UK Oil & Gas Investments PLC (LON:UKOG) Executive Chairman Stephen Sanderson caught up with DirectorsTalk to discuss the acquisition of the PEDL234 licence in the Kimmeridge Limestone oil province
Q1: So this morning you announced the acquisition of a 100% interest in the PEDL234 licence, can you tell me why did UK Oil & Gas Investments acquire this particular licence?
A1: Well I think firstly it’s very exciting to make this acquisition, primarily geared at the good new Kimmeridge Limestone oil play and I think it’s fair to say that in terms of prime acreage in the play, this is about as good as it gets for acreage that’s available at the moment. I think, maybe, let’s go back a bit to February/March with the flow tests at Horse Hill and I think people should be reminded that that actually proved that the Kimmeridge Limestone oil play was a reality, we got record breaking flow results and most importantly those flow rates were actually commercial rates. So I think we knew that from the old Nutech studies that this play actually extends over the entire area of the basin, clearly there are better parts of it than others, and we’re primarily geared at looking at the best parts of it of course and this really fits the bill.
So what we did is we used our own internal studies, and of course Nutech, to actually decide which are the best parts of the basin and this licence clearly falls in the prime areas, right in the centre, it’s either the best development of oil in play, the deepest areas like we had the most oil generation, oil in place for the Kimmeridge clays and also of course our Kimmeridge Limestones. It’s got the same structural trends that we see in Horse Hill, it’s very much a lookalike over the whole area to Horse Hill, it’s also a very much a lookalike to Balcombe well just to the east which also had oil in the Upper Kimmeridge Limestone so this really offers us lookalike or better Kimmeridge potential to Horse Hill, it’s a big block, it’s 300 square kilometres, much bigger than our existing Horse Hill and Holmwood licences.
I think also the other thing is not only does it have Kimmeridge but it has this extension Godley Bridge Portland gas discovery and the Portland is the same reservoir that we have at Horse Hill except it has got gas in it this time and that’s very exciting, it potentially adds Contingent Resources as well as prospective resources and we can drill a well there that appraises that field and also test the Kimmeridge at the same time so we killed two birds with one stone.
The other key part of why we got this is of course that the licence comes with planning permission and environment agency permission to drill a well at Broadford Bridge which has a well pad constructed. That means that we can go forward and test the repeatability of the Horse Hill results in another part of the basin, probably in 2017 we’re ready to go and I’ll speak more about that and that actually then extends the proven area of the Kimmeridge over much of the basin and so that would be a huge step forward with that.
Q2: What does the acquisition mean for UK Oil and Gas Investments?
A2: Well I think as I said in my RNS it really is quite transformational in the sense that it more than doubles our acreage holding in the Kimmeridge Limestone play area, there’s also a significant addition to our total acreage but as I said primarily this is really geared towards the Kimmeridge because that’s where we see the future of the company and the future growth of the company is. So it’s more than doubled our acreage in the prime area of the play, not just in any old part of the play but right in the centre of the best development of oil in play as seen by Nutech’s analysts but I think importantly we’re not just out to grab acreage. I think if you look at this it’s 100% plus increase in acreage but actually when you look at it in terms of potential net to our net potential resources, recoverable resources, from this laterally extensive resource play, it’s more like 500% primarily of course because this acreage is 100% versus our 30% in Holmwood and 27% in Horse Hill which are both very good but this is a step change forward in terms of actual potential recoverable resources that actually net to UKOG.
I think also clearly it gives us other recoverable resources potential in the fact that it’s an appraisal opportunity for Godley Bridge, and that’s gas of course but that’s very nice to have. We think that there’s potentially a very viable gas-to-wire type of development where you basically use the produced gas to actually generate electricity and you put it straight into the National Grid.
I think another important strategic part of this acquisition which is also quite transformational is that it actually really demonstrates the overall strategy to consolidate our leading position in the Kimmeridge and builds upon our acquisitions of Holmwood and the Angus transaction where we actually increased our net potential recoverable resources by 37%. I think in terms of actual operations and moving things forward it’s very important because it means we can now drill 2 wells, the Holmwood-1 and the Broadford Bridge-1, which shows success but will also show the repeatability of the Horse Hill results over the basin and that’s very good because then it proves essentially that we have oil existing in the Kimmeridge play that you can get out of the ground commercially between Horse Hill, Holmwood and much further over to the west in the Broadford Bridge and the 234 licence.
Q3: What are the future plans for licence and the Kimmeridge?
A3: I think that hopefully it’s quite clear in the RNS, we had planning permission and environment agency permission to drill the Broadford Bridge-1 well, we also have a pad constructed to drill so we’ll be pushing forward with our operational plans to drill this as soon as possible, realistically it’s going to be in 2017, we hope before the summer of 2017 so that’s very exciting.
At the same time of course with the Godley Bridge gas discovery that will be a new well, we’ll be starting immediately to put in a planning and environment agency application both in parallel to actually drill an appraisal of the Portland gas discovery there and I think realistically we’ll be looking a drilling that in 2018, of course it’s difficult to say how long it takes to get planning permission in the UK but we’re pretty positive. We have a lot of applications in at the moment so I think we’re being taken seriously and many people understand that this potentially is quite a significant thing for the UK economy and for the South East.
I think very shortly, as in the RNS, we’ll be issuing updates on the Portland Contingent Resources at Godley Bridge, that’s Contingent Gas Resources and also gas in place, and also we’ll be releasing Nutech’s numbers of the actual oil in place over the 300 square kilometres of the licence in the Kimmeridge, specifically in the Kimmeridge shales but also most importantly in the Kimmeridge Limestone, as I said, I think we’ll see that those numbers are actually as good if not better than what we see at Horse Hill.
Overall I think this acquisition fits into UK Oil & Gas Investments’ overall strategy of proving up the Kimmeridge, proving it commercial at Horse Hill and then showing the repeatability of Horse Hill over the weald basin itself. I think at Horse Hill, we’ve also said we’ll be pushing our planning permissions and environment agency applications forward to basically test, long term production test, the 3 zones at Horse Hill, we’ll also be including a fourth deeper test of a Kimmeridge Limestone so hopefully there’ll be 4 productive horizons at Horse Hill very shortly. We hope to do those tests in 2017, those that are successful we’re also permitting a horizontal appraisal well in the Kimmeridge, Portland vertical producer or a deviator producer, possibly followed by 3D seismic.
So for us 2016 has been very very busy and pushing us forward with establishing the Kimmeridge oil play, consolidating our licence holding, consolidating net potential recoverable resources in the Kimmeridge play and moving forward to more operations, a lot of operations actually in 2017 and 2018.
