oil -3-

                                       consolidated sand or a rock made 
                                       of predominantly quartz sand 
-----------------------------------  -------------------------------------------------------- 
 seismic                              a method utilising the common mid-point 
                                       technique, by which the reflections 
                                       of sound waves transmitted into 
                                       the earth are collected and processed 
                                       into an image which can be interpreted 
                                       into a cross section of the earth's 
                                       crust. 
-----------------------------------  -------------------------------------------------------- 
 shale                                a laminated and fissile very fine-grained 
                                       sedimentary rock, consisting of 
                                       compacted silt and clay-size mineral 
                                       particles. Can contain high proportions 
                                       of organic material, which if subjected 
                                       to heat and pressure over geological 
                                       time can generate petroleum (a petroleum 
                                       source rock) 
-----------------------------------  -------------------------------------------------------- 
 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. 
-----------------------------------  -------------------------------------------------------- 
 source rock                          a laminated and fissile very fine-grained 
                                       sedimentary rock, consisting of 
                                       compacted silt and clay-size mineral 
                                       particles. Can contain high proportions 
                                       of organic material, which if subjected 
                                       to heat and pressure over geological 
                                       time can generate petroleum (a petroleum 
                                       source rock). 
-----------------------------------  -------------------------------------------------------- 
 Total Petroleum-initially-in-place   is that quantity of petroleum which 
                                       is estimated to exist originally 
                                       in naturally occurring accumulations. 
                                       Total Petroleum-initially-in-place 
                                       is, therefore, that quantity of 
                                       petroleum which is estimated, on 
                                       a given date, to be contained in 
                                       known accumulations, plus those 
                                       quantities already produced therefrom, 
                                       plus those estimated quantities 
                                       in accumulations yet to be discovered. 
                                       Total Petroleum-initially-in-place 
                                       may be subdivided into Discovered 
                                       Petroleum-initially-in-place and 
                                       Undiscovered Petroleum-initially-in-place, 
                                       with Discovered Petroleum-initially-in-place 
                                       being limited to known accumulations. 
                                       It is recognized that all Petroleum-initially-in-place 
                                       quantities may constitute potentially 
                                       recoverable resources since the 
                                       estimation of the proportion which 
                                       may be recoverable can be subject 
                                       to significant uncertainty and will 
                                       change with variations in commercial 
                                       circumstances, technological developments 
                                       and data availability. A portion 
                                       of those quantities classified as 
                                       Unrecoverable may become recoverable 
                                       resources in the future as commercial 
                                       circumstances change, technological 
                                       developments occur, or additional 
                                       data are acquired. 
-----------------------------------  -------------------------------------------------------- 
 

Notes to Editors:

R. Burwood, J. Staffurth, L. de Walque and S.M. De Witte 1991. Petroleum geochemistry of the Weald-Wessex Basin of southern England: a problem in source-oil correlation.

About Nutech

Nutech (www.nutechenergy.com) is a global oil services company specialising in petrophysics, reservoir evaluation and reservoir optimisation at all stages of the exploration and production life-cycle.

Company Shareholding in Angus Energy

Further to Angus Energy PLC's admission to AIM and the associated issue of equity the Company's shareholding in Angus is now 2.79%.

UKOG Licence Interests

The Company has interests in the following UK licences:

 
Asset          Licence     UKOG's          Licence              Operator         Area              Status 
                           Interest         Holder                               (km(2) 
                                                                                   ) 
------------  ---------  ----------  -------------------  -------------------  --------  -------------------------- 
Avington                                  UKOG (GB)           IGas Energy                      Field in stable 
 (1)           PEDL070       5%             Limited                Plc           18.3             production 
------------  ---------  ----------  -------------------  -------------------  --------  -------------------------- 
                                                                                                  Reviewing 
                                                                                                  economics 
                                                                                           of appraisal/development 
Baxters                                                                                         well. Licence 
 Copse                                    UKOG Weald          IGas Energy                        extended to 
 (2)           PEDL233       50%            Limited                Plc           89.6                2018 
------------  ---------  ----------  -------------------  -------------------  --------  -------------------------- 
                                          Kimmeridge           Kimmeridge                         BB-1 well 
Broadford                                    Oil &                Oil &                           permitted, 
 Bridge                                   Gas Limited          Gas Limited                      expected 2017 
 (3)           PEDL234      100%              (4)                  (4)           300.0            spud date. 
------------  ---------  ----------  -------------------  -------------------  --------  -------------------------- 
                                                                                                EA permission 
                                                                                                 obtained to 
                                                                                                  drill B-4x 
                                            Angus                Angus                            sidetrack, 
Brockham                                    Energy               Energy                       HSE, OGA approval 
 (1)            PL235       1.5%              (6)                  (6)            8.9              pending 
------------  ---------  ----------  -------------------  -------------------  --------  -------------------------- 
                                                                 Europa                          Holmwood-1 
                                                                  Oil &                          exploration 
Holmwood                                                     Gas (Holdings)                       well spud 
 (3)           PEDL143       30%             UKOG                  plc           91.8           expected 2017 
------------  ---------  ----------  -------------------  -------------------  --------  -------------------------- 
Horndean                                  UKOG (GB)           IGas Energy                      Field in stable 
 (1)            PL211        10%            Limited                Plc           27.3             production 
------------  ---------  ----------  -------------------  -------------------  --------  -------------------------- 
                                                                                                  Submitted 
                                                                                             planning application 

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DJ UK Oil & Gas Investments PLC Drilling Plans & Oil -4-

                                                                                                for long term 
Horse                                       Horse                Horse                            production 
 Hill                                  Hill Developments    Hill Developments                     tests and 
 (5)           PEDL137      31.2%           Ltd (7)              Ltd (7)         99.3              2 wells 
                                                                               --------  -------------------------- 
Horse                                       Horse                Horse 
 Hill                                  Hill Developments    Hill Developments 
 (5)           PEDL246      31.2%           Ltd (7)              Ltd (7)         43.6             As above 
------------  ---------  ----------  -------------------  -------------------  --------  -------------------------- 
Isle 
 of Wight                                                                                         Preparing 
 (Offshore)                              UKOG Solent          UKOG Solent                     drilling planning 
 (3)            P1916       100%            Limited              Limited         46.7             submission 
------------ 
Isle 
 of Wight                                                                                         Preparing 
 (Onshore)                                                                                    drilling planning 
 (2, 3)        PEDL331       65%             UKOG                 TBA            200.0            submission 
------------  ---------  ----------  -------------------  -------------------  --------  -------------------------- 
                                            Angus                Angus                           Drilling of 
Lidsey                                      Energy               Energy                          infill well 
 (1)            PL241       1.4%              (6)                  (6)            5.3          being considered 
------------  ---------  ----------  -------------------  -------------------  --------  -------------------------- 
                                                                                                  Submitted 
                                                                                             planning application 
Markwells                                                                                       for appraisal 
 Wood                                     UKOG (GB)            UKOG (GB)                          and field 
 (2)           PEDL126      100%            Limited              Limited         11.2            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 2.79% interest in Angus Energy, which has a 50% interest in Lidsey and a 55% interest in Brockham.

7. UKOG has a direct 48% interest in HHDL, which has a 65% interest in PEDL137 and PEDL246.

This information is provided by RNS

The company news service from the London Stock Exchange

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