UK Oil and Gas Investments, one of the companies behind the Horse Hill oil well near Gatwick, has paid £3.5m for a Petroleum Exploration and Development Licence (PEDL) in the West Sussex Weald.
UKOG announced this morning it had done a deal with Celtique Energie and Magellan to acquire 100% of PEDL234 (pictured red).
The first term of the licence is due to expire on 30 June 2016. UKOG said the agreement was conditional on the Secretary of State for Energy and Climate Change extending the licence for at least one year.
If the deal is confirmed UKOG will double its licence area in what it describes as “prime Kimmeridge Limestone Oil province”. PEDL234 covers 300sq km or 116 sq miles.
UKOG announced in March it had achieved flow rates from the Kimmeridge limestones and Portland sections at Horse Hill of 1,688 barrels of oil day. It described the results as “outstanding” and equivalent to flow rates achieved in the North Sea.
PEDL234 has planning and environmental permissions to drill the Broadford Bridge exploration well near Billingshurst.
The site was prepared in autumn 2014 but no further work has been carried out.
In an agreement with DECC, Celtique Energie and Magellan were allowed to retain PEDL234, along with neighbouring PEDL243, if they drilled the Broadford Bridge well by 2016.
But the two companies have been involved in a legal dispute about funding the well and Magellan had expected to have to relinquish the licence. Magellan recently told shareholders it wanted to sell its assets in the Weald DrillOrDrop report. Today it announced that the dispute had been settled. According to a filing by Magellan in December 2014, the well was expected to cost £3.17m. More details
UKOG said analysis and seismic survey results “strongly suggest” that PEDL234 has similar Kimmeridge Limestone oil potential to that seen at Horse Hill.
It said it believed the rock structure at Broadford Bridge was similar to Horse Hill and the Balcombe-1 well, drilled nearby in 1986.
UKOG said it would secure the remaining consents from the Health and Safety Executive and Oil and Gas Authority in 2017 to drill Broadford Bridge.
Godley Bridge gas
UKOG said it also believed the Portland sandstone gas discovery, made at the Godley Bridge-1 well in neighbouring PEDL 235, extended into PEDL234. It said if this was confirmed there was potential for a conventional “gas to wire” electricity generation project.
It said it planned to apply to West Sussex County Council and the Environment Agency for permission to drill another well in PEDL234 to appraise the Godley Bridge gas accumulation.
Isle of Wight
UKOG said the deal also included Magellan’s 22.5% stake in the offshore Isle of Wight licence, taking UKOG’s interest to 100%
UKOG’s executive chairman, Stephen Sanderson, said:
“This is a transformational step for the Company and its position in the new Weald Kimmeridge Limestone oil resource play. The transaction more than doubles our net acreage position and potential recoverable resource base in the most prospective part of the play, all at a very reasonable entry price. The transaction makes UKOG the leading player and acreage holder in Kimmeridge oil and a significant player in the UK onshore oil industry.”
“The drill-ready and permitted BB-1 site, along with the permitted Holmwood-1 well [also known as Bury Hill Wood] immediately to the north-east, should, by the end of 2017, give us the opportunity to demonstrate the replicability of the HH-1 [Horse Hill well Kimmeridge results over a more significant area of the Weald Basin. In parallel, we will be pushing HH-1 towards first oil with planned long-term production tests, appraisal wells and 3D seismic.”
He described Godley Bridge gas as “the potential cherry on the cake”
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