UK Oil & Gas executes deal for Resan Licence in Turkey

UK Oil & Gas announced on Wednesday that it has executed the participation and joint operating agreements with Aladdin Middle East (AME) for its 50% interest in the 305 square kilometre Turkish Resan Licence, and the respective oil appraisal and exploration programme.

The AIM-traded firm said that after its successful 2 October equity raise, it would now fund its agreed share of key initial preparatory operations so that the first oil appraisal well, currently planned as Basur-3, could be drilled in early 2021.

It noted that Xodus Group’s June report calculated the licence to contain “materially significant” recoverable discovered and undiscovered prospective resource volumes, with calculated aggregate mean and high gross cases of 43.4 million barrels and 84 million barrels respectively.

Of the total resources, the majority lay within the known Basur-Resan accumulation, which was estimated to contain aggregate mean and high case discovered recoverable volumes of 37.2 million barrels and 67 million barrels respectively.

The remainder, classified as undiscovered prospective resources, lay within undrilled prospect A.

Basur-3 well and flow test gross costs were estimated at $3m (£2.4m), compared to $7.5m for a UK equivalent depth well, for example, the recent Horse Hill-2.

UKOG said it would pay the first $5m of drilling and seismic costs, which equated to $0.115 per Xodus recoverable mean case net barrel.

It described AME as a “highly credible and successful” Turkish operator, with a 60-year in-country history.

Produced crude was expected to be of Arab medium-to-light quality, which currently realised prices of around $46 per barrel, marginally above the $41 current Brent price per barrel.

Oil could be readily exported on existing roads to the Batman refinery 80 kilometres to the west.

Turkish petroleum law stated that a Turkish refinery must accept all indigenous oil, and pay market price.

“When compared to our material Loxley and Arreton appraisal projects, Resan offers even greater upside for similar risk, significantly lower operational costs and, more critically, given success, a far quicker route to production and cash flow,” said chief executive officer Stephen Sanderson.

“Resan is therefore a compelling and material growth opportunity that could provide potentially transformational reserves growth in the short term. It is a valuable addition to UKOG's portfolio.

“We look forward to the imminent start of preparations to drill the first Basur-Resan appraisal well and to a long and successful relationship with our new partner AME.”

At 1232 BST, shares in UK Oil & Gas were flat at 0.16p.