The operator of the Horse Hill oil site in Surrey lost nearly £18m in the year to September 2020 –a more than 15-fold increase on the year before.
Annual accounts for Horse Hill Developments Limited (HHDL) reported administrative expenses of more than £9.5m, up from almost £242,000 in the previous 12 months.
The company also wrote off more than £6.5m in exploration costs and paid more than £0.5m in interest payments on loans.
HHDL had loans totalling more than £19m from its three shareholders, UK Oil & Gas plc, Doriemus plc and Alba Mineral Resources plc. This was up nearly a third on the year before.
The year saw an “unprecedented level” of operations at Horse Hill, the accounts said, including the formal start of oil production from the original HH-1 well.
HH-1 was also reperforated in the Portland oil section, with new production tubing and a deeper downhole pump. HHDL said:
“These improvements set HH-1 up for long-term continuous optimised oil production from the Portland”.
The accounts reported 146,900 barrels of oil had been produced and exported from the Kimmeridge and Portland up to the end of May 2021.
The site second well, HH-2/2z, drilled during the year, saw lower than expected oil production, the accounts said. The proportion of produced water to oil also increased rapidly. HHDL said it now planned to convert the well into a water injector.
Total operating costs at Horse Hill fell by 66% from January 2020 to January 2021, the accounts reported.
Despite this, the cost structure of HHDL was said to have a “high proportion of discretionary spend”. The company said this could be quickly reduced if cash flows were constrained to enable the company to continue operating.
The ultimate parent company, UKOG, has said it would continue to provide financial support for at least 12 months from signing of the accounts to meet obligations.
The accounts also reported HHDL had installed 250kw of photovoltaic solar panels and 67kWh Li-ion batteries at the site and commissioned a review of potential for geothermal energy at the site.
Loss for the year after tax: £17,887,978 (2019: £1,155,205)
Turnover: £751,534 (2019: zero)
Cost of sales: loss of £1,905,170 (2019: zero)
Administrative expenses: £9,551,769 (2019: £241,925)
Operating loss: £10,705,405 (2019: £241,925)
Net assets: minus £16,707,285 (2019: £1,180,693)
Income from oil sales from long-term testing: £2,410,945
Outstanding loan balances from UK Oil & Gas plc: £16,025,078 (2019: £11,664,123)
Other loans: Doriemus Plc £556,830 and Alba Mineral Resources Plc £2,517,314
- A legal challenge by Surrey campaigner, Sarah Finch, against planning permission for production at Horse Hill goes to the Court of Appeal in November 2021