UK Oil & Gas PLC (UKOG) have just announced that the planned simultaneous drilling and test production operations at Horse Hill have been successfully implemented.
Continuous Kimmeridge oil production from Horse Hill-1has been maintained since the start of the Horse Hill-2/2z horizontal drilling campaign on 29 September 2019. Total HH-1 Kimmeridge test production now stands at over 41,800 barrels of light, sweet 40° API crude, pushing combined total aggregate Portland and Kimmeridge production to over 71,368 bbl. No discernible Kimmeridge formation water has yet been recovered to surface.
The establishment of safe sim-ops is designed to permit the continued collection of further essential reservoir performance data from the Kimmeridge oil pool and to provide significant oil sales revenues to offset the Company's operational costs. UKOG's innovative use of bespoke safety equipment to protect the HH-1 wellhead and pump during sim-ops places the Company at the forefront of safe UK onshore operational practices.
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.
UKOG holds a controlling 85.635% interest in the Horse Hill oil field and surrounding highly prospective PEDL137 and PEDL246 licences, which are operated by UKOG's subsidiary company, Horse Hill Developments Ltd.
Stephen Sanderson, UKOG's Chief Executive, commented: "The establishment of safe and innovative sim-ops at Horse Hill marks another significant operational milestone for the Company in 2019. "
News and share price outlook
Great news from UKOG this morning. All on track and HH-2z Portland and HH-1 Kimmeridge wells in long term production by end of 2019. Plenty of £££ into the account. 1.1p is ridiculous. Some were sceptical after the Broadford Bridge “cement job” disaster, but Horse Hill is progressing well and no ramping needed. Very undervalued IMHO.
Revenue per day and month key assumptions
UKOG are pumping around 250 barrels a day currently whilst the new wells are drilled during October and November.
Brent Crude = $57 a barrel
Net revenue after lift, marketing and transport = $37 a barrel ($20 assumed costs)
UKOG share of HH = 87%
250 bbl a day x 87% x $37X 30 = $241,000 a month net to UKOG! Once the Horizontal HH-2z Portland super happy days since more like 1000 bopd.
The assumptions going into my NPV 10 model seem more than valid now. See below: