TIDMUKOG
RNS Number : 0320T
UK Oil & Gas PLC
20 July 2022
UK Oil & Gas PLC
("UKOG" or the "Company")
Operational Update
UK Oil & Gas PLC (London AIM: UKOG) is pleased to announce
the following operational updates in respect of its key Turkiye and
Portland Hydrogen/Energy Hub projects, together with an outline of
its near-term forward strategy.
Turkiye Resan Licence (UKOG 50% interest):
Further to the Company's announcement of 30(th) June 2022,
continued examination of the new phase 1 seismic data has revealed
a further potentially significant undrilled geological structure to
the south of the Basur-1 oil discovery. The feature, currently
known as Prospect B, shows the same geological structural style as
the Basur discovery, bounded on its northern extent by a
significant back-thrust fault. It appears to be of similar size to
Basur upon first review. Further phase 2 seismic lines to the west
will be required to confirm its size, prospective resource
hydrocarbon volume, and to help define any future exploration well
location. A revised top reservoir structure map and seismic line
illustrating the new feature will be made available on the
Company's website.
Additional recent oil sampling has also been undertaken by the
Resan licence's operator, Aladdin Middle East ("AME"), at the live
light 42˚ API oil seep, located to the north of the Basur oil
discovery. The oil charge to the seep appears to be continuous as
similar quantities of crude have now been recovered from the same
shallow seismic shot holes at multiple sampling events over a
one-month period. It is anticipated that a new Phase 2 seismic line
will pass over the seep to aid identification of whether it derives
from a previously unrecognised deeper Mardin/Garzan age oil
accumulation.
To help progress Basur towards drilling, members of UKOG's
technical team plan to spend next week in the field, scouting a
potential new Basur-4 location, tying Basur seismic work into
surface geology and investigating whether Prospect B has any
surface geological expression that can help define its extent.
Portland Hydrogen/Energy Hub (UKOG 100%)
Further to recent discussions with UK and international
infrastructure players in relation to the Company's planned
Portland Energy Hub as announced on 30 May 2022, the Company is now
investigating the feasibility of linking Portland's planned
hydrogen-ready salt cavern storage into an envisaged future
hydrogen hub centred in and around Southampton by a consortium
including a major energy company , whereby Portland could provide
both the interseasonal and peak demand hydrogen storage necessary
to provide the hub's resilience to fluctuating demand. Via its
planned LNG receiving facility, Portland could also help satisfy
demand for natural gas feedstock for reforming into blue hydrogen
within the hub.
As part of the Company's Portland engineering and commercial
studies it has now also received a preliminary economic model from
Xodus, which details that the updated expected capital cost to
construct the 14 salt caverns, related surface facilities and the
pipeline tie-in to the current national gas grid is GBP895 million.
Together with the capital expenditure for the envisaged LNG
receiving terminal and the project's green hydrogen generation
capability, the project's total cost will, therefore, likely exceed
GBP1 billion.
The Company continues to talk to interested parties, potential
contractors and potential strategic partners and to shape its
vision for this new long-term project which is at the planning
stage and remains subject to a number of conditions including
planning consents and financing. A diagram illustrating the
Company's current vision for Portland will be made available on the
Company's website.
Forward Strategy
Given the promising positive outlook derived from the Company's
Basur Phase 1 seismic programme, plus the confirmation from the oil
seep that the area has an active light oil petroleum system, the
Company's focus for the forthcoming 6-9 months will be firmly upon
the delivery of Phase 2 seismic and a new Basur appraisal well, now
anticipated to be able to add near-term oil production to the
Company in H1 2023, subject to necessary funding. As previously
stated, the Petroleum Law enables a successful oil well in Turkiye
to be put into full time production within days to weeks of a
successful test.
AME's desire to shoot new unbudgeted Phase 2 seismic before
continuing the Basur appraisal drilling programme (as per UKOG's
30(th) June RNS), combined with a longer than expected seismic
acquisition period over winter, has both required additional
previously unbudgeted working capital and deferred the start of the
anticipated cash flow from a successful Basur well. The Company
will, therefore, need to seek further finance before mid Q4 2022 to
fund this planned programme and for general working capital
purposes. Success at Basur is anticipated to provide additional
working capital to help fund UKOG's other significant projects
which, by their nature, have a longer lead time to cash
generation.
With respect to the June 7(th) 2022 grant of planning consent
for the Company's 100% owned Loxley gas appraisal project the
Company will now implement a pre-planned farmout programme, whereby
the Company's costs would be either fully or part carried by any
farminee. The Company believes that this is the most prudent course
of action to both manage uncertainty and to help ensure the best
use of the Company's working capital.
Qualified Person's Statement
Matt Cartwright, UKOG's Commercial Director, who has 39 years of
relevant experience in the global oil industry, has approved the
information contained in this announcement. Mr Cartwright is a
Chartered Engineer and member of the Society of Petroleum
Engineers.
For further information, please contact:
UK Oil & Gas PLC
Stephen Sanderson / Matt Gormley / Allen Tel: 01483 941493
D Howard
WH Ireland Ltd (Nominated Adviser and
Broker)
James Joyce / Andrew de Andrade Tel: 020 7220 1666
Communications
Brian Alexander Tel: 01483 941493
The information contained within this announcement is deemed to
constitute inside information as stipulated under the retained EU
law version of the Market Abuse Regulation (EU) No. 596/2014 (the
"UK MAR") which is part of UK law by virtue of the European Union
(Withdrawal) Act 2018. The information is disclosed in accordance
with the Company's obligations under Article 17 of the UK MAR. Upon
the publication of this announcement, this inside information is
now considered to be in the public domain.
Notes:
Blue hydrogen: Hydrogen produced by reforming natural gas allied
with the capture of all CO2 from the reforming process
Green hydrogen: Hydrogen produced by electrolysis of water using
renewable electricity
Hydrogen-ready: the small size of the hydrogen molecule and its
interaction with high grade steels causes the metal to become
brittle with time. Consequently, the steel and engineering
specifications currently used in today's natural gas facilities
will require modification to be fully compatible for hydrogen.
UKOG, therefore, aims to build-in hydrogen compatibility during
initial construction, thus future-proofing any Portland Energy-Hub
development.
Salt caverns: man-made caverns constructed by the physical
dissolution of naturally occurring halite (rock salt) deposits. The
dissolution provides a gas tight cavern space that is permanently
filled with gas and/or brine at an equivalent pressure to that
within the surrounding rocks i.e., it is not an empty void at any
time. Portland Port is ideally situated for the construction of
large caverns as it overlies a thick, high quality halite section
of Triassic age. Halite deposits with sufficient thickness to
accommodate significant caverns are confined to three areas of the
UK: S. Dorset (Triassic), Cheshire (Triassic) and the northeast
Yorkshire coast (Permian Zechstein age). Thinner Triassic halite
deposits are present in areas of the NW and Somerset. Active salt
cavern gas storage exists in Cheshire and the northeast.
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