Shares in UK oil firms exploded yesterday, after UK Oil & Gas Investments (UKOG) announced a discovery of 158m barrels of oil per square mile at the Horse Hill well, near Gatwick airport.
The well covers 55 square miles of the Weald Basin in south east England. However, UKOG admitted that potentially only a fraction of the estimated 100bn barrels would be recovered.
This did not stem the flow of investor enthusiasm, and UKOG shares rocketed by 169.23 per cent yesterday. Shares in the four other Aim-listed firms that also hold interests in the Weald basin – Solo Oil, Stellar Resources, Alba Mineral Resources and Doriemus – jumped, too.
A spokesman for UKOG told City A.M. that the next step would be to analyse the findings, which were made by petrophysical analysis firm Nutech, and then to carry out a flow test.
On the question of how and when the oil will be extracted, City A.M. understands that the finer details are likely to fall to central government. Given the potential size and associated value of the well, MPs will want to oversee the project rather than allowing local councils to take control.
However, analyst Malcolm Graham-Wood at Hydrocarbon Capital sounded a note of caution around the news: “I wouldn’t get over-excited about it. There’s no doubt they’ve made a discovery but it’s very early days.”
According to Graham-Wood, UKOG could find itself having to drill several wells in order to extract the oil: “And given that it’s so close to Gatwick, it’s not exactly conducive to a lot of digging, is it?”