UK Oil & Gas Investments PLC to Acquire Celtique Energie and Magellan Petroleum

UK Oil & Gas Investments PLC announces that it has signed agreements with Celtique Energie and Magellan Petroleum to acquire 100% ownership of the 300 sq km (116 sq miles) Weald Basin licence PEDL234 (the "Licence"). The acquisitions more than double the Company's net acreage holdings in the prime Kimmeridge Limestone Oil province, as proven by the Horse Hill-1 ("HH-1") oil discovery which, as previously reported on 21 March 2016, flow tested at a commercial aggregate stable dry oil rate of 1,688 barrels of oil per day from the Kimmeridge Limestones and Portland section.

Importantly, the Licence includes regulatory permission to drill the Kimmeridge at the Broadford Bridge-1 ("BB-1") site. Furthermore, the licence contains a further mapped gas appraisal opportunity, in the eastern extension of the Godley Bridge Portland gas discovery.

The transactions are conditional upon the extension of the Licence and the usual regulatory approvals being granted by the Secretary of State for Energy and Climate Change ("Secretary of State").

A map showing the Licence and its situation in the Weald Basin and Kimmeridge Oil Province is available herehttp://www.rns-pdf.londonstockexchange.com/rns/9264A_1-2016-6-10.pdf.

Transaction Summary

For a total consideration of £3.5 million, the Company will obtain 100% ownership of the Licence via:

• a Share Purchase Agreement ("SPA") with Celtique Energie Petroleum Limited ("CEPL") to acquire Celtique Energie Weald Limited ("CEWL") who own a direct 50% interest in the Licence and;
• an Asset Transfer Agreement with Magellan Petroleum (UK) limited ("Magellan") who own a 50% interest in the Licence

Additionally, via a second Asset Transfer Agreement, the Company will be assigned Magellan's 22.5% direct interest in offshore Isle of Wight licence P1916, taking UKOG's interest to 100%.

The consideration to CEWL, with an effective date of 10 June 2016, is comprised of £625,000 in cash and £1.125 million in the form of 71,324,415 UKOG ordinary shares. The consideration to Magellan for both Asset Transfer Agreements, with an effective date of 10 June 2016, is also comprised of £625,000 in cash and £1.125 million in the form of 71,324,415 UKOG ordinary shares. The issue of UKOG ordinary shares to both CEPL and Magellan is subject to a 6-month lock-in undertaking for both companies.

The overall transaction is subject to formal consent by the Secretary of State to:

• a proposed minimum one-year extension, to at least 30 June 2017, of the initial term of the Licence.
• the change of control to CEWL resulting from the SPA
• the transfer of Magellan's interests in the Licence and P1916

The minimum extension period would allow the drilling of the BB-1 well at the existing well pad, plus a regulatory application to be made to drill a further new Kimmeridge well over the Godley Bridge structure.

Upon and subject to completion, the Licence ownership and operatorship will be held by Kimmeridge Oil and Gas Limited, a 100% UKOG owned private intermediary company. A further announcement will be made once the agreements have become unconditional.

The Licence

The Licence is situated to the south west of UKOG's main Kimmeridge oil interests in Horse Hill (PEDL137, PEDL246) and Holmwood (PEDL143) and straddles the centre of the Weald Basin.

Previous analyses by Nutech and the Company, of wells and seismic within and immediately surrounding the Licence, strongly suggest that the Licence presents look-alike Kimmeridge Limestone oil potential to that seen at Horse Hill. The BB-1 structure is very similar in UKOG's view to both the HH-1 oil discovery and the nearby Balcombe-1 oil discovery, following the same overall structural trends. The Balcombe-1 well, drilled in 1986, recovered 48 barrels of oil from what the Company interprets to be a naturally fractured Upper Kimmeridge Limestone. The recovered oil was typed to a Kimmeridge Clay shale source rock by Burwood et al in 19911.

Both CEWL and the Company also map an extension into PEDL234 of the 1983 Portland sandstone gas discovery made with the Godley Bridge-1 ("GB-1") well. The Licence thus offers the opportunity to both test the Kimmeridge and appraise the gas discovery with a single new well. If successful, the Portland is a good candidate for a potential conventional "gas-to-wire" electrical power generation project.

Numerous further undrilled structural closures at Portland, Kimmeridge, Great Oolite and Triassic reservoir levels are mapped within the Licence.

Future Plans

Regulatory permissions to drill BB-1 are in place from West Sussex County Council ("WSCC") and the Environment Agency ("EA"). The BB-1 well pad has already been constructed, the Company will secure the necessary remaining consents for drilling and testing operations from the Health and Safety Executive and OGA and will drill and test the Kimmeridge Limestones at BB-1 in 2017. Furthermore, the Company will apply to the WSCC and EA for permission to drill an appraisal of the Godley Bridge Portland gas accumulation within the Licence and also test the Kimmeridge Limestones at that location.

The Company has commissioned the following independent external studies, which will be reported shortly:

• Nutech: a detailed analysis of the Oil in Place of the Kimmeridge section and deeper Jurassic within the 300 sq km Licence
• Assessment of the Gas in Place and potential recoverable volumes within the Portland accumulation proven by GB-1

Stephen Sanderson, UKOG's Executive Chairman, commented:

"This is a transformational step for the Company and its position in the new Weald Kimmeridge Limestone oil resource play. The transaction more than doubles our net acreage position and potential recoverable resource base in the most prospective part of the play, all at a very reasonable entry price. The transaction makes UKOG the leading player and acreage holder in Kimmeridge oil and a significant player in the UK onshore oil industry.

The acquisition is an entirely logical step after the very positive flow test at HH-1. It fits perfectly into our overall 2-year strategy to de-risk and push the Kimmeridge play to the point of commercial development. The drill-ready and permitted BB-1 site, along with the permitted Holmwood-1 well immediately to the north-east, should, by the end of 2017, give us the opportunity to demonstrate the replicability of the HH-1 Kimmeridge results over a more significant area of the Weald Basin. In parallel, we will be pushing HH-1 towards first oil with planned long-term production tests, appraisal wells and 3D seismic.

The potential "cherry on the cake" from this acquisition is the opportunity to appraise the conventional Godley Bridge gas discovery 30+ years after its discovery and, most importantly, at the same time to test the underlying Kimmeridge limestones through a single dual-purpose well. We look forward to Nutech's Kimmeridge oil in the ground and the Godley Bridge net gas resource findings and their impact upon the Licence's value shortly.

2016 sees major progress in the Company's exciting journey to establish the Kimmeridge Limestone oil play and its economic potential for the south-east and the UK."