Investors have been waiting patiently for a little while now for the latest drill programme to get underway at Horse Hill, also known as the Gatwick Gusher.
To recap, Horse Hill is a controversial project just a short taxi ride away from Gatwick airport, and it certainly divides opinion.
Some, including serial AIM investor and Doriemus chairman David Lenigas, have claimed there could be as much as 100bn barrels of oil underfoot.
While it remains to be seen just how big the resource may be, many have questioned how easy it will be to get the black stuff up to the surface.
The reason for that is Horse Hill Developments (HHDL) – comprising a handful of small-cap companies including UK Oil & Gas Investments PLC (LON:UKOG) and Solo Oil PLC (LON:SOLO) – is targeting the Kimmeridge Limestone in the Weald Basin, a relatively underexplored area.
Lots of sceptics
Several oil and gas commentators believe the rock’s geological formations make it hard to recover enough oil at economically attractive rates.
The project, nestled between two areas of outstanding natural beauty, has also come under fire from environmental protestors, reluctant to see their countryside become the UK’s answer to Dallas.
HHDL has always insisted that the rock is naturally fractured and doesn’t need any fracking, although some investors have wondered how much of the play’s value could be left in the rocks without such an operation.
So far the group has delivered results at Horse Hill which proved the viability of three naturally fractured zones, with the well – HH-1 – flowing at a rate of 1,688 barrels of oil per day (bopd).
That data has also come in for criticism, given that the tests were over short periods of time which may not have given the well time to settle down after the initial pent-up pressure was released.
The 100bn barrel claim was based on an extrapolated view, with the findings from areas such as Horse Hill assumed across a larger regional play.
HHDL will look for the upcoming drill programme at Horse Hill to back up its previous data and provide a longer-term test of the project’s commercial merits.
Next drill programme “imminent”
The programme – which has been approved by Surrey Council – was supposed to kick off in “late winter 2017/18”. In its results statement at the end of March, UKOG said the start of the programme was “imminent”, so it can’t be too far away.
The purpose of this latest programme is to demonstrate the commercial viability from one, possibly two, wells.
In the best-case scenario, investors will want to see wells drilled and testing, yielding oil flows somewhere between 1,000 and 2,000bopd in testing.
If it is successful and assuming HHDL can secure the necessary funding, the plan is to move HH-1 into long-term commercial production in 2019.
Don’t forget Portland…
That’s what HHDL is looking to do with regards to the Kimmeridge limestone, but it is also looking to a layer of Portland rock which sits just above the Kimmeridge rock.
This isn’t the main focus, more of a “low-risk” introduction which UKOG has previously said offers the potential to produce “several hundred” barrels of oil per day in its first year of production.
HHDL plans to test the Portland formation in HH-1, while it also wants to drill a separate well – HH-2 – to test it further.
Crucially, the syndicate already has planning permission and environmental permits in place to get this underway.