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UKOG shares rally as Horse Hill gets green light for production testing

Horse Hill stakeholders UKOG, Solo Oil and Alba Mineral all saw shares rise as investors look forward to a potentially pivotal phase for the onshore UK oil discovery

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A 150-day testing programme may be a precursor to production starting in 2019

UK Oil & Gas Investments PLC (LON:UKOG) jumped higher on Thursday after plans to test the Horse Hill discovery received approval from the UK authorities.

The UK Oil and Gas Authority (OGA) has greenlighted a proposed 150-day extended production well test at Horse Hill, where both the conventional Portland and unconventional Kimmeridge zones will be flowed.

READ: UKOG shares drop as equity funding is considered

"Horse Hill is the first in a series of planned near-continuous appraisal drilling and testing operations designed to convert the company's recoverable resources into permanent production and reserves,” said Stephen Sanderson, UKOG executive chairman.

“UKOG remains confident that the comprehensive long-term flow testing campaign will provide the necessary data to fully assess Horse Hill's commerciality  and, most importantly, help meet our corporate target of first stable oil production and significant positive cash flow in 2019."

Following up 2016 successes

Specifically, the programme is a follow up to the 2016 testing, which saw aggregate oil flows at a rate of 1,688 barrels per day over short periods (three 30-90 hour tests).

In the new programme, there will be three separate long-term flow periods – one each for the Portland, Kimmeridge Limestone 4 (KL4) and Kimmeridge Limestone 3 (KL3) zones.

The aim of the work is to prove commerciality ahead of a possible field start-up next year.

As part of those plans, the intention is to follow up the longer term well test programme with new drilling – with the proposed Horse Hill 2 well designed as both an appraisal and future production well.

Similarly, if the upcoming tests prove successful, it is also anticipated that the existing Horse Hill well could be extended via a sidetrack.

Whilst UKOG, in today’s statement, said that the proposed new drilling is covered under existing permitting and planning permissions, a new application will be made to the Surrey county council this summer, seeking planning permission for the production operation together with a second contingent drilling phase.

Stable of Horse Hill shares rally

UKOG is the largest London-listed stakeholder in the project, with a 32% interest, and following Thursday’s news, the shares jumped 32% to change hands at 1.36p.

Elsewhere on AIM, shares in Solo Oil PLC (LON:SOLO) advanced 13% to trade at 2.89p – Solo owns a 15% interest in the project.

Alba Mineral Resources PLC (LON:ALBA), which has an 11.7% interest in Horse Hill, meanwhile, gained 14% up to 0.28p per share.

Quick facts: UK Oil & Gas PLC

Price: 0.975 GBX

AIM:UKOG
Market: AIM
Market Cap: £65.54 m
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