The consortium looking to tap the Horse Hill prospect near Gatwick airport has upgraded its estimate of oil in place (OIP) to 158 million barrels of oil per square mile and flags a 'possible world class potential resource'.

The eye-catching number – which is based on analysis of 2014's HH-1 well by consultant NUTECH and could imply an onshore find running to billions of barrels- is driving big gains for all the companies involved in the Horse Hill Developments (HHDL) joint venture. This includes UK Oil & Gas (UKOG:AIM) (30% of HHDL) up 135.2% to 2.6p, Alba Mineral Resources (ALBA:AIM) (10%) up 103% to 0.73p, Dorieumus (DOR:AIM) (10%) up 56% to 0.13p, Solo Oil (SOLO:AIM) (10%) up 26.6% at 0.734p and Stellar Resources (STG:AIM) up 57.7% at 0.67p.

The completion yesterday (8 Apr) by Regency Mines (RGM:AIM) of the sale of a 5% stake in the project to Alba Mineral looks ill-timed. Although following the £300,000 deal it does retain a residual interest through a 7.38% holding in Alba and rises 14.5% to 0.07p.

As the share price reaction suggests today's news could be very significant but it is important to keep things in perspective – note the 'possible' and 'potential' adjectives used to describe the resource above. Work is ongoing to come up with a definitive OIP number for the entire acreage targeted by HHDL which covers 55 square miles. OIP does not show how much of this oil can be produced – UK Oil & Gas says recovery factors could be between 3% and 15% but a great deal of work still needs to be done to demonstrate commercial production is even possible. These are not even prospective or contingent resources (the diagram below shows the different ways oil in the ground is classified).


WH Ireland reiterates its 'buy' recommendation and 1.3p price target (which now looks out of date) on UK Oil & Gas. Analyst Brendan D'Souza says the update, 'is highly encouraging and for the first time provides us with volumetric potential.

'We currently leave our Net Asset Valuation based Target Price unchanged at 1.30p/ share and look forward to the final evaluation of oil in place volumes at HH-1, which we believe should be announced during the course of this month.'

Issue Date: 09 Apr 2015