The gang of junior oil firms trying to follow up the Horse Hill success continue to move forward, and this week brought updates from two potential de-risking ventures.
Angus Energy PLC (LON:ANGS) shares advanced on Friday, up around 7.5% to 32.62p, after announcing that a well on the Lidsey field near Bognor Regis has been opened up to new zones - a large 443 metre section of the Great Oolite reservoir.
Lidset-X2 also cut an 80 metre section of the Kimmeridge play, which was at the heart of the Horse Hill success.
Drilling has just been completed and more evaluation will be needed before material judgements can be made, nonetheless, the omens appear good for the project and Angus is intending to start producing from the well soon.
Won’t be long before oil starts flowing in to these tanks at Lindsey Oil Field. pic.twitter.com/wBdkM4OEN0— David Lenigas (@DavidLenigas) October 13, 2017
If Angus Energy investors have started counting their metaphorical chickens, perhaps, it is time to turn attention back to the week’s other Horse Hill follow-up.
UK Oil and Gas Investments PLC (LON:UKOG), which has been a junior market favourite, dropped almost 30% earlier this week as its potentially exciting Broadford Bridge well ran into complications.
As previously detailed, when drilling completed, UKOG had measured 451 metres (1,480 feet) oil pay at Broadford Bridge, but, now, issues related to the well’s cement lining have meant that a proper flow testing operation has not yet been possible.
It now needs to carry out a new workover programme to allow the project’s commercial merits to be tested.
Follow up success stories
Undoubtedly, the findings from the Horse Hill follow-ups have proved positive – and there can also be little doubt that the positives are being shaped into a compelling narrative – that said, an awful lot more work must be done.
On one hand, new production volumes will likely be on the way, so long as there aren’t any regulatory hold ups.
Findings to date bode well for these single projects. But, there is a big picture for many investors. Indeed, those that recall the media buzz in Horse Hill’s earlier days will tell you that it is potentially a very big picture.
Conceptual estimates saw many billion barrels of oil being present throughout the Weald Basin.
Those estimates were quickly the subject of scrutiny and scepticism, the breakout success of Horse Hill’s initial production testing programme provided a rather stiff retort to the sceptics.
More work is planned for Horse Hill, and the hope of the project’s proponents is that the longer term testing can ratify the successes to date.
But, for Horse Hill to be the game-changer for the UK oil industry that some say it can be, the challenge is to repeat Horse Hill’s success elsewhere, in multiple locations – to prove that the so-called Gatwick Gusher is not the exception in England’s Weald basin, but, the rule.
It is in this context that this week’s updates are significant and closely followed, but, also still just partial. As such, both Lidsey and Broadford Bridge will remain projects to watch.
Angus Energy on Friday told investors that its drill programme has now been completed at the Lidsey field, in the southern edge of the Weald basin, near Bognor Regis.
The Lidsey-X2 well was drilled down to a total depth of 1,700 metres, with the true vertical depth seen between 995 metres and 1,009 metres. It has hit a number of hydrocarbon zones.
The company now plans to produce from 443 metres of net oil pay in the Great Oolite limestone reservoir, and it noted that at the end of the Great Oolite horizontal section it observed an unexpected change in the lithology of the well. According to Angus, this indicates a potential extension, continuing to the west of the original reservoir. The well also passed through two additional potentially productive zones, the Kimmeridge and the Oxford Clay.
It encountered the Kimmeridge between 782 metres and 862 metres, with the zone comprising a mixed series of shales and limestones. Natural fractures appear to be present, though further analysis will be required. The Oxford clay was cut between 920 metres and 1,179 metres.
“I am pleased with the successful drilling of the well,” said Paul Vonk, Angus chief executive.
“We are encouraged the site offers further scope for development.
Significantly, the company has upgraded the surface facilities at Lidsey to efficiently and safely manage all future production.”
On Wednesday, UKOG revealed complications at the Broadford Bridge project. The oil company has been trying to flow test the Kimmeridge play in the Broadford Bridge well.
The test was successful in as much as light oil has flowed to surface, however, further work-over programmes will be needed before meaningful analysis can take place.
UKOG encountered problems related to cement bonding in the well, and it has been interpreted that those issues mean the well is not effectively connected to “much of the best open natural fractures” in the Kimmeridge.
“Therefore, the testing to date has not properly evaluated the full flow potential of the overall Kimmeridge reservoir sequence,” UKOG said in a statement.
A workover programme, to fix the problem, will get underway following the completion of clean-up operations.
UKOG chief executive Stephen Sanderson, in a statement, said: “Although the forthcoming workover presents additional unplanned work, the reservoir zone's cement-bond integrity is readily rectifiable by the planned short cement-squeeze phase, a common-place and routine oilfield practice.
“The well will then be restored to an optimal condition for further testing.”
He also highlighted: “The recovery of free, mobile light oil and solution gas to surface is significant and encouraging news and testament to the Kimmeridge Limestone reservoir's ability to deliver hydrocarbons even from a less than optimal completion.
“The periods of good natural flow and identification of additional prospective reservoir zones to flow test add further positive outcomes.”
In September, proposals for a new Horse Hill programme received approval from the Environment Agency.
The approval will allow the programme to test the HH-1 well, as well as drill a side-track to HH-1 and the new HH-2 well.
The Horse Hill partners, separately, await planning permission for the project – an application was submitted in October 2016 and it is anticipated that a decision will be made by the Surrey County Council planning committee on October 18 2017.
It is expected that the new Horse Hill programme will get underway in the fourth quarter, on the basis that the project secures the necessary remaining approvals.