The programme will see UKOG test up to nine zones in the Broadford Bridge well’s Kimmeridge Limestone formations.
Brief testing of the KL1 zone, which is described as ‘shale dominated’, has led the company to conclude that whilst hydrocarbons are present a sustained commercial flow rate “could only be obtained via reservoir stimulation beyond the scope of its existing regulatory permissions.”
The next tests will take place in the KL2 limestone, before the programme moves to the primary targets in the KL3, KL4 and KL5 zones.
This programme will determine whether the naturally fractured oil bearing zones can deliver commercial flows and volumes.
UKOG said it expects flow testing will continue until the end of 2017.
A £10mln convertible loan
Not only does the newly announced funding cover the Broadford Bridger programme, the company said it is now covered for its forward drilling and testing work for the next twelve months – including Broadford Bridge, its share of the new Horse Hill campaign and the Holmwood exploration well.
The £10mln injection is coming from a loan agreement with an investment consortium arranged by Riverfort Global Capital, including Cuart Investments PCC Ltd and YA II PN Ltd.
It sees UKOG receiving an initial tranche of £7.5mln and a further £2.5mln coming before the end of this year – repayable by November 2019 and December 2019 respectively.
The loan is interest free, but can be converted into new UKOG equity –at a price of either 8p or at a 10% to a calculated average market price at the time of conversion. Conversions can come in parcels of no less than £250,000 at a time, capped at £3mln per quarter.
The lenders, and their affiliates, are contractually obliged not to short the company’s shares for as long as the loan is outstanding.
UKOG can repay the loan in cash at any time, under certain conditions, though there would be a 10% early repayment fee.
Now funded for a year
"This £10mln funding, the largest in the company's short history, ensures that our stated drilling and testing programme, spanning four wells over the next 12 months, is fully funded,” chief executive Stephen Sanderson said.
“The programme has key regulatory permits in place, is designed to further appraise the wider Kimmeridge continuous oil deposit plus the Horse Hill Portland oil discovery.
He added: “ Its overall aim is to provide stable commercial production and cash flow by early 2019.
“A positive programme outcome will give the company a solid base for further drilling and development of the significant untapped Kimmeridge resource-base underlying its extensive licence interests.
“The flow testing at BB-1z continues to be a key element of the Company's wider programme and we remain highly encouraged by the natural flow of further hydrocarbons to surface."