It is paying £300,000 in cash, to Europa Oil & Gas Holdings PLC (LON:EOG) to acquire its 20% stake in the asset, and, it is picking up a further 7.5% through a deal with Union Jack Oil PLC (LON:UJO), which will in due course, hold shares in the company.
As a result, the company has secured control of the Holmwood project, which neighbours the flagship Horse Hill discovery, now on the road to development and permanent production.
The transactions come after UKOG earlier this month updated on Horse Hill’s Portland reservoir production test as preparation for new drilling programmes near finalisation.
UKOG, in today’s statement, highlighted that the Holmwood licence, which includes the significant A24 prospect comprising both the Portland reservoir and Kimmeridge oil zones, is seen as “a direct geological look-alike” of Horse Hill.
The flagship project is located just eight kilometres to the east, meanwhile, UKOG also noted that several smaller prospects (described as being similar size to the nearby Brockham field) have been identified in the area.
Holmwood had previously stalled in the planning permission process, but, UKOG noted that work is presently underway to find a suitable drilling location outside of the Surrey Hills area which is designated as an area of Area of Outstanding Natural Beauty (AONB).
One of best untested prospect in the Weald
"We are delighted to acquire this further significant share of such a highly prospective exploration licence, which contains, in UKOG's view, one of the best undrilled Portland and Kimmeridge prospects in the Weald Basin,” said Stephen Sanderson, UKOG chief executive.
“The proximity to UKOG's Horse Hill field, together with the company's operational and subsurface expertise in the area, adds potentially significant operational and cost synergies to the project's overall benefit.
“UKOG, as the new licence operator, will now push ahead to finalise a new well location outside of the Surrey Hills AONB.”
On 11 April, UKOG – which is the largest UK listed stakeholder in Horse Hill - said that the Portland has continued to flow at a stable rate of 220 barrels of oil per day. It is a constrained rate, held below the 362 bopd top rate seen previously, due to prudent reservoir management.
UKOG told investors that the well has now been shut-in for a 60-hour pressure build-up test, after which test production will resume.
It is anticipated that the drill programme for the HH-1z sidetrack well and the HH2 well is slated to start during the current quarter.
The company also highlighted a number of notable milestones for the test production operation, which has now yielded over 40,000 barrels of crude combined from the well’s Portland and Kimmeridge zones.
Some 25,000 barrels were previously produced from the Kimmeridge, whole Portland production has now exceeded 15,000 barrels. A total of 186 tankers have so far transported crude to the Hamble oil terminal. The Portland crude, at 36 degree API, is sold at the prevailing Brent price, less deductions for handling and marketing.