UKOG shares dropped more than a third today on news that the company had abandoned testing the Pinarova-1 well in Turkey. The company said it was “disappointed” that the well had not met its expectations.

Yesterday, UKOG said it needed to raise money “in the near future” for its gas drilling plans at Loxley, near the Surrey village of Dunsfold.

The money is in addition to a £3m loan taken out in June 2023, which the company said would fund operations for 12 months.

Earlier loans in 2019 and 2017 had raised a total of £15.5m.

UKOG now proposes a capital reorganisation to reduce the nominal value of existing ordinary shares and reduce the number of shares in issue.

In a statement to investors, the company said: “in order to deliver the Company’s stated strategy and growth objectives, it will require further funds in the near future”.

The statement said that “subject to further funding” UKOG planned to start the Loxley-1 appraisal work in the second half of 2024.

It also said it needed to raise money for costs “associated with the discharge of pre-commencement planning conditions” at the Loxley site.

UKOG has called a general meeting for 16 February 2024, which will vote on plans to give the directors authority to issue shares to raise money for the Loxley project, hydrogen storage plans in Dorset and for “general working capital”.

The court of appeal recently refused a further legal challenge to the Loxley scheme. Local campaigners had sought to overturn planning permission granted by the housing minister.

Update: UKOG announced it had adjourned the meeting following questions for shareholders and was taking legal advice.

Pinarova-1

Shares in UKOG closed down 34.25% this afternoon at 0.012p after news that the Pinarova-1 well test had been abandoned.

UKOG has a 50% non-operating stake in the well and the Resan licence in south east Turkey.

In 2020, the company described the licence area as “an irresistible opportunity”. It reported the recovery of mobile light oil during drilling and strong oil odours at the surface.

But in a statement today, the company said the oil was probably from a spill or seepage from an underlying deeper pool.

Stephen Sanderson, UKOG’s chief executive, said:

“Exploration drilling and testing is never guaranteed to deliver success, even if all prior indicators are positive. This is certainly the case for Pinarova-1, and we are disappointed by the lack of commercial flow.

“We will continue to analyse all data and explore both the potential updip shallow Germik/Hoya accumulation and the likely more significant deeper pool objective, the most probable source of the observed shallow hydrocarbons and shot-hole oil seep.”

In August 2021, UKOG delayed plans to drill a sidetrack to the Basur-3 well, also in the Resan licence. The company had hoped Pinarova-1 would confirm the presence of oil in the area.