UK Oil & Gas Investments PLC (UKOG) has agreed to acquire a 1.9% shareholding in Horse Hill Developments Ltd (HHDL) from Regency Mines plc (Regency). On completion, the Company will hold a 32.435% beneficial interest in the onshore Weald Basin licences PEDL137 and PEDL246 (the Licences).
The Licences, covering an area of 55 square miles (143 km2) north of Gatwick Airport, contain the Horse Hill-1 (HH-1) Portland sandstone and Kimmeridge Limestone oil discoveries. As previously reported on 21 March 2016, HH-1 flow tested at a significant commercial aggregate stable dry oil rate of 1,688 barrels of oil per day. Regulatory permissions are being sought for a significant long-term production testing and appraisal programme of the productive Kimmeridge Limestone and Portland reservoirs.
For a total consideration of £323,000, the Company will receive a further 1.235% beneficial interest in the Licences via the purchase of Regency's 1.9% shareholding in HHDL. The total Consideration, with an effective date of 28 June 2016, is comprised of £54,498 payable in cash and £268,502 in the form of the issue of new ordinary shares in UKOG (Consideration Shares). The Consideration Shares are calculated on the 30-day volume weighted average price prior to 29 June 2017. Completion of the acquisition is conditional on the consent of HHDL. A further announcement will be made on completion.
HHDL and the Company's Interest in the Licences
HHDL is a special purpose vehicle, which owns a 65% working interest and operatorship of the Licences. UKOG on completion will own a 49.9% beneficial shareholding in HHDL, which equates to a 32.435% net working interest in the Licences. The remaining 35% interest in the Licences is held by Magellan Petroleum (UK) Limited.
Following communications with Surrey County Council (SCC), we now understand the Horse Hill planning application will be determined at the scheduled SCC Planning Committee meeting of either August or September 2017. The planning application seeks consent to long-term production test HH-1 and to drill two further wells. The Company's plans remain unchanged in that HH-1 testing will directly follow the BB-1 flow test operation, with an HH-1 start expected in Q4 2017.
Stephen Sanderson, UKOG's Executive Chairman, commented:
"This acquisition fits perfectly within UKOG's stated strategy to further consolidate and increase its holdings in the Kimmeridge oil play in the Weald. The licences remain a significant part of UKOG's extensive Kimmeridge portfolio, containing both the HH-1 oil discovery and its likely continuation across much of the licenced area.
In addition to HH-1 Kimmeridge oil, the Portland oil discovery remains a significant potential early monetisation asset, which, given the 323 bopd test rate, we believe has a high chance of commercial viability.
Given a successful production test outcome, both the Kimmeridge and Portland remain on course for stable oil production by end 2018/early 2019."