UKOG announces £10m loan to fund Weald oil exploration

BB 171022 WOW

UKOG’s Broadford Bridge site in West Sussex, 22 October 2017. Photo: Weald Oil Watch

The leading oil exploration company in the Weald in southern England announced this morning it had taken out a £10m loan.

UK Oil and Gas Investments, whose interests include Horse Hill and Broadford Bridge, said the loan would be used for testing and drilling projects in the region.

Executive chairman, Stephen Sanderson, said:

“This £10m funding, the largest in the Company’s short history, ensures that our stated drilling and testing programme, spanning four wells over the next 12 months, is fully funded.”

A statement to investors said UKOG had already drawn down £7.5m of the loan. The remainder would be drawn at the end of the year, it said.

UKOG said the lenders – Cuart Investments PCC Ltd and Ya II Pn Ltd – could convert the laws to shares. The loan was arranged by Riverfort Gobal Capital Ltd, which is also behind a $5m loan announced yesterday by Solo Oil, another investor at Horse Hill.

UKOG shares rose on the news. At the time of writing, they were up just under 0.9p on the opening price of 4p.

“Zone 1 not viable without stimulation”

UKOG is currently carrying out flow tests at its Broadford Bridge oil site near Billingshurst in West Sussex. It has said it plans to test nine zones in the Kimmeridge Limestone in what it calls reservoir sections KL1-KL5.

Today’s announcement suggested zone KL1 was unlikely to be viable without stimulation. UKOG said:

“Although these two KL1 zones are hydrocarbon bearing, the Company concludes that sustained commercial flow rates from the shale dominated KL1 could likely only be obtained via reservoir stimulation beyond the scope of its existing regulatory permissions.”

The company said the next tests would be in the KL2 zone, followed by KL3, 4 and 5. The testing programme was expected to continue until the end of the year, UKOG said.

Mr Sanderson, said:

“The flow testing at BB-1z continues to be a key element of the Company’s wider programme and we remain highly encouraged by the natural flow of further hydrocarbons to surface.”

Setbacks and breaches

DrillOrDrop has reported a series of setbacks at Broadford Bridge, including cement bond problems, a washed-out section of the well bore and a breach of planning condition by working on Sundays.

In an update on the planning breach, West Sussex County Council told DrillOrDrop:

“We have now looked into the previous allegations and raised the matter with the operator. The operator has advised that carrying out flow testing requires that, in the interest of safety, a small number of staff are on site at all times. Although this need was evident at the time of the application and was discussed in Committee, it is not specifically allowed for within the conditions attached to the permission.

“With regard to enforcement, any action by the County Council must be appropriate and proportionate (in accordance with the County Council’s formal Planning Compliance and Enforcement Policy).

“The information provided in the complaints indicates that there has been some movement of forklifts and similar within the site on a Sunday. Importantly, however, the complaints did not state that this level of activity has adversely affected any residents’ enjoyment of their properties.

“Therefore, although there has been a technical breach of planning control at the site, the County Council does not intend to take any formal enforcement action to remedy it because there is no adverse impact on the environment or local communities.

“Notwithstanding the above, the County Council will continue to monitor the situation and take action as necessary to regularise activity on the site.”

The current phase of the exploration licence covering Broadford Bridge, PEDL234, has just over eight months left to run, after a two year extension by the Oil & Gas Authority in July 2016. Details

Other projects

UKOG was granted planning permission last month (details) to carry out extended flow testing and drill two new wells at Horse Hill.

The company also has a stake in Europa’s Bury Hill Wood oil exploration project (also known as Leith Hill and Holmwood). The start of work is still waiting for conditions of the planning permission to be signed-off by Surrey County Council.

13 replies »

  1. Like a dodgy house of marked cards supported by little more than thin air, bluster, greed and punitive loans, it will only take a little push to bring the whole debacle down around their muffled ears.
    And that little push is becoming a big push and is happening now worldwide with the all the self professed big players frantically jostling for top dog bottom dog position and offloading any loss leaders that were never meant to survive anyway.

    The clean up bill will be astronomical while the owners trot rapidly off to their offshore tax havens.

    What a mess, time to stop this barely concealed cynical extortion of the tax payer and get back to some sort of energy secure renewable sanity.

  2. Looks like Professor Smythe was right then? Disappointing but expected KL1 news hidden in RNS with £10million loan as distraction and still no results for investors. I suppose the CEO’s will have a great Xmas though , No-oil No-oil , No-oil No-oil

    • Paula
      Not really, although debt payments should be well covered by profits or expected profits. If not then there is trouble ahead. Carillion is a good example of lots of debt, paid a big dividend and then suffered a 75% or so drop in share price on bad news.

  3. Err, no Paula! Most companies who pay dividends every year also have loans. How do you think the majority of businesses get started?

    In the case of UKOG, the only payments they are making (other than operating expenditure) are to local community funds. Whilst they are EXPLORING in the Weald, what “profits” do you feel they would be achieving?

    See Ruth’s text. This is an EXPLORATION licence.

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