Stephen Sanderson, UKOG’s Executive Chairman, commented: “The first step in evaluating any tight oil play is to calculate the overall OIP using all available data. Nutech’s study has based its OIP conclusions on its established well-by-well methodology that also fully incorporates geological insights gained from the Horse Hill-1 well.
These findings should now serve to give the market the Company’s up to date and science-based view of the estimated quantity of OIP within UKOG’s Licence Areas and in the wider Weald Basin.
The Company believes that the Report illuminates the wider Weald Basin’s significant potential and demonstrates how the Company’s interests fit within the overall geological picture. The calculated OIP volumes provide us with the necessary encouragement to proceed with our plans to prove the concept that oil may flow and possibly be recovered in commercial quantities from these tight oil plays. The planned activities in Horse Hill and Holmwood will therefore be key steps.
Although we are only in the early stages of this proof of concept process, the findings of our recently published Weald tight oil conceptual development studies, demonstrate that, in the success case, oil could be produced with sensitivity to the Weald locality. This is a fundamental aspect of the company’s business philosophy.”
Allen D Howard, Nutech’s Chief Commercial Officer, commented: “This was a very rigorous study analysing the oil in place measured in 86 wells calibrated by our own in-house core and cuttings analyses, geochemical and legacy data. This, coupled with the experience and knowledge Nutech brings from the majority of proven producing tight oil and gas plays in the USA, gives us confidence in the specific potential of the Weald’s tight oil plays and the Kimmeridge limestone play in particular.”
UK Oil & Gas Investments PLC (LSE AIM: UKOG) has told DirectorsTalk that it has received an oil in place (“OIP”) volumetric evaluation that it commissioned Houston based Nutech, a leading specialist in the evaluation of tight oil plays, to conduct over eight of the licence areas in which the Company has an interest in the Weald Basin and also over the wider Weald Basin, located in southern England.
Key Points:
· A gross best estimate (“P50”) OIP of 15.7 billion barrels (“BBO”) is calculated to lie within three Jurassic shale and interbedded limestone tight oil plays underlying the 8 licence areas in the Weald Basin in which UKOG has an interest (“Licence Areas”, covering 151 sq miles see Table 2).
· Within this gross best estimate, an aggregate net attributable 3.9 BBO P50 OIP is calculated for UKOG’s economic interests in the Licence Areas.
· The three Jurassic tight oil plays underlying the wider Weald Basin’s 1,261 sq mile area (the Area of Interest “AOI”) are calculated to contain a gross best estimate P50 OIP of 124 BBO.Please note that other than UKOG’s eight Licence Areas, in which it is calculated UKOG has a net attributable 3.9 BBO P50 OIP, the Company has no further economic interest in the AOI.
The gross P50 OIP for the Licence Areas stated above is the aggregate OIP for all eight licences, in which UKOG has varying economic interests. These eight licences represent the Company’s total licence interests within the AOI.
The Report’s executive summary is available on the Company’s website (www.ukogplc.com).
Cautionary Statement
The Report’s OIP numbers should be regarded as Total Petroleum Initially in Place, as defined by the Society of Petroleum Engineer’s Petroleum Resource Management System of resource reporting.
As previously stated by the Company, it is emphasised that the above estimated OIP volumes should not be construed as recoverable resources, contingent or prospective resources, or reserves and also should not be construed in any way to reflect potential producibility of hydrocarbons from the formations evaluated prior to any successful flow tests and the assessment of an estimated recovery factor to these OIP volumes.
Until further work is done there can be no current estimate of the recovery rate for the Weald Basin or assurance that oil can be recoverable at all.
The Report
The Report’s calculated OIP volumes are derived from a 3D geological and petrophysical static model containing analysis of 85 DECC/OGA released wells and one proprietary well over the wider Weald Basin. The Calculated OIP for the Licence Areas and wider Weald are shown in Table 1 below:
Table 1 – Nutech Calculated Jurassic Tight Oil OIP Under UKOG Licence Areas and Wider Weald Basin (BBO)
|
Area |
UKOG’s Licence Areas 2 (151 sq. miles) |
Weald Basin AOI 2 (1,261 sq. miles) |
|||||||
|
Gross Aggregate OIP (BBO) |
Net Attributable Aggregate OIP (BBO) |
Gross OIP (BBO) |
|||||||
|
Confidence level |
P90 Low |
P50 Best |
P10 High |
P90 Low
|
P50 Best
|
P10 High
|
P90 Low
|
P50 Best
|
P10 High |
|
Jurassic Tight Oil1 |
8.1 |
15.7 |
29.4 |
2.0 |
3.9 |
7.2 |
61.8 |
124.3 |
229.9 |
|
¹ Jurassic tight oil is defined as the plays contained within the source rock shale sequences and interbedded tight conventional limestones of the Kimmeridge Clay, Oxford Clay and Lias Shale Formations. Conventional reservoirs of the Corallian and Great Oolite and of the overlying Portland section are excluded, as they were not the purpose of the study. 2 Volumetric estimates by Nutech. |
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Kimmeridge Tight Oil Play OIP
The Report calculates that the most significant portion of the reported OIP lies within the Kimmeridge Clay Formation, with a calculated gross P50 OIP of 10.0 BBO in the Licence Areas (net attributable to UKOG of 2.4 BBO) and a calculated gross P50 OIP of 81.9 BBO within the overall AOI.
Three tight limestones within the Kimmeridge Clay Formation represent the Company’s principal near-term tight oil exploration and appraisal focus, and are calculated to contain a gross P50 OIP of 2.1 BBO within the Licence Areas and a gross P50 OIP of 19.5 BBO within the overall AOI.
From earlier reports, the Kimmeridge limestones are interpreted by Nutech and by Schlumberger to contain hydrocarbons within the Company’s Horse Hill-1 well, in which the Company has a 20.358% per cent economic interest, and are known to have flowed oil from the nearby Balcombe-1 well (in which the Company has no interest).
Possible Oil Producing Analogues
The Report also states that the Kimmeridge limestones are analogous to the oil productive Austin Chalk and Eagle Ford formations of the US. Furthermore, the analysed Kimmeridge section is possibly analogous to the known oil productive tight oil sections of the Bakken of the US Williston Basin, the Wolfcamp, Bone Springs, Clearfork, Spraberry, and Dean Formations in the US Permian Basin. These US analogues have estimated recovery factors of between 3% and 8% and in a few cases up to 15% of contacted OIP per well. These recovery factors are achieved with the use of well stimulation techniques.
Until further work is done there can be no current estimate of the recovery rate for the Weald Basin or assurance that any Oil in Place can be recovered at all.
It should be noted that Nutech’s report and estimates contain judgements and assumptions that may differ from other prior studies. For example a prior study on the wider Weald basin by the British Geological Survey (“BGS”) differs with Nutech’s analysis largely as a result of differing judgements regarding the likely presence of oil in the Kimmeridge section as a result of different assumptions on the thermal maturity of the Kimmeridge section derived from the findings of the Horse Hill well.
Future Plans
As well as pursuing the appraisal and development of the separate Horse Hill Portland sandstone oil discovery, the Company will also focus on the appraisal of the Kimmeridge limestones at Horse Hill, which it believes present the most viable near-term objective for potential tight oil production in the basin, and which could potentially be produced utilising conventional limestone stimulation methods.
The planned Horse Hill-1 flow test, specifically designed to test the Kimmeridge limestones along with the Portland sandstone, is planned to be the next significant milestone in the Company’s Kimmeridge “proof of concept” process. The Company expects these flow tests to be conducted within the next few months.
Following the expected approval of the Company’s farm-in to the PEDL143 Holmwood licence (originally announced on 29 June 2015), the Company will participate in the drilling of the Holmwood-1 exploration well, which UKOG believe will provide a further Kimmeridge limestone proof of concept step alongside testing the conventional Portland and Corallian targets. This is planned for 2016 or 2017.
