Shares in oil minnow UK Oil & Gas Investments (LSE: UKOG) are surging this morning, after the company revealed that there could be up to 100bn barrels of oil at its Horse Hill prospect in the South of England.
These figures are based on the analysis of data recovered from a well drilled last year, which indicates that the local area could hold 158 million barrels of oil per square mile.
UKOG has a 20.36% interest within The Horse Hill licences that cover 55 square miles of the Weald Basin in southern England.
However, the company has admitted that only a fraction of the 100bn barrel total is recoverable. Initial estimates indicate that 3% to 15% of the oil could be recovered, which, even at the low end, is still a sizeable amount.
According to UKOG Chief Executive Stephen Sanderson:
"... we have identified that the Horse Hill Upper Jurassic rock sequence is analogous to known oil productive hybrid reservoir sections of the Bakken of the US Williston Basin, the Wolfcamp, Bone Springs, Clearfork, Spraberry, and Dean Formations in the US Permian Basin and the Bazhenov Formation of West Siberia."
"The operator ...is now focussed on flow testing the Portland Sandstone and Kimmeridge Limestone sections of the well, to establish producibility and thereby seeking to quantify an overall net discovered resource,"
Estimates still need to be established of total oil in place within the licence area. The semi-regional resource potential of the Weald Basin's eastern footprint is the subject of ongoing analysis.
So, a more detailed set of figures on the region's potential should be available soon.
These initial figures indicate that UKOG has struck black gold at its Horse Hill prospect. What's more, it has also been suggested that there is no need to use the controversial extraction process, known as fracking, to get access to the oil.
This should speed up the development of the prospect. The use of fracking across the UK has attracted much criticism and protests against the process have hampered efforts to begin extracting more oil and gas across the UK.
Time to buy?
Should you buy UKOG following today's "world class" discovery?
Well, there's still a long way to go before initial production from the Horse Hill prospect, and there is plenty that could go wrong between now and first oil production. Although with a minimum of 3bn barrels of oil in the ground, the sky really is the limit for UKOG.
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