UKOG published half-year results this morning with details of its exploration and appraisal work in southern England.
Horse Hill, Surrey
UKOG said it had started construction work and site reorganisation for what it called simultaneous drilling.
The programme would drill a new vertical pilot well (HH-2) and a horizontal side track (HH-2z) into the Portland oil formation, the company said. It would also include test production from the deeper Kimmeridge layers in the existing HH-1 well.
Drilling was expected to start in the period July-September 2019, following approval from the Oil & Gas Authority.
The HH-2 vertical pilot hole would be deepened into the Kimmeridge to obtain key fracture imaging and rock data, the company said. This would confirm the orientation of a planned HH-1z sidetrack.
A planning application for four additional production wells, a water reinjection well and long-term oil production was now due to be considered by Surrey County Council’s planning committee in September 2019.
A permit application for production had been submitted to the Environment Agency, UKOG said. A field development plan was also being prepared.
UKOG now holds a 77.9% stake in Horse Hill Developments Ltd (HHDL), the Horse Hill operating company, and a 50.635% interest in the Horse Hill field.
The Portland oil pool is commercially viable at oil prices “significantly below current levels the company has concluded. Portland production remains at 220 barrels per day (bopd), the company said.
Kimmeridge oil during an initial 50-hour test produced 563-771 bopd from KL3 zone.
UKOG said it remained “very positive” about the commercial potential of Kimmeridge oil. But it said it would reduce risks by starting the full-scale development of the Portland production first, followed by development of the Kimmeridge.
Arreton, Isle of Wight
UKOG said it had selected three drilling sites.
The first planning application for appraisal drilling and well test would be submitted this summer. A second application for an exploration well would “follow shortly afterwards”.
The company said any drilling operations would be in the autumn and winter to avoid the tourist season.
UKOG holds 95% of PEDL331 on the Isle of Wight. It remained a “key focus area”, the company said.
Broadford Bridge, West Sussex
There were no activities in the six months to March 2019, UKOG said, apart from monitoring of downhole pressure and routine visits.
Loxley/Godley Bridge/Dunsfold, Surrey
UKOG has submitted an application for drilling to appraise the Godley Bridge gas field at a site between Loxley and Dunsfold in Surrey. A decision is expected before the end of the year, UKOG said.
The proposal is for a pilot hole, horizontal sidetrack and testing programme. If approved, this would follow further production drilling at Horse Hill, the company said. A permit application would be submitted shortly to the Environment Agency, it added.
PEDL143, near Dorking, Surrey
UKOG said it was making “good progress” in finding drilling locations.
The prospect, formerly known as Holmwood, is now referred to as A24, after the main road through the area.
A former wellsite at Bury Hill Wood was in the Surrey Hills Area of Outstanding Natural Beauty (AONB). It had planning permission and an environmental permit. But it was abandoned before drilling when the Environment Secretary, Michael Gove, refused to renew a lease on Forestry Commission land.
The new sites are outside the AONB, UKOG said.
Operation of the licence has transferred from Europa Oil & Gas to UKOG, which now holds 67.5%.
Markwells Wood, West Sussex
UKOG said the well was successfully plugged and abandoned and the site restored. Native trees would be planted in the autumn, the company said.
“We are currently actively evaluating several opportunities both in the Weald Basin and overseas”
It raised £3.5m in a share placing in March 2019 to assess and acquire new opportunities.
Aggregate total test production: 54,000 barrels (bbls), of which 29,000 was from the Portland and more tha n 25,000 from the Kimmeridge
Tankers sold to Perenco and sent to the Esso refinery at Fawley: 250+
Receipts from sale of test crude oil in six months to March 2019: £1.62m
Operating loss: £1.56m; six months to 31 March 2018 £3.87m – lower depletion and impairment charges
Administrative expenses: £1.56m; six months to 31 March 2018 £0.93m – increased employment costs
Net cash outflow from operations: £3.45m; six months to 31 March 2018 £1.76m – reduction in trade payables, increase in abandonment expense and increase in admin expenses
Net cash outflow from investing activities: £1.69m; six months to 31 March 2018 £5.02m – receipts from sale of test volumes
Cash outflows prior to financing activities: £5.15m; six months to 31 March 2018 £6.79m – lower net cash outflow from investing
Cash and cash equivalents: £7.2m; six months to 31 March 2018 £4.5m
Expenditure on exploration and evaluation assets: £3.31m; six months to 31 March 2018 £4.95m
Updated 29/6/2019 to replace Isle of Wight map with updated version