Excitement builds at UK Oil & Gas

UK Oil & Gas hit a five-week high Monday following eye-popping geophysical data from its 300 square kilometre Weald Basin licence, PEDL234. According to American petrophysical specialist Nutech, there's over 7.1 billion barrels of the back stuff in the so-called Kimmeridge clay formation.

Crucially, more than 1.7 billion barrels are thought to be in place within the Kimmeridge limestone reservoirs. These are the same naturally-fractured limestones that flowed oil at 1,365 barrels per day (bopd) from the nearby Horse Hill-1 (HH-1) well, 31.2% owned by UKOG.

Natural fractures both eliminate the need for hydraulic fracturing and slash costs.

It's now estimated UKOG's net attributable P50 - a 50% chance of being realised - Kimmeridge limestone oil in place in the Weald Basin stretches to over 2.4 billion barrels. That's up 348% since October 2015.

And it could be more after the Broadford Bridge-1 (BB-1) exploratory well, just 17 kilometres from the potential gusher at Horse-Hill near Gatwick Airport, is drilled in the first half of 2017.

Success here will define the eventual success-case estimates of recoverable oil, says Brendan Long, an analyst at house broker WH Ireland.

"We believe that the Horse Hill 1 test [earlier this year] has proven that when naturally fractured the Kimmeridge limestone in the Weald Basin can be extremely productive," writes Long.

"We believe that the appraisal of the Kimmeridge Limestone in the Weald Basin is the most exciting development that has occurred in the UK onshore oil & gas sector for decades and the production testing at Horse Hill 1 provides, in our opinion, unambiguous evidence of the productive qualities of the Kimmeridge Limestone in the basin."

UKOG shares were up over 10% on today's news, taking the bounce off the recent four-month low to 23%.

It's worth remembering there are almost 2.6 billion UKOG shares in issue, so every 1p move in the share price adds around £26 million to the value of the company. It's currently worth £37 million.

Prior to this announcement, Long had pencilled in a price target of 8.7p for UKOG. That target is now "under review".

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