UK Oil & Gas said today it would reperforate the Portland section of its first well at the Horse Hill oil site in Surrey.
In a statement to investors, the company said the intervention on the HH-1 well, once nicknamed the Gatwick Gusher, was planned to “further improve oil production rates”.
UKOG has described flow tests and pressure data from the Horse Hill well site as “sub-commercial”.
Today’s statement said the full reperforation would use “larger and more deeply penetrating perforating guns, at twice the perforation density per foot compared to the current completion”.
“The reperforations are designed to materially increase the ability of oil to flow into the wellbore.
“The work will also reconfigure the well’s production tubing set-up and deepen the downhole pump to maximise pumping efficiency and hence maximise HH-1 production.”
The statement also announced that UKOG had repaid the remaining £1.75m of the loan from Riverfort Global Opportunities PCC Limited and YA II PN (Ltd). This makes the company debt free, it said.
UKOG has been regularly paying off the loan through the allotment of new shares in the company. Two recent payments, totalling £175,000 were made on 28 May 2020 and 3 June 2020.
The statement said:
“The repayment eliminates the uncertainty attached to Loan Note conversion timings and pricing, something the Company feels was perceived to exert a negative influence on the Company’s share price.”
At the time of writing, the share price was down 14.23% at 0.2p. There were also two stock market price monitoring extensions, indicating increased trading.
UKOG said it had also agreed to buy all PW Well Test Ltd’s existing surface production equipment being used at Horse Hill for £1.65m in cash and shares.
The statement said this would reduce operating costs by $4 a barrel. The overall asset level operating costs would be cut to $13 a barrel at current production rates, “amongst the lowest in the UK oil sector”, the company said.
UKOG said the well intervention, loan repayment and equipment purchase would be funded by £4.2m, raised through a placing of 2.1bn new ordinary shares at 0.2p per share.
The money would also fund preparations for work at the proposed Loxley gas site at Dunsfold, in Surrey, the company said. A decision on planning permission for this site is expected on 29 June 2020. Remaining funds would be spent on another proposed site, also yet to be decided, at Arreton on the Isle of Wight, UKOG said.
Following admission of the new shares, the total number of ordinary shares in UK will be 10,838,995,288.
UKOG’s chief executive, Stephen Sanderson, said:
“With the lockdown rules easing and encouraging signs of recovery in the Brent oil price, the Company has acted decisively to both strengthen its financial position, target further profitability of its flagship Horse Hill asset and start preparations for its next appraisal wells at Loxley and on the Isle of Wight.”