UKOG Energy for Britain

Licence number: PEDL234
UKOG interest: 100%

UK Oil & Gas Investments PLC acquired 100% ownership of the 300 sq km Weald Basin licence PEDL234 from Celtique Energie and Magellan Petroleum.

The acquisition more than doubled the Company's net acreage holdings in the prime Kimmeridge Limestone oil province, as proven by the Horse Hill-1 ("HH-1") oil discovery which, as reported in March 2016, flow tested at a commercial aggregate stable dry oil rate of 1,688 barrels of oil per day from the Kimmeridge Limestones and Portland section.

The Licence included regulatory permission to drill the Kimmeridge at the Broadford Bridge-1 ("BB-1") site. Furthermore, the licence contains a further mapped gas appraisal opportunity, in the eastern extension of the Godley Bridge Portland gas discovery. The licence is operated by Kimmeridge Oil & Gas Limited (“KOGL”), a wholly-owned subsidiary of UKOG.

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It straddles both the northern and southern flanks of the Weald Basin and, more crucially, the basin centre, where the Kimmeridge is thickest, most thermally mature and is consequently interpreted to contain the most significant volumes of in-situ generated KL oil.

The results of the BB-1z and HH-1 wells now firmly puts the prime prospective are of the KL play, or sweet spot, firmly over the central and northern areas of the Nutech’s calculated Kimmeridge P50 OIP figures of 7.1 billion barrels within PEDL234, of which 1.7 billion barrels lie within the limestones, gives comfort to this viewpoint.

The BB-1 technical objectives were as follows; confirm that KL oil is contained within a resource or continuous oil deposit, determine the southerly extent of the deposit and provide supporting evidence for a regionally extensive natural fracture system within the KL.

To achieve these goals, the well was planned to acquire the most comprehensive data set gathered to date over the KL sequence. Data acquisition included an extensive conventional coring and electric logging programme aimed at characterising natural fracturing and other key reservoir and engineering parameters. Once drilled, cored and logged, the well would be completed to allow for flow testing of four KL zones.

We conclude that the most important technical goals of the drilling, coring and flow testing programme were achieved, namely: further proof of the KL “geological concept”, the determination of the deposit’s lateral extent and the presence of a regional scale open natural-fracture network capable of flowing oil to surface from the KL without reservoir stimulation.

The BB-1 well was deliberately designed as a deviated or “slant” well with a steady angle throughout the Kimmeridge so that it would penetrate an optimal number of near vertical natural fractures within the five naturally-fractured KL’s (KL1-KL5).

Drilling commenced on the BB-1 exploration well in May 2017 and was successfully drilled at an inclination of around 50 degrees to vertical to a depth of around 6,000 ft or 1,900 metres, terminating within the Jurassic Corallian sandstone.

The well’s orientation was deliberately chosen to intersect the maximum number of potentially open fractures by drilling at approximately 90 degrees to the predicted open natural fracture orientation within the KL. The open natural fracture orientation was derived from analysis of the Weald’s regional stress field and available wells with image logs.

Drilling and coring of the BB-1 exploration well was completed in July 2017. An extensive coring programme was successfully completed acquiring some 550 feet of 4-inch core. A continuous core totalling 520 feet was cut within the KL3 to KL5 section and a single 30 ft core within the deeper KL2 limestone. Specialist core analysis was undertaken on the cores by COREX in Aberdeen and Premier Oilfield Laboratories in Houston, Texas, a specialist in the analysis of the shale and unconventional reservoirs of the USA.

These cores represent the first significant coring of both Kimmeridge limestones and shales in the UK and provide the essential calibration for subsequent electric log analyses. The coring programme provided the first evidence for the technical proof of KL geological concept. The cores retrieved from the KL5 section saw mobile, light oil recovered to surface. Oil in fact was seen at the site seeping from open natural fractures.

The oil was sampled and analysed and was confirmed to have been generated by an Upper Jurassic shale source and of nearly identical geochemical composition and origin to the Horse Hill KL 3 and KL4 oils.

Subsequent analysis of the KL5 limestone core also revealed that the matrix of the limestone itself was also oil saturated, occupying a significant 6% by weight of the actual rock. Further live oil traces were seen in cores throughout the coring process.

Following coring, the well was drilled ahead to total depth. Good mobile oil shows were seen in cuttings, and in the mud retort samples throughout the KL sequence together with elevated wet gas readings. Oil shows and elevated gas readings were found to coincide with fractures interpreted from image logs and appeared to be connected to several lost circulation zones (i.e. drilling fluid entering open fractures connected to the wellbore).

Indirectly, therefore, it appears that the lost circulation zones indicate that fractures were open and apparently well-connected and likely the source of the oil shows. Significantly, prior to the testing campaign fracture-related data showed the key fracture sets to be open i.e. likely able to transmit fluids under reservoir conditions.

Consequently, neither the drilling fluid nor drilling and coring methodology appears to have “damaged” the reservoir (i.e. blocked or plugged fractures surrounding the well bore). As to whether these fractures remained fully or partly open during the necessary pressure draw-downs following acidisation used during testing is currently under investigation.

After completion of the BB-1 exploration well it became apparent that the duration and difficulty of coring such highly-fractured rocks in an inclined well within the overall compressional stress regime of the Weald, together with the multiple pipe trips and significant electric logging runs likely exacerbated potential borehole breakouts creating ledges protruding into the borehole. These ledges prevented the final 7-inch casing from reaching the necessary depth in the inclined well.

Caliper log data clarly showed that the well maintained an acceptable degree of rugosity with absolutely no evidence of any collapse. The inability to case the well in the main reservoir section combined with potential plugging of near wellbore fractures with lost circulation material likely meant that future testing would be compromised.

Therefore, the decision was made to drill, log and case a mechanical sidetrack exploration well, BB-1z. This was drilled over a 6-day period in August 2017. The BB-1z sidetrack was drilled from below the Purbeck Limestones and replicated the BB-1 exploration well some 200 ft to the south. The sidetrack delivered a fresh, near identical section of the KL, with minimal formation damage designed to be optimal for well completion and flow testing.

Mobile oil traces were recovered from the drilling fluid throughout the Kimmeridge section and both oil and wet gas shows were at approximately the same level as that seen in the original BB-1 borehole. In September 2017 the BB-1z exploration sidetrack was completed with an aggregate total of 1,064 ft of perforations over eight naturally fractured zones, including within the new uppermost reservoir zone, KL5 and within a 500 ft section of the deepest KL0 section.

Over the next six months, the Company embarked on an extended well test across the identified KL zones (KL0-KL5). The first four tests were conducted over the original 4-zone production completion. Each test covered multiple peforated sections which included significant sections of interbeddedd fractured KL shales. Acidisation was therefore not selectively administered to any specific limestone horizon. Whilst the results of the tests showed inflows indicating some initial permeabilty together with natural gas blows, the results were disappointing.

It was concluded that during the significant pressure draw-downs associated with the test’s coiled tubing lifting methodology, the fractures within the predominantly shale test sections closed-up, reducing permeability effectively to zero.

Given that traces of oil had been recovered to surface from each of the four tests, it was decided to abandon nitrogen lifting, open all four test zones and lift the well with a linear rod pump. This lift achieved oil to surface in measurable quantities but with no definition as to which zone or zones may have contributed to flow. It is, however, interesting that the KL5 zone, which subsequently flowed oil to surface during the latter selective test campaign was not perforated, suggesting oil flow came from a deeper zone in the well. The recovered oil was sampled and analysed, showing it was geochemically identical to that found in the KL5 cores and HH-1 crudes.

In October 2017 management made the decision to proceed with a workover of the well and implement a revised selective testing programme. The revised testing methodology was similar to that undertaken at the Horse Hill oil discovery, utilising a rod pump and nitrogen cylinders to provide initial lift to the well. The decision to workover the BB1-z exploration well also followed an assessment by two independent consultants and the Company that the quality of the cement-bond between the well casing and the surrounding rock was not optimal, particularly over some of the secondary interbedded limestone and shale units in KL1, KL2 and KL5.

As a result, the completion programme had in some places not effectively connected the BB-1z well to the best open natural fractures, therefore the testing up to that point had been unable to accurately assess the flow potential from the KL sequences. The revised testing programme consisted of nine individual selective test zones throughout the KL each of around 50-100 ft of vertical extent. In November 2017 UKOG reported the results from KL1. Two short initial tests over secondary shale-dominated fractured secondary reservoir objectives within the KL1 were performed. The interbedded shale and limestone stringers returned gas to the flare and traces of oil to surface. The second KL1 test, recorded an inflow were returned to the well at an initial natural flow rate of over 370 barrels per day, accompanied by a wet gas blow and traces of oil to surface. The KL2 test, again in a secondary section of shales and interbedded limestones, showed an initial inflow of returned completion fluids of 99 barrels per day. Although these KL1 and KL2 zones are interpreted on electric logs to be hydrocarbon bearing corresponding to the oil recovered to surface, the Company concluded that sustained commercial flow rates from the shale dominated KL1 could likely only be obtained via reservoir stimulation beyond the scope of its existing regulatory permissions. As with the original 4-zone test programme we believe that the acid wash likely entered the highly fractured shales, not the thinner, lesser fractured limestones and under the pressure drawdowns exerted by both nitrogen lifting and pumping closed up during testing.

Oil and associated gas were recovered to surface from within three tests in the uppermost KL3 and KL4. High initial instantaneous flow-back rates were obtained from the KL4 and KL3 test zones of between 466 and 719 barrels of fluid per day respectively, but with no sustained flow. Due to the limited time remaining on the planning consent and the ongoing costs of testing, the decision was made to spend no further time on these zones and proceed ahead to the KL5 zone. In February 2018 the Company reported that oil had flowed to surface from the naturally fractured KL5 reservoir. Fluid returns to the surface, measured as half-hourly instantaneous pumped flow-rates over a 96- hour near-continuous period, ranged between 10 to 72 barrels per day. The fluid returns through the test equipment consisted of a mixture of oil plus returned spent-acid from an acid wash treatment, with no observed obvious formation water component. Associated oil-cut steadily increased to over 30%, with intermittent periods exceeding 50% by volume. The test continued to flow oil to surface at similar rates and oilcuts as reported on 20 February. Although the continuous flow showed evidence of gradual cleaning and stabilisation over further days, due to planning permission time-constraints, the test was halted to test the deeper KL1 zone.

The KL1 test, over a newly perforated 40 ft naturally-fractured limestone section, showed encouraging initial fluid inflow rates of between 40-50 barrels per day post acidisation. However, no fluids were able to flow to surface due to a series of significant mechanical problems that could not be rectified within the remaining planning consent window.

However, after the test halt, upon retrieving the uppermost packer and tubing, live mobile light oil was seen mixed with completion fluids. Well test operations were completed in late March 2018 and the well was suspended for possible future re-entry and interventions. As previously reported on 20 February, the presence of KL5 oil flowing to surface, oil returned to surface from KL1-KL4 flow tests, together with mobile oil in cores and drilling fluids, presents further compelling evidence that the Upper Jurassic Kimmeridge of the central Weald Basin contains an extensive continuous oil accumulation.

These live, mobile oil occurrences, together with corresponding rock and electric log data likely demonstrate a deposit of up to 1400 ft vertical extent at BB-1/1z. Geochemical analyses further support this conclusion, as all oil samples from both BB-1z and HH-1 analysed to date are determined by Geomark Research to come from the same Upper Jurassic shale source, i.e. the oil lies within or immediately adjacent to the Upper Jurassic rocks where it was generated, one of the key aspects of a continuous oil accumulation.

The near identical reservoir geology and geochemistry between HH-1 and BB-1/1z demonstrates that this continuous oil deposit has around a 30 km north-south extent, with BB-1/1z likely lying on the deposit’s southernmost boundary. UKOG is the largest licence holder within the deposit’s most prospective area or “sweet-spot”, much of which resides in PEDL234.

Flow test inflows and pressure data, together with electric image log analyses, also demonstrate that the Kimmeridge contains both a local and regionally developed natural-fracture system, key to the future commercial viability of the KL deposit. Whilst the KL flow rates observed are likely sub-commercial, given the multiple occurrences of mobile oil observed in the well and their correlation with good calculated oil saturations in electric logs and core analyses, we are exploring new methods and technologies that might enable us to achieve higher sustainable oil rates and commercial viability from the 1400 vertical feet of oil-saturated KL reservoir rock interpreted at BB-1z.

With this in mind, serious consideration is being given to a possible future short sidetrack, BB-1y. The sidetrack’s objective would include a selective re-test of the main KL units, likely utilising an alternate completion methodology, new completion fluids, the possible use of small-bore radial drilling and other reservoir stimulation techniques. Any future work at BB-1/1z would likely take place after a successful trial of such alternate methods and technologies in the next PEDL234 exploration well.