UK Oil & Gas Investments PLC LON:UKOG has this morning announce that it has executed a Farm-in agreement with Egdon Resources U.K. Limited LON:EDR to acquire a 20% interest in UK onshore licence PEDL143, further increasing UKOG’s interests in the Weald Basin. The operator of PEDL143 is Europa Oil & Gas Limited LON:EOG.
The 91.8 square km (35.5 square miles) PEDL143 licence is located to the immediate west of Horse Hill licence, PEDL137, in which UKOG has an interest, and to the immediate south of the Brockham oil field, licence PL235, in which UKOG has an interest via its 6% ownership of Angus Energy Limited. PEDL143 contains the Holmwood prospect, which the PEDL143 partnership plans to test with the Holmwood-1 commitment well. The well is intended to be drilled to a total depth of approximately 4600 ft (1400 metres) true vertical depth to penetrate the Upper and Lower Portland Sandstone reservoir targets, the full Kimmeridge Clay section and the underlying Middle Jurassic Corallian Sandstone reservoir objective. Regulatory consent to drill the well is currently awaiting the outcome of a recent planning inquiry held by the Planning Inspectorate.
A Competent Persons Report by ERC Equipoise Limited, published in June 2012 shows the Holmwood prospect is estimated to contain mean gross unrisked prospective resources of 5.6 million barrels for the combined Portland and Corallian objectives. The Chances of Success, estimated by ERCE at 32% for the Portland Sandstone and 25% for the Corallian Sandstone, are representative of moderate to low exploration risk. The report can be viewed here: CPR_Europa_Final_070612
Subject to the grant of planning consent for the Holmwood-1 well and subject to receipt of the necessary approval from the Oil & Gas Authority, UKOG will pay a 40% share of the Holmwood-1 exploration drilling costs in order to acquire a full 20% working interest in PEDL143 from Egdon Resources. UK Oil & Gas Investments share of well costs will be capped at £1.2 million net to UKOG (i.e. 40% of a gross Holmwood-1 well cost estimate of £3 million). Gross well costs above £3 million, should they arise, will be met by UKOG, Egdon and other partners pro-rata according to their working interests in PEDL143.
Stephen Sanderson, UK Oil & Gas Investments plc CEO said: “The opportunity to increase our interests in the Weald Basin adjacent to Horse Hill and to participate in the drilling of Holmwood’s potentially significant low to moderate risk prospective resources is both exciting and a logical growth step in the Company’s core business area. The Company’s interest in the Horse Hill-1 Portland oil discovery, along with our interest in the producing Portland Sandstone reservoir of the Brockham oil field, likely represent the best subsurface analogues for the Holmwood prospect. Consequently, we can utilise our key proprietary knowledge and experience of these analogues to the benefit and future success of the project. I therefore believe that this is a sensible and mutually beneficial transaction for UKOG, Egdon and the PEDL143 partnership.”