Its been a while since my last update concerning UKOG and the Broadford Bridge drill site in Sussex, with my interest having waned since the operational problems first reported in the Autumn of 2017.
Early yesterday afternoon the shares were trading 15% higher at 3.3p. Now they change hands for as little as 1.50p after another disappointing RNS from the company at 2.50 pm on February 20th.
Much hope was resting on a successful outcome from the prolonged drilling and testing of the BB-1-z sidetrack well.
All seemed to be well at Broadford Bridge when Stephen Sanderson, UKOG's Executive Chairman, commented on September 6th, 2017:
"I am delighted to report the safe and successful completion of the drilling and completion phase of the well at our flagship Broadford Bridge oil discovery.
The well continues to deliver significant technical insights, this time via the extensive perforation programme, the results of which provides further encouraging confirmation of mobile, light oil within the target Kimmeridge reservoir zones.
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."
But then the bombshell hit on October 10th, 2017 concerning well problems. So much for BB-1-z being in optimal condition. Up to then there was much euphoria about the potential for significant oil recovery from Southern England's Weald Basin.
"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.... which 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.
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."
Investors then had a wait for further results which started coming through after the cement-squeeze but culminated in an RNS of December 27th, 2017. Things hadn't gone too well causing the shares to decline further.
"Basal KL3 test successfully re-run following mechanical problems. Initial natural flow of approximately 300 barrels of returned completion fluids per day ("bfpd") decreasing to a continuous rate of 30-50 bfpd during well clean-up. Gas blow and live oil traces recovered to surface. Low reservoir productivity indicates zone likely not economically viable."
Apparently BB-1-z was now not in the "sweet spot"! Alarm bells should have started ringing when Sanderson stated this in the RNS.
Then yesterday further results came through causing a 50% reduction in the share price over 2 trading sessions.
"Oil flowed to surface from Kimmeridge Limestone 5 ("KL5") throughout 96 hours of near-continuous rod-pumping. Fluid returns, measured as half-hourly instantaneous pumped rates, currently range from around 10 to 72 barrels per day ("bpd").
Fluids flowed to surface consist of oil mixed with returned reactants ("spent acid") from an acid-wash programme. Associated average oil percentages ("oil-cut") exceed 30% with intermittent periods exceeding 50% by volume and continue to increase. To date, no obvious formation water has been observed in returns.
In the light of results and analyses from tests 5 and 6, together with learnings from test 7 in KL5, the Company and its consultants are currently investigating the possibility that zones 5 and 6, originally perforated in summer 2017 and acidised during the original test programme, were damaged by a combination of the long residence times of spent acid within the reservoir prior to current testing and the perforating technique utilised. It is now thought that both fractures and perforated channels around the wellbore of KL3 and KL4 could be partially blocked by released clay particles and cement related debris, thus preventing sustainable fluid inflow.
In this respect, serious consideration is being given to a possible future short sidetrack and selective re-test of KL3 and KL4 which electric logs show as oil-saturated.
Existing planning consent time permitting, following completion of KL5 testing, the plan remains to test a 40 ft thick limestone zone in KL1 which, as per KL5, was not perforated or acid-washed in 2017."
Summary of situation for UKOG after February 20th RNS
During a conference call with Angus Energy shareholders, Paul Vonk, CEO, made some references to well problems at Broadford Bridge and these have come to pass.
With 3,668,067,032 shares now in issue, the company is valued at around £59 million as of today. With 10-72 barrels per day from Broadford shareholders must now hope for Horse Hill to come good as the new wells are drilled near Gatwick in the coming weeks. But the valuation seems excessive given the disappointment with BB-1-z and £6.5 million of loan shares still be issued, albeit into a market where the share price is much lower and hence a lot more dilution.
Unless the final testing at Broadford Bridge is spectacular, I don't see why the shares should readily recover and will probably drift lower as more shares hit.
Its been a really disappointing journey since the high hopes of last summer for the Weald Basin bonanza. A combination of bad luck, overly high expectations and botched well operations by Schlumberger have left many shareholders nursing substantial losses. Poor news from Angus Energy haven't helped as the Lidsey Well has too struggled to produce substantial oil flows. No wonder the major oil companies have kept their distance from this acreage. It was amazing that the shares were close to 10p before all the operational issues came to light. Another AIM oil disaster to follow on from Xcite Energy, Sound Oil, Gulf Keystone, Range Resources and many more. Really gutted for UK PLC and that is genuine!
The question now are will a new sidetrack well be drilled at Broadford Bridge and the new "sweet spot" wells? This will take time and plenty of money at £2-3 million per well. New planning consents with West Sussex County Council will also be required (which will take a little time) as this window of opportunity will expire shortly. A rig currently going to Horse Hill is therefore unlikely to take a side trip to Broadford Bridge as it would delay Horse Hill by some time.
Oil is flowing, but nowhere near enough to be commercial at around 100 bopd per day best after further clean up work and the final testing zone. The dreams of 1000-2000 bopd have gone with the news over the last few months.