UKOG Announces Annual Review and Accounts for the Year Ended 30 September 2021

Source: 3/25/2022, Location: Europe

UK Oil & Gas Plc, a UK and internationally focused energy company, is pleased to announce its full year results for the full year ended 30 September 2021. A copy of the full annual report and details of the Company's annual general meeting will be posted to shareholders in due course.

Qualified Person's Statement
Matt Cartwright, UKOG's Commercial Director, who has 39 years of relevant experience in the global oil industry, has approved the information contained in this announcement. Mr Cartwright is a Chartered Engineer and member of the Society of Petroleum Engineers.


The Directors present their strategic report on the group for the year ended 30 September 2021.

UK Oil & Gas Plc ("UKOG" or the "Company") is an energy company currently primarily focused upon oil & gas exploration and production. We specialise in creating new geological ideas, concepts and methodologies to find and produce oil & gas from previously unexplored or overlooked rock formations within established petroleum producing provinces.

Our current operational focus is on the UK and Turkey onshore sectors, where we aim to build a sustainable oil & gas production base that can act as a springboard to further worldwide opportunities. UKOG has operated safely and environmentally responsibly in the UK since 2013.

Our current UK onshore portfolio consists of direct and indirect interests in six oil & gas exploration, appraisal, development and production assets, all situated within the Weald and Purbeck-Wight Basins of southern England. We are the largest acreage holder in the south of England, with assets covering 689 gross km˛.

We hold majority interests in four UK onshore oil & gas discoveries, the most notable being at Horse Hill and Loxley in Surrey, together with a significant position in the Kimmeridge Limestone (KL) oil deposit or "play". UKOG holds the largest acreage position within the play's most prospective area or "sweet spot", covering 489 gross km˛.

Our UK oil & gas portfolio contains a good balance of low-risk production, appraisal and development assets as well as upside exploration assets within both the Kimmeridge Limestone and Portland conventional plays.

Our portfolio in Turkey consists of a 50% non-operated working interest in the 305 km˛ Resan licence in southeast Turkey, containing the potentially significant undeveloped Basur-Resan oil discovery plus further exploration prospects. This project is assessed to contain significantly greater discovered oil volumes than any of our UK projects and, if successful, offers potentially transformational growth for the Company.

Our portfolio, notably Basur-Resan in Turkey, has the potential to generate significant returns for the Company and its shareholders.

The Company is reviewing the potential acquisition of further new international producing oil and gas properties which have the potential to deliver potentially significant short term cash flow. These assets also have the potential to become self-funding relatively quickly.

As a further diversification, we are increasingly active in the newly emerging geothermal energy field, where we possess the key subsurface and engineering skills necessary to make such projects work. We have teamed up with UK geothermal technology specialist Ceraphi Energy Limited ("Ceraphi") to evaluate the economic feasibility of transitioning a part of our Horse Hill site into a geothermal and solar energy hub. This hub could potentially supply heat energy to a defined significant industrial end-user in the area. We are also a founder member of the Geothermal Energy Advancement Association.

As well as standalone geothermal projects, we are currently investigating the viability of hybrid energy sites centred around subsurface gas and/or hydrogen storage. These projects are envisaged to test the Company's hydrogen battery concept to provide peak-shaver power generation and green hydrogen generation from geothermal and other renewable sources. Two new prime coastal sites have been identified and are under active investigation.

A review of business activities in the year and future developments is outlined within the Statement from the Chairman (page 5), the Chief Executive's Statement (page 6) and the Operational Review (page 12).


UKOG aims to build a diverse, sustainable and self-funding international energy business which has the following strategic objectives:

Oil & Gas:

1. Find and Develop Low-Cost and Long-life Assets
- Continuing to invest in new and existing near-term production assets in the international sector is a key priority. New assets added to the Company's portfolio must demonstrate potential self-funding capacity in the near term. Once in production, revenues from these assets will provide free cash flow to re-invest and deliver shareholder returns.

2. Resource and Reserve Growth
- Building our recoverable resources, reserves and future production through targeted and disciplined high-impact exploration, appraisal projects and acquisitions, both in UK and increasingly in the international sector.

3. Balance Risk and Reward
- Maximising value by ground floor or early entry where possible.
- Judicious use of farmouts to provide operational funding.
- Maximising return on investment by actively considering divestment after an asset has been de-risked, where appropriate.

Geothermal, Renewables and Hydrogen:

1. UK Energy Diversification - Reduce Carbon Footprint of Company's Existing Petroleum Producing Sites
- Where viable, implement geothermal and/or solar energy cogeneration plus battery storage from existing wells/sites.
- Where viable, add new standalone geothermal and battery storage for grid/heat export.

2. Find and Develop New Stand-alone Geothermal and Energy-hub Projects
- Ground floor entry, either operated or as joint venture partner.
- UK initial focus, international expansion if successful or commercially viable opportunities arise.
- Strategic partnerships with sector technology specialists.

3. Hydrogen
- Investigate potential sites for hydrogen generation, storage and hydrogen battery concept.
- Focus initially on the UK, with international expansion if successful or if commercially viable opportunities arise.
- Ground floor operated entry through planning permission stages, with possible subsequent strategic partnerships/JV arrangements with a large infrastructure player.
- Strategic partnerships with sector technology specialists.

Targeted Portfolio Management:
Continuously review and high-grade our portfolio to either acquire or divest further stakes in existing assets. We also look to acquire assets at any stage in the life cycle and are not limited by geography, where we can create significant value for shareholders.

UKOG shares this vision and strategy through internal dialogue with employees and externally with shareholders and stakeholders via public announcements and dissemination of information through our website and the Annual Report and Accounts.

Two years ago, the price of crude oil in the USA was briefly negative. As we approach the end of the first quarter of 2022, the picture is altogether optimistic and brighter, with Brent crude surpassing 100 dollars per barrel as I write this statement. The uncertainty of oil prices over the last 24 months has thankfully stabilised, but that cannot be said of the geo-political picture where any number of dramas could unfold which could alter the mood of our industry.

That is why I am excited by UKOG's pursuit of opportunities in renewable energy, notably in respect of geothermal energy and gas storage solutions for hydrogen development. As a country the UK needs to be more self-reliant and less dependent on international gas pipelines. Over decades we have allowed our gas storage capacity to fall alarmingly. UKOG, a company with multi-faceted ambitions and abilities, is looking at domestic projects which could reverse that decline. Additionally, the management team is also considering several other potentially exciting opportunities both domestic and international and is proactively seeking to diversify the Company's portfolio in recognition of the rapidly evolving industry landscape.

The Company's gas project at Loxley is in the hands of the Secretary of State after a tortuous appeal process, but I hope that common sense will prevail and follow the view of Energy Minister Greg Hands who said: "We will always prefer British gas production to foreign imports". Given today's mammoth carbon footprint of importing oil and gas into the UK, why should the resources directly under our feet, including Loxley, not be drilled and developed?

I have only recently taken on the role of Chairman, but I have had close links with UKOG for many years and fully support the efforts of Stephen Sanderson to take on new opportunities in new territories and in new sectors. Whilst some private investors may harbour concerns regarding the recent trend in the Company's share price, raising funds from equity remains a necessary part of UKOG's strategy as it continues funding the forward growth of its high priority projects. This will remain the case until such time as the Group is generating self-sufficient cash flows from operations. Reserve-based lending is rarely an economic option for junior oil companies primarily engaged in exploration and, whilst I have sympathy for any frustrations regarding share dilution, I am encouraged that the Company is building a highly desirable and carefully curated asset portfolio with long-term economic promise.

It requires a great deal of specialist knowledge and experience for a business to spin several plates in this industry, however geographical and sector-based diversification remains core to UKOG's ambitions. Tireless efforts continue to be made in the pursuit of maximising shareholder value, and as ever there is no room for standing still.

I confidently predict a busy 2022 on all fronts, both home and abroad. There will rarely be a dull moment and, as we approach the drilling of our first production well in Turkey, let's hope for an enjoyable and profitable ride.

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