UK Oil & Gas Investments Plc (LON:UKOG) has agreed a deal to increase its interest in the Horse Hill oil discovery, near Gatwick airport, up to 27.3%.
The company has struck a deal to acquire Angus Energy’s 7.8% stake in the project for £1.8mln paid partly (£1mln) in cash and partly in shares.
Of the cash, some £200,000 will be paid directly to the HHDL operating vehicle to meet the seller’s cash calls relating to the recently completed flow testing operations.
Earlier this year, the flow testing at Horse Hill measured aggregate flows amounting to 1,688 barrels of oil per day from three separate zones in the vertical exploration well.
Stephen Sanderson, UKOG chief executive, described the deal as a ‘logical step’ and highlighted that it is part of the AIM quoted company’s ongoing strategy to consolidate and expand its position in the ‘new and potentially significant Kimmeridge Limestone oil province.’
“With our increased interest in Horse Hill we will be looking hard at translating the commercial flow rates seen from the Kimmeridge and Portland flow tests at Horse Hill - 1 towards commercial production,” Sanderson said.
“To this end, further long-term production tests of all zones are now planned by the Horse Hill Licence holders within the next year, subject to regulatory approvals.”
He added: “The next year to 18 months will be an exciting journey for both the company and the new Kimmeridge Limestone oil play.
“We know HHDL are committed to putting the Horse Hill Portland and Kimmeridge zones in to long term production as soon as practicably possible."
With today’s deal UKOG will own a 42% beneficial shareholding in HHDL, the operator and 65% stakeholder in Horse Hill. Its shareholding equates to a 27.3% interest in the underlying project.
In a separate statement, UKOG highlighted a new report authored by EY – the 'big four' accountant formerly known as Ernst & Young – which has assessed the potential impact of the Kimmeridge oil discovery that was confirmed in the Horse Hill well.
The oil play could, according to EY, provide between 4% and 27% of UK oil demand at its ‘peak production’.
It could add between £7.1bn and £52.6bn of gross value to the UK economy, EY adds, and between 1,000 to 5,000 new jobs could potentially be generated over the project’s lifespan.
The ‘lifetime’ tax revenues were estimated by EY between £2.1bn to £18.1bn.
"The development of Kimmeridge Limestone Oil in the Weald Basin, assuming it can be extracted from a development site at the volumes projected by UKOG, has the potential to generate significant economic value to the UK economy,” EY said.
"These benefits will be maximised via the development of a UK-based supply chain, and through a series of targeted policies and initiatives to appropriately mitigate potential barriers to development.”