See below link to Surrey County Council video link for UKOG Horse Hill production well planning decision (including drilling of two side tracks). Meeting on 18th October starting at 10.30am.
After the many operational and funding questions that I raised yesterday, (UKOG update October 15th) a good Valium RNS from UKOG this afternoon, which addresses all the ops issues at Broadford Bridge. Some good stuff about continued flow of light sweet oil, increasing oil cut, that Kimmeridge limestone contains a thick regionally extensive continuous oil accumulation (to Horse Hill) and testing operations planned to commence before end of month. So results zone by zone in early November and continuing through December for sustained flow results. Shame no financing update though as this remains a stress.
Also good comments from Sanderson repeating his claim that he is confident of commercial viability:
"In the Company's view, the volume and nature of the oil and gas recovered to date from the Kimmeridge proves that BB-1z contains a continuous oil accumulation some 1400 ft thick. The near identical reservoir characteristics seen at both BB-1z and HH-1, some 27 km apart, show this accumulation is laterally extensive over much of the Weald Basin. UKOG as the largest licence holder in the basin is in a prime position to exploit this resource.
This proof of geological and scientific concept is a major achievement and has significant positive implications for the prospectivity of PEDL234 and our extensive licence holdings in the Weald. Our focus now moves to delivering further proof that BB-1z can deliver both commercially viable rates and volumes of oil to surface.
The test results to date are technically significant and highly encouraging and I am confident that the more finely focussed and optimised testing plan can establish commercial viability."
So flow testing due to begin zone by zone by end of month, Horse Hill planning on Wednesday.
The shares down 12% earlier at 4.15p, now pushing 5.55p at the close. A long way to go to recover the losses from the cementing problems RNS but there is light at the end of the tunnel.
· Broadford Bridge-1z ("BB-1z") continues to flow light sweet oil and gas from the Kimmeridge Limestones.
· Flow continues to clean up, demonstrating an increasing oil cut, together with sustained periods of associated gas flaring. The shrouded flare stack has been in daily operation, exhibiting a clean burn.
· Flowing Kimmeridge light oil and associated gas at both BB1-z and Horse Hill-1 ("HH-1") proves Kimmeridge contains a thick regionally extensive continuous oil accumulation.
· Optimised sequential flow testing of multiple 30-100ft zones planned to commence by end October 2017.
As previously reported, BB-1z was deliberately drilled in a location where no conventional hydrocarbon trapping mechanism within the Kimmeridge reservoir section is evident. Therefore, in the Company's opinion, the presence of flowing, light Kimmeridge oil and associated solution gas at BB-1z provides proof that the Kimmeridge at BB-1z contains a significant continuous oil deposit of around 1400 ft gross vertical thickness.
"The near identical Kimmeridge reservoir parameters and geology seen at BB-1z and the Horse Hill-1 ("HH-1") Kimmeridge oil discovery, in which the Company holds a 32.435% interest, some 27 km to the northeast, demonstrates that the Kimmeridge oil accumulation is also laterally extensive across the Central Weald Basin.
The Company will now press on immediately with the revised rig-less test plan to establish whether the extensive connected natural fracturing seen in BB-1 and BB-1z can flow oil in commercial rates and volumes.
Upon delivery of further testing equipment, scheduled for the end of this week, the current completion assembly will be removed and, as previously announced, a more finely focussed and optimal test plan implemented.
The planned programme is as follows:
· Firstly, proceed ahead to isolate, acid-wash and sequentially flow test multiple 30-100 ft existing perforated zones in the naturally-fractured KL1-KL4, and then;
· Perforate further naturally-fractured limestone reservoir zones in the KL1, KL2 and KL3, isolate, acid-wash and sequentially flow test multiple 30-100 ft zones, and finally;
· Conduct a short cement squeeze in a section of the KL4/KL5, run a new cement bond log, re-perforate the newly cemented section, isolate, acid wash, and sequentially flow test multiple 30-50 ft zones.
· Flow will be initiated throughout the programme via the use of nitrogen-lift (without coil tubing), swabbing and/or pumping via the existing high-capacity linear rod pump
Testing is planned to continue until mid-December 2017.
After the disappointment of the well completion cementing issues for UKOG announced in the last operational update RNS of October 10th, time to take stock. The shares have had an awful week, falling from around 7p a week ago to just over 4.3p at the open on Tuesday after the RNS. UKOG finished the week at 4.725p. The main concerns are now the quality of the well reservoir at Broadford Bridge and funding. The last RNS had some cause for optimism, particularly Steve Sanderson, " I am confident that the revised forward testing plan will be able to deliver the results that will help demonstrate BB-1z's near term commercial viability."
But let's face it we were expecting "commercial flows of oil" not "near term commercial" from Broadford Bridge by now and the waiting, together with the uncertainty caused by the cost of the remedial works is a problem. The company need to come clean on the timing of the cementing at BB as well as who pays. Is it Schlumberger because they messed up the cementing or is this a turn key well, payment on completion?
Last week was a big setback for shareholders after all the weeks of waiting with baited breath for exciting well test flows at Broadford. Hopefully, Sanderson can drag this back and prove up the Weald Basin dream and leave 4.75p well behind. But UKOG haven't helped the cause with the latest news. These things happen and as UKOG have said "Rectifying poor cement bonding in a wellbore is standard oilfield practice and is carried out by squeezing further fresh cement slurry through new or existing perforations in the well's heavy-gauge steel casing.". These things happen with oil and gas exploration, but nerves are being tested that's for sure!
Current status at Broadford Bridge
Two key points from the last operational update RNS:
"Well clean-up operations, utilising a high capacity linear rod pump, continue. Further developments will be reported in due course"
"The cement-squeeze and new flow test programme is planned to commence upon the completion of well clean-up operations and delivery of the necessary equipment. The commencement of the programme will be announced in due course"
Pictures last week showed a waste tanker arriving but as the RNS says commencement of the cement squeeze will be announced in due course. My understanding is that some sort of workover rig will be needed to carry out this procedure. Perhaps the rig from Angus' completed Lydsey X2 well? Clarity is needed from UKOG. Are we talking days or weeks?
On 19th May, UKOG announced " it has today raised gross proceeds of £6.5 million through the placing of 812,500,000 new ordinary shares in the Company ("New Shares") at 0.8 pence per New Share largely with institutional funds." Subsequently there were a couple of warrant issues.
A well costs £2-3 million onshore and with BB-1 and BB-1-z having been drilled this must have depleted the coffers. I was expecting a placing after a successful flow test at Broadford Bridge but with the timings being put back for commercial flow rates this puts a placing at a high price under question. An amazing flow rate of say 2500 bopd sustained would have meant a placing at 7-10p minimum. The company needs to fund ongoing ops at BB plus also there is the work soon to start at Horse Hill near Gatwick.
The Horse Hill planning application meeting for the additional 2 side track wells is on October 18th. If this goes to plan, UKOG and its partners can drill these wells in November but money is needed to drill them. The last thing shareholders need is a placing at 2-3p, since it means big dilution.
The RNS 12th October indicated that SCDM Energy Ltd had retained 174,954,179 shares after the impact of the Warwick Energy share issue at 7.9p to fund the additional Holmwood stake. So the French haven't increased their stake.
What can Sanderson pull out of the hat? Commercial flows double quick time hopefully to avoid any mega-dilutive fund raising. But shareholders need that operational update RNS with details of start and completion of work and when we can now expect flow results. Let's have full transparency please and stop all the speculation. Uncertainty causes share price declines, so Sanderson needs to kill the endless speculation. How much is in the kitty, probably not much? Can UKOG use the existing funding solutions without a placing at this stage? Plenty of questions.....let's have some clarity.
1. Operational update RNS to announce start of re-cementing and hopefully timing of flows
2. Funding status. Is a placing needed? (hopefully no stupid discounted placing). Other sources of finance?
3. Confirmation of commercial flows and figures. Initial and sustained. (the latter 1500-2000 bopd)
3. Horse Hill planning approval 18.10.17 and subsequent timing of rig deployment to site and spud (November). Start of well test December?
4. Start of drilling at Holmwood prospect near Cold Harbour Surrey. December?
Investors in UKOG were sweating yesterday after an 11% fall to 6.35p and then further falls this morning to 5.8p. Then a bounce back to 6.7p and close at 6.3p. All a long way off the 9p+ after the last operational RNS. Many blamed the move in cash to Jersey Oil and Gas but clearly someone knew the impending bad news.
This news dropped after the market close tonight. On 6th September UKOG's Steve Sanderson said in the RNS: "I thank all the many staff and contractors involved for their professionalism and dedication in delivering the well in optimal condition for the extensive flow testing programme, which is now underway."
Clearly Schlumberger's delivery of the well in "optimal condition" wasn't optimal enough! A well workover involving a cement squeeze will need to be started. There were rumours of cementing issues some time ago but the RNS of 6/9 seemed to fully dispel them. Schlumberger botched up the cement job on the Macondo well in the Gulf of Mexico, here we go again in West Sussex.
So by now we were hoping for a commercial discovery instead we get "I am confident that the revised forward testing plan will be able to deliver the results that will help demonstrate BB-1z's near term commercial viability". Also no sign of the flow tests us shareholders were all hoping for, as "the well has also free flowed for short periods during the well clean-up sequence in which spent completion fluids mixed with hydrocarbons were returned to surface."
We knew before that oil shows were present but the flow rate was the critical piece of information. I'm sure UKOG's Broadford Bridge asset will come good in the end, but the delays and well integrity problems are a huge disappointment. Now the planning consent for the 14 weeks of testing comes into question. Hopefully the " flow tested sequentially over multiple, individual reservoir zones." will mean RNS releases in November once the workover has been completed but it still means several weeks of waiting (assuming cementing and well completion done in around 2 weeks).
Bad news, no wonder Steve released the RNS after the market close. Disappointing indeed and a big surprise given the quality of the contractors. I hope that Schlumberger pick up the costs for the extension in well work.
It could be messy in the short term, but hopefully the zonal flow tests recover confidence after this RNS. 4-5p is my guess tomorrow. The wait will also not be good for the share price. Another AIM oil share screw up.....
The good news:
"pleased to announce that it has recovered measurable volumes of light oil and solution hydrocarbon gas to surface from the Kimmeridge reservoir section during well clean-up operations, at its 100% owned Broadford Bridge-1z ("BB-1z") exploration well, located in licence PEDL234. The well has also free flowed for short periods during the well clean-up sequence in which spent completion fluids mixed with hydrocarbons were returned to surface. Well clean-up operations, utilising a high capacity linear rod pump, continue. Further developments will be reported in due course"
"Ongoing analysis of electric logs has also revealed further Kimmeridge reservoir zones of interest and these will be perforated and included in the new forward testing programme."
The bad news:
"To ensure that the flow testing of Kimmeridge reservoir zones is fully optimised, the Company will proceed ahead to workover the well and implement a revised testing programme. The well clean-up operation will continue, then the current multi-zone completion assembly will be retrieved, the well worked over and flow tested sequentially over multiple, individual reservoir zones. Additional perforated zones will be added to the existing 1064 ft aggregate perforated section.
The decision to workover the well follows receipt of two independent cement-bond analyses by Premier Oilfield Laboratories in Houston, USA and Xodus in the UK. These analyses, together with the Company's own internal evaluation, demonstrate that the quality of the cement-bond over some of the reservoir zones within the current BB-1z well is less than optimal. The findings conclude that, due to the cement-bond condition over segments of the reservoir section, the current completion programme has not effectively connected the wellbore to much of the best open natural fractures. Therefore, the testing to date has not properly evaluated the full flow potential of the overall Kimmeridge reservoir sequence.
Rectifying poor cement bonding in a wellbore is standard oilfield practice and is carried out by squeezing further fresh cement slurry through new or existing perforations in the well's heavy-gauge steel casing. Consequently, following the removal of the current BB-1z well completion assembly, the Company plans to carry out a short sequence of cement-squeezes through the 7-inch casing to rectify sections of the reservoir zone's cement-bond.
The cement-squeeze and new flow test programme is planned to commence upon the completion of well clean-up operations and delivery of the necessary equipment. The commencement of the programme will be announced in due course.
Stephen Sanderson, UKOG's Executive Chairman, commented:
"The recovery of free, mobile light oil and solution gas to surface is significant and encouraging news and testament to the Kimmeridge Limestone reservoir's ability to deliver hydrocarbons even from a less than optimal completion. The periods of good natural flow and identification of additional prospective reservoir zones to flow test add further positive outcomes.
Although the forthcoming workover presents additional unplanned work, the reservoir zone's cement-bond integrity is readily rectifiable by the planned short cement-squeeze phase, a common-place and routine oilfield practice. The well will then be restored to an optimal condition for further testing.
I am confident that the revised forward testing plan will be able to deliver the results that will help demonstrate BB-1z's near term commercial viability."
Some nice pics from Peter Boocock today indicating CT / coiled tubing leaving Broadford Bridge. Shares up 3.5%. Finally news will be soon from UKOG re. flow tests. After the decline in the share price on boredom....interesting times!
Also reference in this morning's Solo oil RNS: "Following the successful testing at Horse Hill-1 ("HH-1") various operators have drilled additional wells in the Kimmeridge Limestone play in the Weald Basin and have demonstrated the widespread occurrence of the play, further supporting the regional significance of the naturally fractured oil bearing reservoir."
A reminder from February's Environmental Statement:
2.3.2 Extended Well Test Operations
If BB-1 extended well testing (EWT) operations proceed, they are planned in the KL as follows:
a) Mobilise the coiled tubing (CT) unit and well test spread
b) Perforate the Upper KL (KL4) zone
c) Perform an acidisation operation on KL4 with the CT unit
d) Flow back the spent acid (calcium chloride) and initiate KL4 flow with nitrogen lift
e) Shut off KL4 zone and open the Middle KL (KL3) zone
f) Perform an acidisation operation on KL3 with the CT unit
g) Flow back the spent acid (calcium chloride) and initiate KL3 flow with nitrogen lift
h) Demobilise the coiled tubing unit
i) Flow test the KL3 zone for up to 35 days
j) Shut off the KL3 zone and open the KL4 zone
k) Flow test the KL4 zone for up to 35 days
l) Suspend the well pending further planning and regulatory approvals