Will UKOG clean up its mess at Dunsfold?

Broadford Bridge Site

Will UKOG clean up its mess at Dunsfold?

UKOG 234 Limited (the applicant at Dunsfold) is a subsidiary of a very small oil and gas company, UK Oil and Gas. If UKOG 234 are ever granted permission to drill, will they actually have the hundreds of thousands of pounds which will be required to cover the costs of removing the security fencing, vehicle access and concrete well pad and restoring the site to arable farmland? If they go bust who will clean up after them?

When Mike Goodman, the now former Cabinet Member at Surrey County Council with responsibility for Environment was contacted about this earlier in 2020 he was not in the least concerned. He appears to have been taking at face value assurances from his planning officers that UKOG will have the financial heft to clean up. Waverley Against Drilling (amongst others) do not share this confidence. We maintain that an insurance policy or bond is the minimum that should be required of UKOG before permission is given to turn that drill and pump that acid.

The indicators of UKOG’s financial stability do not look good. Their share price has been bumping around the bottom of the graph for some time – in response to repeated share offerings that dilute shareholders’ investment, and to the very poor performance. For their increasingly despondent shareholders it is always ‘jam tomorrow’. They have an unenviable record of failed or unproductive sites such as Broadford Bridge and Markwells Wood. Then the great hope was Horse Hill but while Horse Hill stutters and splutters on (so much for the “Gatwick Gusher”) the next provider of tomorrow’s jam is now Arreton on the Isle of Wight.

The two wells at Broadford Bridge and Horse Hill are both described by UKOG in their Planning application for Dunsfold UKOG as sub-commercial because of the cost of disposal of the waste products out-weighs the quantity of oil extracted.

UKOG Planning Statement to Surrey CC 19th April 2019: “Flow tests and pressure data from the Broadford Bridge and Horse Hill Wells Sites have been sub-commercial which is why the ‘potential means of recovery’ needs to be tested at Loxley in compliance with SMP Policy MC12. This is precisely why the sidetrack well (L-1z) forms part of the development proposal. L-1z will allow alternate completion methodology, new completion fluids and the possible use of small-bore radial drilling to be deployed in the search for higher sustainable recovery rates. Knowledge gained at Loxley would be used elsewhere within the PEDL-234 licence area to benefit hydrocarbon recovery.  “

UKOG’s latest interim results look like they are putting on a very brave face to these most recent reports from their wells. https://drillordrop.com/2020/06/30/stimulation-considered-as-solution-to-continuing-water-problem-at-horse-hill-well/

Six months to 31 March 202020202019
Operating loss: £771,000£1,555,000
Revenue:£88,000£100,000
Cost of sales:£40,000£43,000
Expenditure on exploration
& evaluation assets:
£7,803,000£3,975,000
Receipts from sale of test volumes:£995,000£1,773,000
Gross profit:£48,000£60,000
Administrative expenses:£715,000£1,560,000
Net cash outflow from operations:£1,060,000£3,440,000
Total liabilities:£7,931,000£4,677,000
Net assets:£47,859,000£39,929,000
Borrowing:£5.48m £2.3m
UKOG half year results in summary: six months to 31 March 2020

We don’t actually believe that anybody at Surrey County Council has conducted any due diligence on UKOG’s perilous financial state. Which leaves us with the prospect of a financially weak oil and gas company with limited resources and no indication of a robust income stream giving a Minerals Planning Authority (i.e. Surrey CC) assurances that it will cover the cost of restoring the Dunsfold exploration site to farmland which it is in no financial position to do.

Surely this requires more security and insurance than an exchange of emails?

Waverley Against Drilling