Shares in UK Oil and Gas dropped by more than 35% this afternoon following the company’s announcement of possible formation damage at its Broadford Bridge oil exploration well and the prospect of drilling another sidetrack.
On publication of a statement to shareholders, the price fell from 3.42p down to 1.87p at the close of trading. This represented a drop in the company’s market capitalisation of more than £50m.
UKOG has been carrying out flow testing in the Kimmeridge limestone zones at the well, near Billingshurst, in West Sussex.
In today’s statement, issued at 2.50pm, the company said a 96-hour near continuous test in zone KL5 – the first conducted in the Weald – had resulted in a flow of 10-72 barrels a day. Of that, between 30 and 50+% was oil. The rest was spent acid from an earlier acid wash treatment.
Previous core results and geochemical analysis from KL5 had reported live oil in the fractures, UKOG said.
The statement said investigations were underway into whether zones KL5 and KL6, perforated in summer 2017 and acidised during the original test programme, had been damaged by long residence times of spent acid in the reservoir and the perforating technique used.
A rod-pumping programme would continue on KL5 until further notice, the company said, with the aim of achieving 100% oil to surface.
Earlier tests on the Kimmeridge limestone zones, KL3 and KL4, had recovered oil and associated gas to the surface but produced no sustained flow, UKOG said (more details).
The company added:
“It is now thought that both fractures and perforated channels around the wellbore of KL3 and KL4 could be partially blocked by released clay particles and cement-related debris, thus preventing sustainable fluid inflow.
“Serious consideration is being given to a possible future short sidetrack and selective re-test of KL3 and KL4 which electric logs show as oil saturated.”
UKOG announced in August 2017 that it had drilled a longer sidetrack, apparently bypassing the entire Kimmeridge Limestone section of the original wellbore after regions became washed out.
Last week, Angus Energy’s Managing Director, Paul Vonk, suggested that sections of the Broadford Bridge well had been blocked by bentonite. This was strongly rejected by UKOG’s Executive Chairman, Stephen Sanderson.
Today, Mr Sanderson described the results from KL5 as “positive and encouraging”. He said:
“[They] provide further supporting evidence for the presence and significant spatial extent of a viable Kimmeridge continuous oil deposit within the PEDL234 licence.
“The KL5 test results, plus the many strands of technical evidence gathered from the well, now also indicate that the BB-1 location lies towards the southern edge of a thick, naturally-fractured, oil-saturated Kimmeridge “wedge”, stretching around 30 kms to the north of BB-1 across the Weald. UKOG, as the largest licence holder in the thickest part of this “wedge”, is therefore ideally placed to exploit the potentially commercially viable recoverable resources that now likely underlie our Licences.”
The statement said UKOG now planned to test the KL1 zone:
“Existing planning consent time permitting, following completion of KL5 testing, the plan remains to test a 40 ft thick limestone zone in KL1 which, as per KL5, was not perforated or acid-washed in 2017.”
The current stage of the PEDL234, which includes Broadford Bridge, expires on 30 June 2018 and the site’s planning permission on 15 September 2018.