Dunsfold drilling: Decision delayed again and opponents consider legal challenge as operator declares £6.9m loss

Section of Dunsfold boreholes UKOG

Proposed boreholes at Loxley near Dunsfold in Surrey. Source: UKOG planning application

The decision on plans for two oil and gas wells near the Surrey village of Dunsfold have been postponed for the fourth time.

The delay came as the developer, a subsidiary of UK Oil & Gas plc, posted a recent loss for 2018 of nearly £7m and a debt of £14m.

Local opponents of the scheme have said they are concerned that the company would not be able to afford to restore any future well site. They are considering a possible court challenge to any planning permission granted without financial security checks.

The drilling proposal, by UKOG (234) Ltd, was submitted to Surrey County Council in April 2019 to explore for gas in the Portland sandstone and oil in the deeper Kimmeridge limestones.

A decision had originally been expected by August 2019. But the date was delayed first to September, then October and November. The application is currently scheduled to go before the council’s planning committee on 18 December 2019.

A second application, submitted in June 2019 for an alternative access track, is also now due to be decided in December.

DrillOrDrop asked Surrey County Council for the reason for the latest delays and UKOG for reaction. This post will be updated with any responses.

We reported in the summer that Dunsfold residents described the alternative application as “confused and muddled” and had called for all the proposals to be withdrawn.

We now understand that local groups are considering raising money for a legal challenge in case Surrey County Council grants planning permission without what they regard as adequate financial security.

A spokesperson for the campaign group, Protect Dunsfold, said the grounds for a judicial review would be that the company did not have the credible financing for restoration.

“It is quite clear that UKOG (234) Ltd will be massively overstretched by the time they have drilled an exploration well and will be unable to restore if they find nothing commercial.

“If they do find commercial hydrocarbons then Surrey will be held as a hostage to grant production permission at the site even if the full environmental impact assessment concluded that production from the site is inappropriate.”

UKOG (234) Ltd’s annual accounts for the year ending December 2018 show it owed UKOG plc more than £14m.

The loss for the year was £6,980,276, compared with £2,766, 236 in 2017. The company also wrote-off exploration assets of £6,629,384, up from £2,622,487 in the previous year.

The company said it was reliant on the continued financial support of UKOG plc for working capital. The accounts said UKOG has undertaken to make available necessary funds for the next 12 months and would not seek repayment of amounts already provided.

UKOG plc accounts showed it had a loss for the year to 30 September 2018 of £16,747,000, compared with a loss for the year before of £2,268,000.

Yesterday, a campaigner in North Yorkshire began a legal challenge over clean-up costs for Third Energy’s gas wells in Ryedale. The case centres on whether the Oil & Gas Authority sufficiently scrutinised the finances of York Energy (UK) Holdings in its purchase of Third Energy.

Also yesterday, the National Audit Office reported that the government was unable to say who would pay for decommissioning if a site operator went out of business.

  • UKOG (234) Ltd accounts said the company expected to spud the Dunsfold wells in 2020, if it received planning permission. It also indicated that it would re-enter the Broadford Bridge well in West Sussex, in the same licence area, before March 2020.

Key financial facts for UKOG (234) Ltd

Loss for the year after tax: £6,980,276 (2017: £2,766, 236)

Administrative expenses: £350,893 (2017: £143,748)

Exploration write off: £6,629,384); (2017: £2,622,487)

Exploration and evaluation assets: £7,756,966; (2017: 11,399,089)

Total net assets: -£5,951,727; (2017: £1,028,549)

Amounts payable to ultimate parent company: £14,001,263; (2017: £9,991,365)


Main Dunsfold application: SCC Ref 2019/0072

Second application with alternative access: SCC Ref 2019/0108

DrillOrDrop Dunsfold page with key facts and timeline

28/10/19 Date of UKOG’s latest accounts corrected to 30 September 2018


8 replies »

  1. Drill or drop.

    Are you sure these figures are the figures up untill the 30 September 2019?

    UKOG plc accounts showed it had a loss for the year to 30 September 2019 of £16,747,000, compared with a loss for the year before of £2,268,000.

    Normally UKOG accounts to September 2019 would not be published untill March 2020.

    If not this article is a gross misrepresentation of the facts.

    As I am sure you are aware UKOG now has permission granted at Horse Hill for production from 6 wells for 25 years with oil production revenues currently from 2 sites.

    This is about to be improved with an initial estimated extra 1000BOPD production from the first sidetrack well into the Portland before the Reserves are reported, future wells are drilled & other sites appraised for there further reserves.

    Although many people can understand your bias reporting it can unfortunately not be relied on for a professional judgement of the facts.

    • Hi M

      Thanks for spotting the error in the date of UKOG’s latest accounts – this has now been corrected.

      The bulk of the report concerns UKOG(234) Ltd, a subsidiary of UKOG, and concerns from local campaigners that the subsidiary would not have sufficient funds to restore the site if hydrocarbons are not present in commercial quantities.

      • Hi Paul

        Many thanks for the correction that you have made regarding your article.

        I still have to disagree with local & other campaigners that UKOG would be irresponsible in the event of no hydrocarbons being present at Dunsfold in not restoring the site & the past concerns at Markswells Wood do not justify these current concerns.

        As I am sure you are aware PEDL234 is a subsidiary company of UKOG & has the support of it’s parent company & it’s shareholders.

        I understand people not wanting oil production in there neibourhood but now Hires Hill is going into safe & secure production this should elevate many of the financial concerns about the company.

        Maybe some of your genuine concerned readers should accept UKOG’s invitation to visit Horse Hill & see there genuine efforts to be a consiencious onshore oil producer & good neibour.

        Oil has been produced at Whych farm for many years for the benifit of all without all the bad feeling being created here by the few extremist’s with a agenda.

        There will be many benifits to come for the local community & the future of this country.

        • Completely agree M
          Plus the significant funds being generated for the county council, I’m happy to see this responsible operator operate near me.

  2. Thank you Peter & Paul for your comments UKOG is a responsible company please find below a exert from there website about what they do & how they do it & why.

    Some may not like what they do but it will be done carefully & with due consideration for the many not just the few:

    UK Oil & Gas PLC (UKOG) is an ambitious oil and gas exploration company, striving to support the drive for increased energy security for this country, while ensuring the preservation of the natural beauty of the Weald Basin region.

    We are the company behind the exploration well at Broadford Bridge in West Sussex and a leading investor at Horse Hill, dubbed the “Gatwick Gusher”. Listed and trading on London’s Alternative Investment Market (AIM), we have a portfolio of direct and indirect investments in 8 UK onshore exploration, appraisal, development and production assets.

    These assets cover 791.5 km² in the Weald and Purbeck-Wight basins of southern England.

    UKOG is also working to explore further opportunities within our 100%-owned Broadford Bridge licence area and advance our other assets, including our Arreton onshore Isle of Wight licence. By making use of the world’s latest oil and gas technologies, we are endeavouring to turn our discoveries into commercially viable oil fields for the benefit of the UK. We are also actively investigating ways to benefit local communities by creating employment and financial benefits.

    At the heart of all that we do is working to minimise our impact on local communities and ensuring we have total respect for the environment in which we live and where we operate. We are determined to provide energy for Britain while preserving the way of life and the rural beauty of our licence areas.

    • As anyone who has published a website knows, what it says ain’t necessarily so.

      Broadford Bridge has been written off as a disaster by UKOG (234) ltd as they tried to acidise the well and in the process it released globs of clay which blocked the well. As of now UKOG (234) have not got anything except a £14 Million debt to its Parent Company and another £7 million in sunk costs held as an asset on the balance sheet. Not a single well with any prospect of revenue.

      Now you can say what you like about companies reputation, but the structure of UKOG with multiple separate and unrelated companies all sharing the same director is clearly designed to enable the principle of limited liability to protect the whole from the insolvency of a part.

      It is important to understand the corporate structure before getting too invested in some notion that these are “good chaps” who will do the right thing. They are operating in a very risky area and spending a lot of “Other peoples money” in pursuit of their own fortune. Nothing wrong with that one might say as it is all perfectly lega in ourt capitalist system but…..

      However, the principle of limited liability works another way in that no one should be forced to accept an unlimited obligation from a company with limited liability.

      At the end of the day if these “Good Chaps” have a disaster borne of their lack of experience then corporate governance rules will require them to protect the interests of their shareholders by casting the unlimited obligor into administration and that will mean the local environment is returned as good as it was before they got involved. The government has been criticised by the National Audit office because they have no idea where liability goes once the “explorer fails

      This means that people to whom this company owe an obligation and who are not shareholders will suffer a loss – there are no reserves in the company to compensate these losses.

      It might all go wonderfully but the probability and all the history says that it will not. The local people – called “receptors” in planning speak should not be forced to accept the huge risks that are being taken “on their behalf” by people who are desperate to reap the profits if their massive gamble pays off but who are simply incapable of restoring the damage if they make a mistake.

      Smooth words are all very well but when it all goes horribly wrong the cry will be “someone should have done something about this”.

      well go figure – someone is going to call this out and get proper guarantees in place.

      We already know where all the oil and gas we can possibly burn is and have no real need of more. and IMO 2020 means in about a month the emissions from impporting oil from established wells will be slashed by far more than local drilling will save.

  3. Not happy to being surrounded by UKOG actual or proposed wells, more importantly climate emergency needs mean we don’t need to expand the oil and gas industry any further. I wouldn’t visit Horse Hill they had a fire there recently.

    • Oh Paula?

      I sorry to hear of your frustrations!

      But unfortunately the facts do not bear you out.

      The reality is that every barrel of oil produced onshore in the UK has a minimum of 3 times the benefit in carbon reduction & economic benefits than one produced elsewhere & transported to the UK.

      That is fact if you like it or not.

      Oil has many uses which have limited alternatives & even where there are alternatives (e.g. wind turbines) it is likely that they will have a more harmful effect on the environment than focal fuels.

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