The OGA has also consented to the start of long-term production from the field, which is located near London's Gatwick Airport.
UK Oil & Gas (UKOG) owns a controlling 85.635% interest in the Horse Hill oil field and the surrounding PEDL 137 and PEDL 246 licences; Alba Mineral Resources PLC (LON:ALBA) has an 11.765% interest in the licences.
The OGA’s decision will enable net recoverable reserves to be allocated to UKOG, which is a pre-requisite for future potential debt-based funding. It will also permit UKOG to enter into long-term field operations contracts that could help reduce operating costs below US$19 per barrel, making the field more profitable even at current low oil prices.
Oil pool production from the Portland formation will commence via Horse Hill-1 (HH-1), with Kimmeridge production planned to be added in late spring via conversion of the well to a dual completion.
Production from HH-2z is planned to follow upon completion of the current extended well testing campaign, UKOG revealed.
"This is an important regulatory milestone, granting governmental production consent. The company can now focus firmly upon maximising stable production, reducing operating costs and generating positive cash flow. The ability to book reserves also opens the way to potential debt funding, a positive step towards both creation and preservation of shareholder value,” said Stephen Sanderson, UKOG’s chief executive.
George Frangeskides, Alba's executive chairman, welcomed the confirmation by the OGA.
Shares in UKOG shot up 27% to 0.47p on the news while Alba climbed 14% to 0.08p.