UK Oil & Gas Investments PLC OGA Agrees Work Programme and Extends Retention Area Periods for Horse Hill Licences

UK Oil & Gas Investments Plc

UK Oil & Gas Investments PLC (LON:UKOG) announced today that it has been informed by the operator, Horse Hill Developments Ltd (“HHDL”), that the Oil and Gas Authority (“OGA”) has consented to extend the current PEDL137 and PEDL246 Retention Areas (“RAs”) until 2021. The PEDL137 and PEDL246 RAs, which cover the entirety of the licences, will now expire on 30th September and 30th June 2021, respectively. The Company holds a 31.2% net interest in the licences via its 48% ownership of the licence’s operator HHDL.

The RA work programmes, now agreed with OGA, comprise; the planned Horse Hill-1 (“HH-1”) Kimmeridge and Portland production tests, HH-1z Kimmeridge Limestone (“KL”) and HH-2 Portland appraisal wells, 50 km² of 3D seismic, 25 km of 2D seismic and a PEDL246 exploration step-out well. The RAs for each licence can be further extended or modified subject to an ongoing minimum work programme agreed by the OGA.

Stephen Sanderson, UK Oil & Gas Investments PLC Executive Chairman, commented: “The revised RA expiry dates ensure that the knowledge gained from the Company’s forthcoming extensive 2017 Broadford Bridge, Horse Hill and Holmwood drilling and test campaign, can be fully incorporated into future Kimmeridge Limestone step-out wells in PEDL246 and PEDL137. 2017 is set to become a pivotal year for the Company.”

HH-1 Oil Discovery (UKOG interest 31.2%)

The HH-1 Kimmeridge Limestone and Portland oil discovery well is located within onshore exploration Licence PEDL137, on the northern side of the Weald Basin, 3 km north of Gatwick Airport. As previously reported in February and March 2016, two naturally-fractured limestone members within the Kimmeridge section, known as KL3 and KL4, flowed dry, 40-degree API oil, at an aggregate stabilised natural flow rate of 1,365 barrels per day (“bopd”) with no clear indication of depletion. The overlying Portland flowed dry, 35-degree API gravity oil at a stable pumped rate of 323 bopd. The Portland oil was produced at the rod-pump’s maximum achievable rate and thus flow was constrained by the pump’s mechanical capacity.

As previously reported in October 2016 and February 2017, an application for long term production testing and further appraisal drilling was submitted to Surrey County Council in October 2016, and is now scheduled to be decided at the Council’s planning committee meeting in July 2017. The Company therefore envisages that these operations will commence in the second half of 2017 upon grant of the necessary remaining regulatory permissions.

Broadford Bridge-1 Exploration well (UKOG interest 100%)

The Broadford Bridge-1 (“BB-1”), planned to commence in Q2 2017, will be a deviated or “slant” well, drilled to a true-vertical depth of approximately 1,300 metres. The well is designed to penetrate four naturally-fractured Kimmeridge Limestone reservoirs (KL1-KL4) on the southern flank of the Weald Basin, within a mirror-image of the Horse Hill fault block. The Kimmeridge section is planned to be drilled at an angle of approximately 50 degrees to vertical and approximately orthogonal to the predicted direction of open natural fractures within the Kimmeridge Limestones.

Operations will include the acquisition of an extensive coring, electric log and borehole imaging data set to provide further key information on the limestone reservoirs and natural fracturing. All pre-drill tenders have been received and a drilling rig chosen. The civil construction works necessary to commence drilling have been completed. Planning permission to drill the well was granted by West Sussex County Council in 2013 and includes the ability to flow test the well for up to 14 weeks.

The well will use safe, tried and tested conventional oil field techniques, approved by the Environment Agency and Health and Safety Directorate, and as used at Horse Hill in Surrey in 2014 and 2016 and by 84 legacy wells. As previously reported in March 2017, BB-1 will be drilled utilising a British manufactured, natural, biodegradable drilling fluid. This zero-hazard drilling fluid (or “mud”) will ensure that there can be zero contamination of any groundwater via the drilling process.

The drilling fluid, also used by water well drilling companies in the UK, is registered with the Centre for Environment, Fisheries and Aquaculture Science (CEFAS). It is also the only drilling fluid to be formally approved by the Department for the Environment, Food and Rural Affairs for use in drilling wells for public water supply.

Holmwood-1 Exploration Well (UKOG interest 30%)

The Holmwood-1 well, scheduled to be drilled in the second half of 2017, is located in PEDL143, approximately 8 km to the west of HH-1. The well is designed to test a further geological look-alike of Horse Hill with reservoir objectives in the Portland, Kimmeridge Limestones and Corallian.

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