UK Oil and Gas Investments (LON:UKOG) Chief Executive Officer Stephen Sanderson caught up with DirectorsTalk for an exclusive interview to discuss the significant oil discovery at Horse Hill and their delivery expectations.
Q1: I believe there’s some news that you want to get out to the market today?
A1: I think it’s a very bright morning for UKOG investors. As you can see from the press release, we have had a very significant report from New Tech in Houston who specialise in evaluating well data. We’re pleased that we can announce that in the Horse Hill well, we have an estimate of oil in place from New Tech of about 158 million barrels per square mile in the well and we’re currently looking at how we can extrapolate that across the rest of the 55 square miles of licence. So it’s very significant for us and also I think very significant for Britain and I think that’s something that we should want to bear in mind when we look at this.
Q2: Are these new findings an upgrade? Is it what you were expecting or is it a pleasant surprise? How would you classify the new information?
A2: Well I should say this is in addition to previously released Portland Sandstone discovery. These rocks containing oil are actually below the Portland sand, they’re half a mile below the surface so just below the Portland sand and I think it’s true to say that it’s somewhat of a pleasant surprise, we had it in the back of our minds but it wasn’t the main objective, I think that the main point is that this is in addition to what we’ve found. It’s something very new, it’s actually a very new play time for Britain. We have one well and of course the news has only really just come in to the company in the last few days, we actually received the final report Wednesday evening so we’re still in the process of really understanding what it means but I think when we announce the 158 million barrels per square mile, the producing analogous that we see worldwide, particularly in the United States and also from Russia, we see very similar rocks to the ones we have here.
Q3: A couple of questions maybe for investors in your company who are not be totally familiar with the oil and gas business. In terms of how long this could take to deliver, are we looking at 1 or 2 years before we can get this out of the ground? What’s the timeframe in terms of that?
A3: Well we plan to test our well this year, sometime later in the year, and we will be including not only the Portland sand but we will be testing these deeper zones and if we can establish that we have movable oil then we have to go through the process of applying to drill appraisal wells. The nice thing about the on-shore is that you can actually get to production fairly quickly, it’s not like the off-shore where you wait years to build huge facilities. I think realistically, within the next 5 years.
Q4: Everybody’s obsessed by the oil price at the moment, the cost of extraction versus the oil price, is that still favourable?
A4: Yes, of course. On-shore oil and gas exploration and production is much cheaper than off-shore. The fields that we’re currently involved in actually still make good money at even $50 a barrel so $60 a barrel is good. The cost of drilling is not particularly onerous for these wells so we think that with current prices we should be able to make money and of course we expect that the oil price will rise.
