RNS Number : 6742J
UK Oil & Gas Investments PLC
09 April 2015
 



9 April 2015

UK Oil & Gas Investments PLC

("UKOG" or the "Company")

 

Significant upgrade of the Horse Hill discovery, UK Weald Basin

 

London quoted UK Oil & Gas Investments PLC (LSE AIM: UKOG) is pleased to announce that US-based Nutech Ltd ("Nutech"), one of the world's leading companies in petrophysical analysis and reservoir intelligence, estimate that the Horse Hill-1 ("HH-1") well in the Weald Basin has a total oil in place ("OIP") of 158 million barrels ("MMBO") per square mile, excluding the previously reported Upper Portland Sandstone oil discovery.

 

The Horse Hill licences cover 55 square miles of the Weald Basin in southern England in which the Company has a 20.36% interest.

 

Nutech's report to the Company states this OIP lies within a 653 feet aggregate net pay section, primarily within three argillaceous limestones and interbedded mudstones of the Kimmeridge, and the mudstones of the Oxford and Lias sections. Approximately 72% of OIP, or 114 MMBO, lies within the Upper Jurassic Kimmeridge interbedded limestone and mudstone sequence. The Executive Summary of the Nutech Report is appended in full at the end of this release and the full executive report with figures will be available on the Company's website at www.ukogplc.com.

 

In order to establish estimates of total OIP within the licence area, the semi-regional resource potential of the Weald Basin's eastern footprint is the subject of ongoing analysis under the contracted alliance between Nutech, UKOG and Solo Oil Plc. The results of the estimated OIP within the licence will be reported when completed.

 

Final assessments of the Upper Portland Sandstone and the Oxford and Lias sections are in progress, with further results expected shortly. 

 

Stephen Sanderson, UKOG's CEO, commented:

"Drilling the deepest well in the basin in 30 years, together with the ability to use concepts, techniques and technology unavailable in the 1980s, has provided new cutting-edge data and interpretations to comprehensively change the understanding of the area's potential oil resources."

 

"As a result, we believe that, in addition to the Portland Sandstone oil discovery, the Horse Hill well has discovered a possible world class potential resource in what is interpreted to be a new Upper Jurassic "hybrid play".

 

"With the help of Nutech's considerable global knowledge base and play library, we have identified that the Horse Hill Upper Jurassic rock sequence is analogous to known oil productive hybrid reservoir sections of the Bakken of the US Williston Basin, the Wolfcamp, Bone Springs, Clearfork, Spraberry, and Dean Formations in the US Permian Basin and the Bazhenov Formation of West Siberia."

 

"The US analogues have estimated recovery factors of between 3% and 15% of Oil in Place."

 

"The Company considers that the high pay thickness, combined with interpreted naturally fractured limestone reservoir with measurable matrix permeability, gives strong encouragement that these reservoirs can be successfully produced using conventional horizontal drilling and completion techniques."

 

 "Nutech's results combined with our extensive geochemical analyses strongly indicates that the Company's Horse Hill licences lie within the likely sweet spot of the identified "Weald hybrid play"."

 

"Appraisal drilling and well testing will be required to prove its commerciality, but this "Weald hybrid play" has the potential for significant daily oil production."

 

"The operator, Horse Hill Developments Ltd, with the assistance of Nutech, is now focussed on flow testing the Portland Sandstone and Kimmeridge Limestone sections of the well, to establish producibility and thereby seeking to quantify an overall net discovered resource".

 

UKOG's interest in Horse Hill:

The Horse Hill-1 well is located within onshore exploration License PEDL 137, on the northern side of the Weald Basin near Gatwick Airport.  UKOG owns a 30% direct interest in Horse Hill Developments Ltd ("HHDL") and a 1.32% interest in HHDL via its 6% interest in Angus Energy Limited. HHDL is a special purpose company that owns a 65% participating interest and operatorship of Licence PEDL 137 and the adjacent Licence PEDL 246 in the UK Weald Basin.

Qualified Person's Statement: Stephen Sanderson, UKOG's CEO, who has over 30 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.

The oil in place hydrocarbon volumes estimated should not be considered as either contingent or prospective resources or reserves.

 

For further information please contact:

 

UK Oil & Gas Investments PLC

David Lenigas / Donald Strang                                                                   Tel: 020 7440 0640

 

WH Ireland (Nominated Adviser and Broker)

James Joyce / Mark Leonard                                                                       Tel: 020 7220 1666

 

Square 1 Consulting (Public Relations)

David Bick / Mark Longson                                                                           Tel: 020 7929 5599


Nutech Executive Report Summary (dated: 8 April 2015):

 

Results and Recommendations:

NULOOK and NULIST (electric) log interpretation results, now calibrated by POROLAB's rock analyses, calculate that the Horse Hill-1 well, excluding the structurally constrained Upper Portland sandstone, has a total oil in place ("OIP") estimate of 158 million barrels of oil ("MMBO") per square mile. The 158 MMBO per square mile OIP correlates to an aggregate pay section of 653 feet, primarily from the argillaceous limestones and mudstones of the Kimmeridge, and the mudstones of the Oxford and Lias sections. Table 1 shows the calculated OIP values for the well's main stratigraphic units. It is highly recommended that conventional flow testing be undertaken in one or more of the Kimmeridge limestone units as part of the planned flow testing of the Upper Portland sandstone discovery.

From its proprietary regional well log analyses NUTECH considers that the HH-1 OIP extends significantly beyond the 55 square miles of PEDL137 and PEDL246 with strong evidence that the eastern section of the Weald Basin contains considerably larger oil potential than has been previously estimated and published. This regional potential is the subject of ongoing analysis under NUTECH's contracted alliance with UK Oil & Gas Investments PLC and Solo Oil Plc.

 

Table 1: HH-1 NULOOK/NULIST OIP Summary Table:

SECTION

DEPTH FT

DEPTH  FT

GROSS FT

PAY FT

OIP


TOP

BASE

MD

MD

MMBO/Sq. Mile

L. Portland

2038

2320

129

19

7.2

Kimmeridge

2482

4430

1948

511

114.9

Top Corallian

4430

5000

374

0

0.3

Oxford

5050

5466

415

30

7.2

Kellaways

5466

5517

16

0

0.0

Upper Lias

6370

6711

220

0

0.4

Middle Lias

6711

7072

100

4

1.6

Lower Lias

7072

8096

986

53

17.6

Triassic

8288

8507

150

12

3.2

Palaeozoic

8508

8837

213

24

5.5

TOTAL



4308

653

158.0




TOT

TOT

CUM

 

 

The most significant calculated OIP volumes lie within the Upper Jurassic Kimmeridge section at 115 MMBO per square mile. The total Kimmeridge section calculates at 511 feet net pay with a corresponding average TOC of 2.8 %. Table 2, below, illustrates that the Kimmeridge now contains three interbedded argillaceous limestone and mudstone hybrid reservoir sequences, which contain an aggregate OIP of 107 MMBO per square mile, or 93% of the total Kimmeridge OIP.

The Middle Kimmeridge hybrid reservoir sequence is likely the most prospective as it contains two thick circa 100 gross feet oil saturated limestone reservoir units with an aggregate limestone only net pay section of 78 feet. The Middle Kimmeridge units are encased within 593 gross feet of self-sourcing, oil-saturated organic rich mudstones, with high TOCs up to 9.4%.

Fracture analysis, together with information from offset well information, indicates that the Kimmeridge shows good evidence of natural fracturing, particularly in the Middle Kimmeridge Limestone 1 and 2 pay sections.

 

Table 2: Kimmeridge Total and Kimmeridge Hybrid Section OIP and Metrics:

UNIT

LITHOLOGY

TOP FT MD

BASE FT MD

GROSS FT MD

NET PAY

FT MD

PAY RANK*

CLAY

%

PORO-SITY

%

SW PAY ² %

AVG ³ TOC %

 

OIP MMBO/

SQ. MILE

U. KIMM

Mudstone 1

2482

2649

167

19

3

50.1

    9.7


1.14

7.9

 

 

M. KIMM HYBRID SEQUENCE

Mudstone 2

2649

2825

176

100

3

50.2

9.7


2.13

19.2

Upper Limestone 1

2825

2931

106

17

2.94

16.1

8.5

53.8

n/a

3.0

Mudstone 3

2931

3082

151

98

2.97

42.2

7.9


4.05

17.4

Lower Limestone 2

3082

3184

102

61

2.66

18.2

8.5

45.6

n/a

12.7

Mudstone 4

3184

3450

266

113

3

41.4

7.2


3.69

20.6

L. KIMM HYBRID SEQUENCE

Limestone 3

3450

3479

29

17

2.88

23.6

9.3

57.0

n/a

3.0

Mudstone 5

3479

4430

951

86

3

41.8

5.1


2.48

31.2


TOTAL



1948

511






114.9

 

*NUTECH flag system that shows the average pay ranking over a formation sequence (5 flags=1, 4 flags=2, 3 flags=3), where 3 is minimum pay ranking; ² Sw in generative shale assumed as ~0%, i.e. no free water; ³ TOC calculated appear underestimated at high TOC sample values >5% TOC, values up to 9.4% seen in samples.

 

Potential Analogue Plays and Recovery Factors:

From a geological, reservoir engineering and possible future operational perspective, the interbedded naturally fractured carbonate and mudstone reservoirs encountered in the HH-1 are analogous to the Middle Bakken limestone of the Williston Basin. Further analogues are represented by the interbedded tight clastic reservoirs and source rocks of the Three Forks Formation, the US Permian Basin (Bone Springs, Wolfcamp, Clearfork, Spraberry, and Dean Formations), and possibly the age equivalent Upper Jurassic Bazhenov Formation of Russia's Western Siberian basin.

Bakken wells analyzed by NUTECH show a contacted OIP of between 10-20 MMBO per square mile, from a formation thickness of 40-150 feet, containing one hybrid carbonate reservoir to mudstone source-rock pairing. The Kimmeridge in HH-1 now shows three carbonate reservoir-mudstone source-rock pairings. Recoveries per well to date from the Bakken range from 8-15% in identified sweet spots.

NUTECH's analyses of the Wolfcamp/Bone Springs shows a contacted OIP range of between 60-160 MMBO per sq. mile in a 300-400 feet thick section and exhibits recovery factors of 1-10%.

 

Table 3: Comparison Metrics of HH Kimmeridge vs. Analogous Hybrid Producing Plays:

Basin Names

HH Kimmeridge (Weald Basin)

Bakken &Three Forks

Wolfcamp/Bone Springs

U. & L. Bazhenov Russia- W. Siberia

Geological Era

U. Jurassic

Devonian & Carboniferous

Permian

U. Jurassic

Reservoir Age

145-157 MMybp

320-380 MMybp

260-300 MMybp

140-152 MMybp

Depth (feet)

2300-4400*

8,000-11,000

7,000-10,000

8000-11000

Areal Extent (sq. miles)

~1100²

~6500

~7800

~800000

Thickness (feet)

1500-2000

25-150

300-400

60-150

Porosity

4-10%

4-12%

4-8%

2-12%

Water sat. (Sw)

10?-57%

25-60%

20-50%

10-15%***

Clay Content

15**-50***%

25%

20-30%

10-30%

Maturity Ro

0.5- 0.91%

0.5-1%

0.8-1%

0.5-1.1%

Measured TOC%

2- 9.4%

8-12%

4-8%

3->11%

Hydrogen Index

650-900

298-450

~100-700

200-700

OIP/sq. mile (MMBO)

114

10-20

60-160

7.25->13

Recovery Factor

???

8-15%

3-10%

???

 

*HH-1 uplifted by up to ~5000 feet, **within argillaceous limestone units, *** in mudstones, ² total Jurassic Weald shale prospective area, from BGS 2014, fig 47.

The Bazhenov Formation, of the same geological age and general stratigraphic, oil source rock composition and source richness as the Kimmeridge, constitutes the main oil source rock of the super-giant W. Siberian petroleum system. Some 200 conventional Soviet era vertical wells have been drilled and produced at highly variable rates and recovery factors in the last 50 years in the Bolshoi Salym field area. Production to date is primarily from a hybrid of thin naturally fractured low porosity and permeability limestone, silicite and carbonate silicite conventional tight reservoir units interbedded within the currently generative high TOC source rock (key metrics are shown in Table 3).

Recent publications show that the Upper and Lower Bazhenov mudstone oil source rock formations both contain a 10-30 feet low porosity limestone/carbonate conventional reservoirs created by the replacement of radiolarian fossils and algae or bacteria by carbonate cementation. Additional reservoirs exist in thin 5-10 feet thick naturally fractured silicites and carbonate silicites. The Bashenov constitutes a significant future hybrid reservoir target and oil resource albeit on a much larger geographical scale than the Kimmeridge. It is the focus of intense studies and horizontal drilling by Shell/Gazprom and Exxon/Rosneft. Bazhenov well economics have likely been significantly boosted by Russia's recent oil/corporation tax exemptions for tight (low poroperm i.e., under 2 milliDarcy permeability) reservoir developments.

 

Work in Progress:
Final assessments of the Upper Portland sandstone reservoir and the Oxford and Lias sections are still being completed with the assistance of UKOG and its technical team. The overall regional potential of the Weald Basin is the subject of ongoing analysis under the contracted alliance.

 

Glossary:

argillaceous limestone

a limestone containing a significant proportion of clay minerals

cementation

involves ions carried in groundwater chemically precipitating to form new crystalline material between sedimentary grains

clastic

rocks composed of broken pieces of older rocks

discovery

a discovery is a petroleum accumulation for which one or several exploratory wells have established through testing, sampling and/or logging the existence of a significant quantity of potentially moveable hydrocarbons

effective porosity (PHIE)

The interconnected pore volume or void space in a rock that contributes to fluid flow or permeability in a reservoir. Effective porosity excludes isolated pores and pore volume occupied by water adsorbed on clay minerals or other grains

electric logs

tools used within the wellbore to measure the rock and fluid properties of surrounding rock formations

fractured

containing a crack or surface of breakage within rock; fractures can enhance permeability of rocks greatly by connecting pores together

free water

water that is mobile, available to flow, and not bound to surfaces of grains or minerals in rock

hydrogen index (HI)

the amount of hydrogen relative to the amount of organic carbon in a sample, normally expressed in milligrammes of hydrogen per gramme of TOC.  The higher the amount of hydrogen the more oil prone the source rock when subjected to time, temperature and pressure; an initial HI over 450 normally indicates an oil prone source rock

limestone

a carbonate sedimentary rock predominantly composed of calcite of organic, chemical or detrital origin. Minor amounts of dolomite, chert and clay are common in limestones. Chalk is a form of fine-grained limestone

lithology

The macroscopic nature of the mineral content, grain size, texture and color of rocks

micrite

a sedimentary rock formed of very fine grained calcareous particles ranging in diameter from 0.06 to 2mm, often referred to as lime mudstone

milliDarcy

a standard unit of measure of permeability. One Darcy describes the permeability of a porous medium through which the passage of one cubic centimeter of fluid having one centipoise of viscosity flowing in one second under a pressure differential of one atmosphere where the porous medium has a cross-sectional area of one square centimeter and a length of one centimeter. A milliDarcy (mD) is one thousandth of a Darcy and is a commonly used unit for reservoir rocks

MD

measured depth

MMBO

millions of barrels of oil

MMybp

millions of years before present

mudstone

an extremely fine-grained sedimentary rock consisting of a mixture of clay and silt-sized particles

oil in place (OIP)

the quantity of oil or petroleum that is estimated to exist originally in naturally occurring accumulations before any extraction or production

oil saturation

the amount of the pore space within a reservoir containing oil

organic rich

a rock rich in organic matter which, if subjected to sufficient heat and pressure over geological time, will generate oil or gas.  Typical source rocks, usually shale or limestone, contain above an initial 2% organic matter by weight

pay

a reservoir or portion of a reservoir that contains economically producible hydrocarbons. The term derives from the fact that it is capable of "paying" an income. The overall interval in which pay sections occur is the gross pay; the smaller portions of the gross pay that meet local criteria for pay (such as minimum porosity, permeability and hydrocarbon saturation) are net pay

permeability

the capability of a porous rock or sediment to permit the flow of fluids through its pore spaces

play

a set of known or postulated oil and or gas accumulations sharing similar geologic, geographic, and temporal properties, such as source rock, migration pathways, timing, trapping mechanism, and hydrocarbon type

porosity

the percentage of void space in a rock formation, where the void may contain, for example, water or petroleum

recovery factor

those quantities of petroleum, as a proportion of OIP anticipated to be commercially recoverable by application of development projects to known accumulations from a given date forward under defined conditions

reservoir

a subsurface rock formation containing an individual natural accumulation of moveable petroleum that is confined by impermeable rock/formations

sandstone

a clastic sedimentary rock whose grains are predominantly sand-sized. The term is commonly used to imply consolidated sand or a rock made of predominantly quartz sand

silicite

fine grained rocks composed primarily of layered silica

source rock

a rock rich in organic matter which, if subjected to sufficient heat and pressure over geological time, will generate oil or gas.  Typical source rocks, usually shale or limestone, contain above an initial 1% organic matter by weight

sweet spot

the area within a shale source rock unit showing highest TOC and generative potential normally associated with basin centred deposition

thermal maturity (Ro)

a term applied to source rocks which have received sufficient temperature and pressure over geological time to generate hydrocarbons

TOC

total organic carbon - the weight percent amount of organic carbon within the rock which is a commonly used measure of hydrocarbon source rock richness

water saturation (Sw)

The fraction of water in a given pore space. It is expressed in volume/volume, percent or saturation units.

 


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