The company behind oil production at Horse Hill in Surrey has raised £1.275m in a share placing to pay for cost cuts.
Following record falls in the oil price, UK Oil & Gas plc (UKOG) said in a statement this morning it was negotiating contracts at reduced rates for key equipment and services at Horse Hill.
It was also seeking to buy, rather than lease, surface facilities, such as stock tanks, flow lines, choke manifolds and oil and gas separators. It was looking to install a gas-to-wire generator to power the site and to automate functions to reduce staff costs.
The statement said there was “a general downsizing of all operational elements not essential for continued safe oil production”. Directors’ payments had been cut from 20-50%.
The cuts had reduced the operational costs of Horse Hill oil production by $7 a barrel (bbl) to $12/bbl, UKOG said.
The asset level operational cost, which includes tanker export, sales and marketing, was now $17/bbl, it said, making Horse Hill production profitable at current Brent oil prices.
UKOG said the cost cuts and other payments at Horse Hill would be paid for by £1.275m, raised through the issue of 637,500,000 new ordinary shares at a price of 0.2 pence per share.
The issue increases the total number of UKOG shares to almost 8.5 billion.
DrillOrDrop reported last week that UKOG had issued 1.7 billion new shares in eight months. The new total is an increase of 40% on the level in mid-August 2019.
UKOG said average daily flow rates at Horse Hill were “over 300 barrels of dry oil per day”. It was planning “a series of interventions aimed at significantly increasing field production”.
The company said these included adding commingled Kimmeridge oil flow. But it said the plans had been halted until necessary procedures could be redesigned to remove the risk of Covid-19 infection to site staff.
At the time of writing, the UKOG share price was down 26.15% at 0.24 pence.