UKOG update October 15 2019 - coring operations complete at Horsehill and Live Oil bleeding profusely through sweet spot

UKOG rig

UKOG has announced the successful completion of an extensive conventional coring programme in its 85.635% owned Horse Hill-2 (HH-2) Portland pilot well.

Things are looking very good with this latest news, yet the shares are only up 7% per cent to 1.15p. The horizontal well should produce some stunning results of 1000-1500 bopd since it is now targeting the “sweet spot”.

Things are going perfectly at Horse Hill so far, unlike the 2017 drill at Broadford Bridge. 1.15p is a stupidly low price caused by poor sentiment and burnt fingers from 2017-2018, YA share sales for Tellurian buy out to give UKOG an 85% share in HH, oil and gas AIM out of favour, risk-off investment scenario caused by Brexit etc. but fundamentals at HH justify more like 2-3p min. More patience! But the HH-2z well is now only a few weeks away from flowing. Exciting times at Horse Hill. No operational problems at all so far and the oil is still flowing at 250 bopd and being delivered to Fawley Refinery to help pay for the drilling rig (around $25,000 a day cost).

The RNS

Preliminary visual analysis of a total of 241.45 ft of core has clearly identified the Portland reservoir's most productive zone or "sweet spot", which will now be the target of the planned circa 1,000 m HH-2z horizontal trajectory, expected to commence next week.

Live oil was observed "bleeding" profusely from core throughout the sweet-spot, the Upper Portland reservoir's most porous, permeable and oil productive interval. Lesser degrees of oil bleed, together with oil shows and oil staining were also observed from porous sandstone intervals lying above and below the sweet-spot.

The core is now at a Surrey-based laboratory, where an extensive geological and petrophysical analysis programme is now underway. Results of analyses that directly impact the field's possible increased oil in place and recoverable oil volumes will be reported in due course.

Having also reached its planned depth of around 2320 ft below rig floor, the well is now being prepared for electric logging, following which it will be plugged back to the "kick-off" point delineating the start of the HH-2z horizontal section. To ensure the borehole remains wholly within the sweet spot, HH-2z will be actively "geo-steered" during drilling to keep within a series of core and electric log-derived diagnostic geological markers delineating the zone's upper and lower boundaries. The successful delivery of such an optimally placed horizontal trajectory is designed to optimise flow rates and oil recoveries from the Portland reservoir.

About HH-2/2z:

HH-2/2z, the first of two new horizontal wells in the field's Portland oil pool, is designed to be retained as a future production well, capable of delivering flow rates significantly higher than the previously reported 362 barrels of oil per day from the HH-1 vertical Portland discovery well. Following a planned extensive HH-2z production flow-testing campaign, both HH-2z Portland and the HH-1 Kimmeridge well are expected to be put into long term production by the end of 2019.

Stephen Sanderson, UKOG's Chief Executive, commented: "The HH-2 coring programme has delivered its key short-term goal of defining the Portland reservoir's sweet-spot, the most porous and permeable vertical zone within the oil pool. We can now confidently proceed ahead to drill the HH-2 horizontal trajectory wholly within the most oil productive part of the Portland, the zone capable of delivering the significant flow rates we seek."