Alba Minerals has downgraded the value of its investment in the Horse Hill oil field in Surrey by more than £1.43m.

In accounts for the year to November 2020, the company said the fair value of the company’s investment in the site operator should be cut by 26% to £4m, down from £5.43m, the year before.

Alba has an interest of more than 11.7% in the two PEDL licences that comprise the Horse Hill prospect. The well site is operated by a subsidiary of UK Oil & Gas (UKOG).

“Technical concerns flagged” on HH-2z

During the financial year, several interventions tried but failed to stop the ingress of formation water which was inhibiting oil production from the Horse Hill-2z well. This is a deviated borehole drilled into the Portland formation in autumn 2019.

Alba’s chairman, George Frangeskides, said today:

“While it is disappointing that HH-2z was not successful as an oil producer, Alba’s technical team had flagged concerns from the outset as to the significant challenges that lay ahead in UKOG attempting to drill a horizontal well into this reservoir.

“While we would have much preferred not to be proven correct in this particular instance, it should also be said that in our view the failure of HH-2z has no bearing on the merits of drilling successive vertical wells into both the Portland and Kimmeridge oil pools.”

UKOG has now said it intends to use HH-2z as a water injection well.”

Mr Frangeskides said Alba was encouraged by UKOG’s revised strategy for Horse Hill, which includes additional vertical and horizontal drilling in the formations.

“We look forward to UKOG delivering on this revised and reaffirmed strategy for enhancing production and delivering on the inherent value of the Horse Hill Oil Field.”

He also welcomed the approval of the Horse Hill Field Development Plan by the Oil & Gas Authority. He said:

“This key consent should enable net recoverable reserves to be allocated to the field, which is important for future potential debt-based funding for the field.”

• Alba, which also has mining interests in Wales, Ireland and Greenland, saw its loss for the year increase to £2.079m, from £1.312m in the previous year.