The AIM quoted company has a 30% stake in the UK Oil & Gas (LON:UKOG) operated venture, which was offered the new licence in December.
UKOG this morning told investors that a new petrophysical analysis of the Arreton prospect, which was drilled by British Gas in 1974, has shown it to be an undeveloped discovery.
Across a number of reservoir intervals – called the Purbeck, Portland and the Inferior Oolite limestone - the project is now estimated to host some 219mln barrels of oil-in-place, with around 10.2mln currently deemed ‘recoverable’.
UKOG added that there’s further oil potential in the area, which also includes a landward extension of the offshore M prospect as well as other undrilled prospects within tight limestones and shales.
“It is very exciting because it means that the risk of making a commercial discovery or production from our new licence in the Isle of Wight is substantially reduced, which is great news,” Neil Ritson, Solo Oil chairman, said in an interview with Proactive Investors.
He added: “With a well already down and tested, it looks very attractive as an early opportunity for us within this new licence.”
Whilst the Isle of Wight is best known for its natural beauty and its ‘holiday homing’ community, the Solo boss pointed out that the Arreton project area is located in a brownfield area.
Ritson also highlighted that with the new technology and industry experience gained in the decades since 1974, Ritson now see a considerable chance of success at Arreton.
“Obviously we’re 40 years on from when the well was originally drilled, and new technology will be very helpful,” he said.
Arreton is located within PEDL 331, which was offered to UKOG and its partners Solo Oil (LON:SOLO) and Angus Energy in December 2015. The Arreton-2 well was drilled in 1974 by British Gas and at that time it unexpectedly encountered oil shows but subsequent well tests were unsuccessful.
At present, the partners are working on documentation following December’s licensing round to finalise the regulatory arrangements, and the licence start date is expected in April.
UKOG intends to accelerate discussions with the local planning authority on the Isle of Wight and plans to submit applications for a planned appraisal programme which will aim to confirm the new assessment of Arreton.
The company says it has already completed studies and cost estimates for potentially re-drilling the historic well, and it added that there’s also plans to conduct 2D seismic work too though this would come after a well.
Stephen Sanderson, UKOG chief executive, highlighted that Arreton more than triples his company’s net recoverable resource base for conventional oil.
“The PEDL 331 Licence is thus a highly significant and material addition to our portfolio and will be a key part of the company's growth plans,” he said.
“We are well advanced in our plans to drill a vertical pilot and horizontal appraisal of the Arreton-2 oil discovery. We are confident that, since independently derived drilling costs are relatively modest, the economic viability of the project is robust even at reduced oil prices.”
He added that the plan is to pilot new and innovative limestone reservoir stimulation techniques which may maximise flow rates and recoverability without the use of “massive hydraulic fracturing.”
The new assessment of Arreton was conducted by consultant Xodus Group.
On London’s AIM market, Solo Oil shares were up 9.26% at 0.29p each while UKOG was down 3.6% changing hands at 1.32p.
*In his interview with Proactive Investors Neil Ritson also discusses the group’s progress in Tanzania, and the upcoming flow tests at Horse Hill.