9 April 2015

UK Oil & Gas Investments PLC

("UKOG" or the "Company")

 

Significant upgrade of the Horse Hill discovery, UK Weald Basin

 

London quoted UK Oil & Gas Investments PLC (LSE AIM: UKOG) is pleased to announce that US-based Nutech Ltd ("Nutech"), one of the world's leading companies in petrophysical analysis and reservoir intelligence, estimate that the Horse Hill-1 ("HH-1") well in the Weald Basin has a total oil in place ("OIP") of 158 million barrels ("MMBO") per square mile, excluding the previously reported Upper Portland Sandstone oil discovery.

 

The Horse Hill licences cover 55 square miles of the Weald Basin in southern England in which the Company has a 20.36% interest.

 

Nutech's report to the Company states this OIP lies within a 653 feet aggregate net pay section, primarily within three argillaceous limestones and interbedded mudstones of the Kimmeridge, and the mudstones of the Oxford and Lias sections. Approximately 72% of OIP, or 114 MMBO, lies within the Upper Jurassic Kimmeridge interbedded limestone and mudstone sequence. The Executive Summary of the Nutech Report is appended in full at the end of this release and the full executive report with figures will be available on the Company's website at www.ukogplc.com.

 

In order to establish estimates of total OIP within the licence area, the semi-regional resource potential of the Weald Basin's eastern footprint is the subject of ongoing analysis under the contracted alliance between Nutech, UKOG and Solo Oil Plc. The results of the estimated OIP within the licence will be reported when completed.

 

Final assessments of the Upper Portland Sandstone and the Oxford and Lias sections are in progress, with further results expected shortly. 

 

Stephen Sanderson, UKOG's CEO, commented:

"Drilling the deepest well in the basin in 30 years, together with the ability to use concepts, techniques and technology unavailable in the 1980s, has provided new cutting-edge data and interpretations to comprehensively change the understanding of the area's potential oil resources."

 

"As a result, we believe that, in addition to the Portland Sandstone oil discovery, the Horse Hill well has discovered a possible world class potential resource in what is interpreted to be a new Upper Jurassic "hybrid play".

 

"With the help of Nutech's considerable global knowledge base and play library, we have identified that the Horse Hill Upper Jurassic rock sequence is analogous to known oil productive hybrid reservoir sections of the Bakken of the US Williston Basin, the Wolfcamp, Bone Springs, Clearfork, Spraberry, and Dean Formations in the US Permian Basin and the Bazhenov Formation of West Siberia."

 

"The US analogues have estimated recovery factors of between 3% and 15% of Oil in Place."

 

"The Company considers that the high pay thickness, combined with interpreted naturally fractured limestone reservoir with measurable matrix permeability, gives strong encouragement that these reservoirs can be successfully produced using conventional horizontal drilling and completion techniques."

 

 "Nutech's results combined with our extensive geochemical analyses strongly indicates that the Company's Horse Hill licences lie within the likely sweet spot of the identified "Weald hybrid play"."

 

"Appraisal drilling and well testing will be required to prove its commerciality, but this "Weald hybrid play" has the potential for significant daily oil production."

 

"The operator, Horse Hill Developments Ltd, with the assistance of Nutech, is now focussed on flow testing the Portland Sandstone and Kimmeridge Limestone sections of the well, to establish producibility and thereby seeking to quantify an overall net discovered resource".

 

UKOG's interest in Horse Hill:

The Horse Hill-1 well is located within onshore exploration License PEDL 137, on the northern side of the Weald Basin near Gatwick Airport.  UKOG owns a 30% direct interest in Horse Hill Developments Ltd ("HHDL") and a 1.32% interest in HHDL via its 6% interest in Angus Energy Limited. HHDL is a special purpose company that owns a 65% participating interest and operatorship of Licence PEDL 137 and the adjacent Licence PEDL 246 in the UK Weald Basin.

Qualified Person's Statement: Stephen Sanderson, UKOG's CEO, who has over 30 years of relevant experience in the oil industry, has approved the information contained in this announcement.  Mr Sanderson is a Fellow of the Geological Society of London and is an active member of the American Association of Petroleum Geologists.

The oil in place hydrocarbon volumes estimated should not be considered as either contingent or prospective resources or reserves.

 

For further information please contact:

 

UK Oil & Gas Investments PLC

David Lenigas / Donald Strang                                                                   Tel: 020 7440 0640

 

WH Ireland (Nominated Adviser and Broker)

James Joyce / Mark Leonard                                                                       Tel: 020 7220 1666

 

Square 1 Consulting (Public Relations)

David Bick / Mark Longson                                                                           Tel: 020 7929 5599

Nutech Executive Report Summary (dated: 8 April 2015):

 

Results and Recommendations:

NULOOK and NULIST (electric) log interpretation results, now calibrated by POROLAB's rock analyses, calculate that the Horse Hill-1 well, excluding the structurally constrained Upper Portland sandstone, has a total oil in place ("OIP") estimate of 158 million barrels of oil ("MMBO") per square mile. The 158 MMBO per square mile OIP correlates to an aggregate pay section of 653 feet, primarily from the argillaceous limestones and mudstones of the Kimmeridge, and the mudstones of the Oxford and Lias sections. Table 1 shows the calculated OIP values for the well's main stratigraphic units. It is highly recommended that conventional flow testing be undertaken in one or more of the Kimmeridge limestone units as part of the planned flow testing of the Upper Portland sandstone discovery.

From its proprietary regional well log analyses NUTECH considers that the HH-1 OIP extends significantly beyond the 55 square miles of PEDL137 and PEDL246 with strong evidence that the eastern section of the Weald Basin contains considerably larger oil potential than has been previously estimated and published. This regional potential is the subject of ongoing analysis under NUTECH's contracted alliance with UK Oil & Gas Investments PLC and Solo Oil Plc.

 

Table 1: HH-1 NULOOK/NULIST OIP Summary Table:

SECTION	DEPTH FT	DEPTH  FT	GROSS FT	PAY FT	OIP
	TOP	BASE	MD	MD	MMBO/Sq. Mile
L. Portland	2038	2320	129	19	7.2
Kimmeridge	2482	4430	1948	511	114.9
Top Corallian	4430	5000	374	0	0.3
Oxford	5050	5466	415	30	7.2
Kellaways	5466	5517	16	0	0.0
Upper Lias	6370	6711	220	0	0.4
Middle Lias	6711	7072	100	4	1.6
Lower Lias	7072	8096	986	53	17.6
Triassic	8288	8507	150	12	3.2
Palaeozoic	8508	8837	213	24	5.5
TOTAL			4308	653	158.0
			TOT	TOT	CUM

 

 

The most significant calculated OIP volumes lie within the Upper Jurassic Kimmeridge section at 115 MMBO per square mile. The total Kimmeridge section calculates at 511 feet net pay with a corresponding average TOC of 2.8 %. Table 2, below, illustrates that the Kimmeridge now contains three interbedded argillaceous limestone and mudstone hybrid reservoir sequences, which contain an aggregate OIP of 107 MMBO per square mile, or 93% of the total Kimmeridge OIP.

The Middle Kimmeridge hybrid reservoir sequence is likely the most prospective as it contains two thick circa 100 gross feet oil saturated limestone reservoir units with an aggregate limestone only net pay section of 78 feet. The Middle Kimmeridge units are encased within 593 gross feet of self-sourcing, oil-saturated organic rich mudstones, with high TOCs up to 9.4%.

Fracture analysis, together with information from offset well information, indicates that the Kimmeridge shows good evidence of natural fracturing, particularly in the Middle Kimmeridge Limestone 1 and 2 pay sections.

 

Table 2: Kimmeridge Total and Kimmeridge Hybrid Section OIP and Metrics:

UNIT	LITHOLOGY	TOP FT MD	BASE FT MD	GROSS FT MD	NET PAY FT MD	PAY RANK*	CLAY %	PORO-SITY %	SW PAY ² %	AVG ³ TOC %	OIP MMBO/ SQ. MILE
U. KIMM	Mudstone 1	2482	2649	167	19	3	50.1	9.7		1.14	7.9
M. KIMM HYBRID SEQUENCE	Mudstone 2	2649	2825	176	100	3	50.2	9.7		2.13	19.2
	Upper Limestone 1	2825	2931	106	17	2.94	16.1	8.5	53.8	n/a	3.0
	Mudstone 3	2931	3082	151	98	2.97	42.2	7.9		4.05	17.4
	Lower Limestone 2	3082	3184	102	61	2.66	18.2	8.5	45.6	n/a	12.7
	Mudstone 4	3184	3450	266	113	3	41.4	7.2		3.69	20.6
L. KIMM HYBRID SEQUENCE	Limestone 3	3450	3479	29	17	2.88	23.6	9.3	57.0	n/a	3.0
	Mudstone 5	3479	4430	951	86	3	41.8	5.1		2.48	31.2
	TOTAL			1948	511						114.9

 

*NUTECH flag system that shows the average pay ranking over a formation sequence (5 flags=1, 4 flags=2, 3 flags=3), where 3 is minimum pay ranking; ² Sw in generative shale assumed as ~0%, i.e. no free water; ³ TOC calculated appear underestimated at high TOC sample values >5% TOC, values up to 9.4% seen in samples.

 

Potential Analogue Plays and Recovery Factors:

From a geological, reservoir engineering and possible future operational perspective, the interbedded naturally fractured carbonate and mudstone reservoirs encountered in the HH-1 are analogous to the Middle Bakken limestone of the Williston Basin. Further analogues are represented by the interbedded tight clastic reservoirs and source rocks of the Three Forks Formation, the US Permian Basin (Bone Springs, Wolfcamp, Clearfork, Spraberry, and Dean Formations), and possibly the age equivalent Upper Jurassic Bazhenov Formation of Russia's Western Siberian basin.

Bakken wells analyzed by NUTECH show a contacted OIP of between 10-20 MMBO per square mile, from a formation thickness of 40-150 feet, containing one hybrid carbonate reservoir to mudstone source-rock pairing. The Kimmeridge in HH-1 now shows three carbonate reservoir-mudstone source-rock pairings. Recoveries per well to date from the Bakken range from 8-15% in identified sweet spots.

NUTECH's analyses of the Wolfcamp/Bone Springs shows a contacted OIP range of between 60-160 MMBO per sq. mile in a 300-400 feet thick section and exhibits recovery factors of 1-10%.

 

Table 3: Comparison Metrics of HH Kimmeridge vs. Analogous Hybrid Producing Plays:

Basin Names	HH Kimmeridge (Weald Basin)	Bakken &Three Forks	Wolfcamp/Bone Springs	U. & L. Bazhenov Russia- W. Siberia
Geological Era	U. Jurassic	Devonian & Carboniferous	Permian	U. Jurassic
Reservoir Age	145-157 MMybp	320-380 MMybp	260-300 MMybp	140-152 MMybp
Depth (feet)	2300-4400*	8,000-11,000	7,000-10,000	8000-11000
Areal Extent (sq. miles)	~1100²	~6500	~7800	~800000
Thickness (feet)	1500-2000	25-150	300-400	60-150
Porosity	4-10%	4-12%	4-8%	2-12%
Water sat. (Sw)	10?-57%	25-60%	20-50%	10-15%***
Clay Content	15**-50***%	25%	20-30%	10-30%
Maturity Ro	0.5- 0.91%	0.5-1%	0.8-1%	0.5-1.1%
Measured TOC%	2- 9.4%	8-12%	4-8%	3->11%
Hydrogen Index	650-900	298-450	~100-700	200-700
OIP/sq. mile (MMBO)	114	10-20	60-160	7.25->13
Recovery Factor	•	8-15%	3-10%	•

 

*HH-1 uplifted by up to ~5000 feet, **within argillaceous limestone units, *** in mudstones, ² total Jurassic Weald shale prospective area, from BGS 2014, fig 47.

The Bazhenov Formation, of the same geological age and general stratigraphic, oil source rock composition and source richness as the Kimmeridge, constitutes the main oil source rock of the super-giant W. Siberian petroleum system. Some 200 conventional Soviet era vertical wells have been drilled and produced at highly variable rates and recovery factors in the last 50 years in the Bolshoi Salym field area. Production to date is primarily from a hybrid of thin naturally fractured low porosity and permeability limestone, silicite and carbonate silicite conventional tight reservoir units interbedded within the currently generative high TOC source rock (key metrics are shown in Table 3).

Recent publications show that the Upper and Lower Bazhenov mudstone oil source rock formations both contain a 10-30 feet low porosity limestone/carbonate conventional reservoirs created by the replacement of radiolarian fossils and algae or bacteria by carbonate cementation. Additional reservoirs exist in thin 5-10 feet thick naturally fractured silicites and carbonate silicites. The Bashenov constitutes a significant future hybrid reservoir target and oil resource albeit on a much larger geographical scale than the Kimmeridge. It is the focus of intense studies and horizontal drilling by Shell/Gazprom and Exxon/Rosneft. Bazhenov well economics have likely been significantly boosted by Russia's recent oil/corporation tax exemptions for tight (low poroperm i.e., under 2 milliDarcy permeability) reservoir developments.

 

Work in Progress:
Final assessments of the Upper Portland sandstone reservoir and the Oxford and Lias sections are still being completed with the assistance of UKOG and its technical team. The overall regional potential of the Weald Basin is the subject of ongoing analysis under the contracted alliance.

 

Glossary:

argillaceous limestone	a limestone containing a significant proportion of clay minerals
cementation	involves ions carried in groundwater chemically precipitating to form new crystalline material between sedimentary grains
clastic	rocks composed of broken pieces of older rocks
discovery	a discovery is a petroleum accumulation for which one or several exploratory wells have established through testing, sampling and/or logging the existence of a significant quantity of potentially moveable hydrocarbons
effective porosity (PHIE)	The interconnected pore volume or void space in a rock that contributes to fluid flow or permeability in a reservoir. Effective porosity excludes isolated pores and pore volume occupied by water adsorbed on clay minerals or other grains
electric logs	tools used within the wellbore to measure the rock and fluid properties of surrounding rock formations
fractured	containing a crack or surface of breakage within rock; fractures can enhance permeability of rocks greatly by connecting pores together
free water	water that is mobile, available to flow, and not bound to surfaces of grains or minerals in rock
hydrogen index (HI)	the amount of hydrogen relative to the amount of organic carbon in a sample, normally expressed in milligrammes of hydrogen per gramme of TOC.  The higher the amount of hydrogen the more oil prone the source rock when subjected to time, temperature and pressure; an initial HI over 450 normally indicates an oil prone source rock
limestone	a carbonate sedimentary rock predominantly composed of calcite of organic, chemical or detrital origin. Minor amounts of dolomite, chert and clay are common in limestones. Chalk is a form of fine-grained limestone
lithology	The macroscopic nature of the mineral content, grain size, texture and color of rocks
micrite	a sedimentary rock formed of very fine grained calcareous particles ranging in diameter from 0.06 to 2mm, often referred to as lime mudstone
milliDarcy	a standard unit of measure of permeability. One Darcy describes the permeability of a porous medium through which the passage of one cubic centimeter of fluid having one centipoise of viscosity flowing in one second under a pressure differential of one atmosphere where the porous medium has a cross-sectional area of one square centimeter and a length of one centimeter. A milliDarcy (mD) is one thousandth of a Darcy and is a commonly used unit for reservoir rocks
MD	measured depth
MMBO	millions of barrels of oil
MMybp	millions of years before present
mudstone	an extremely fine-grained sedimentary rock consisting of a mixture of clay and silt-sized particles
oil in place (OIP)	the quantity of oil or petroleum that is estimated to exist originally in naturally occurring accumulations before any extraction or production
oil saturation	the amount of the pore space within a reservoir containing oil
organic rich	a rock rich in organic matter which, if subjected to sufficient heat and pressure over geological time, will generate oil or gas.  Typical source rocks, usually shale or limestone, contain above an initial 2% organic matter by weight
pay	a reservoir or portion of a reservoir that contains economically producible hydrocarbons. The term derives from the fact that it is capable of "paying" an income. The overall interval in which pay sections occur is the gross pay; the smaller portions of the gross pay that meet local criteria for pay (such as minimum porosity, permeability and hydrocarbon saturation) are net pay
permeability	the capability of a porous rock or sediment to permit the flow of fluids through its pore spaces
play	a set of known or postulated oil and or gas accumulations sharing similar geologic, geographic, and temporal properties, such as source rock, migration pathways, timing, trapping mechanism, and hydrocarbon type
porosity	the percentage of void space in a rock formation, where the void may contain, for example, water or petroleum
recovery factor	those quantities of petroleum, as a proportion of OIP anticipated to be commercially recoverable by application of development projects to known accumulations from a given date forward under defined conditions
reservoir	a subsurface rock formation containing an individual natural accumulation of moveable petroleum that is confined by impermeable rock/formations
sandstone	a clastic sedimentary rock whose grains are predominantly sand-sized. The term is commonly used to imply consolidated sand or a rock made of predominantly quartz sand
silicite	fine grained rocks composed primarily of layered silica
source rock	a rock rich in organic matter which, if subjected to sufficient heat and pressure over geological time, will generate oil or gas.  Typical source rocks, usually shale or limestone, contain above an initial 1% organic matter by weight
sweet spot	the area within a shale source rock unit showing highest TOC and generative potential normally associated with basin centred deposition
thermal maturity (Ro)	a term applied to source rocks which have received sufficient temperature and pressure over geological time to generate hydrocarbons
TOC	total organic carbon - the weight percent amount of organic carbon within the rock which is a commonly used measure of hydrocarbon source rock richness
water saturation (Sw)	The fraction of water in a given pore space. It is expressed in volume/volume, percent or saturation units.