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UKOG Announces Upgrade to Portland Oil in Place

Source: www.gulfoilandgas.com 7/19/2016, Location: Europe

UK Oil & Gas Investments PLC announces that a new petrophysical analysis by Nutech, incorporating the findings of the successful Horse Hill-1 ("HH-1") flow test, demonstrates a threefold increase in calculated total oil in place (OIP) per square mile at the HH-1 well within the Upper Portland pay zone. As reported in May 2015 a total Horse Hill Portland P50 OIP of 21 million barrels ("MMbbl") was calculated utilising Nutech's petrophysical analyses.

Nutech's May 2015 evaluation assigned a Portland OIP value of 7.7 MMbbl per square mile at the HH-1 well. Nutech's current evaluation upgrades the Portland OIP at HH-1 to 22.9 MMbbl per square mile, a 200% increase.

As previously announced the final HH-1 Portland test flowed at a constrained stable dry oil rate of 323 barrels of oil per day ("bopd"). The Portland was produced at maximum pump capacity and showed no clear indication of depletion. It is likely that the rate can be further increased using a higher capacity downhole pump during the next planned test.

As previously stated by the Company, the calculated OIP per square mile should not be construed as recoverable resources, contingent or prospective resources or reserves.

HH-1 Discovery Well Location and Company Interest

The HH-1 well is located within onshore exploration Licence PEDL137, on the northern side of the Weald Basin near Gatwick Airport. PEDL246 lies adjacent to and immediately to the east of PEDL137 ("the Licences"). UKOG owns a 27.3% interest in the Licences, which are operated by Horse Hill Developments Ltd.

Background

Nutech's Report ("Report") details that the production of dry oil from the Portland, with little or no observed water production, required a rethink of the pre-flow test petrophysical model. Prior to the flow test, interpretations suggested that water would likely be produced along with oil, as is seen in Portland reservoirs in nearby producing oil fields. The revised model fully incorporates well test observations and measurements.

From a similar review of the petrophysical response within the Kimmeridge Limestones, the Report concludes that the well test results reinforce Nutech's and the Company's expectations regarding the significant volumes of OIP seen at the HH-1 well. As previously reported in April and June 2015, the overall Kimmeridge and Jurassic shale and limestone sequence is calculated to contain an OIP of 158 MMbbl per square mile at the HH-1 well and P50 9,245 MMbbl over the 55 square miles of the Licences.

Horse Hill Future Plans

The revised petrophysical model will be used to update Xodus' 2015 estimates of the total OIP contained within the mapped Horse Hill Portland oil accumulation. This will include an estimate of Contingent Resources net to the Company and will be reported in due course.

The Operator has also informed the Company that the flow test data analysis undertaken by Nutech and Xodus provides the necessary technical encouragement to engage Barton Wilmore Ltd, one of the UK's leading planning and environmental assessment practitioners, to prepare and submit a planning application to Surrey County Council ("SCC"), and to assist with obtaining necessary permissions from the Environment Agency ("EA"), for a significant appraisal programme at Horse Hill.

The applications will seek permission to conduct a programme consisting of the production flow testing of 3 Kimmeridge Limestone zones plus the overlying Portland over a total flow period of up to 360 days, plus two further appraisal/development wells and the acquisition of 3D seismic data.

A public consultation and engagement process related to the planning application is scheduled to take place, leading to an application to SCC and the EA.

Engineering studies to examine the range of possible flow rates from a planned horizontal sidetrack well are ongoing. Data to further calibrate these studies will be acquired during the further planned extended flow tests.

Stephen Sanderson, UKOG's Executive Chairman, commented:

"The record breaking flow test results and revised Nutech analysis gives us key new technical insight into the oil bearing Portland reservoir. More importantly than the simple increase in Portland oil in the ground, these learnings have significant positive implications for potential recovery factors and for future commercial viability. The economic potential of the Portland looks increasingly positive.

The validation of Nutech's Kimmeridge evaluation by the flow tests also underscore the Company's expectation that significant volumes of oil lie in the ground within the licence and can be brought to the surface at commercial rates.

We will work closely with Barton Willmore and others to ensure the necessary applications for regulatory consents are submitted. The granting of these permissions is the next key step to enable us to move the Horse Hill Portland and Kimmeridge projects forwards towards early monetisation.

We look forward to the conclusion of the regulatory consent cycle and eagerly await the start of planned long term flow testing."

Qualified Person's Statement:

Stephen Sanderson, UKOG's Executive Chairman, who has over 35 years of relevant experience in the oil industry, has approved the information contained in this announcement. Mr Sanderson is a Fellow of the Geological Society of London and is an active member of the American Association of Petroleum Geologists.

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