Corporate and Operational Update

RNS Number : 1640E

Independent Oil & Gas PLC

04 November 2020

 

4 November 2020

Independent Oil and Gas plc

Corporate and Operational Progress One Year on from FID

Independent Oil and Gas plc ("IOG" or "the Company"), (AIM: IOG.L), the UK gas company targeting high returns via an infrastructure-led hub strategy, is pleased to update on the substantial progress in the year since Final Investment Decision (FID) on Phase 1 of its Core Project in the UK Southern North Sea (SNS).

Highlights

-  Team significantly strengthened in 2020 to deliver successive phases of growth 

-  Phase 1 development on schedule for First Gas in Q3 2021

-  Blythe and Elgood pipelay campaign ongoing, expected to complete later this month

-  Rig signed on attractive terms with extension options, with first well to spud in Q1 2021

-  Platform fabrication and Thames Reception refurbishment works continue to progress  

-  Programme of 1200km² SNS 3D seismic reprocessing nearing completion

-  JV partnership continuing to function effectively

-  Adapting to increased Covid-19 restrictions while seeking to minimise disruption

-  IOG has released a new Investor Presentation, available at: www.iog.co.uk/investors/results-reports-and-presentations  

Corporate

Over the year since FID, IOG has significantly strengthened its team to support its planned growth into an established UK North Sea operator and material gas producer, delivering strong returns for shareholders. The team has evolved from a small core of employees pre-FID into a fit-for-purpose organisation of over 30 employees, supported by over 20 specialist consultants and technical experts.

The operational team focused on construction, installation and commissioning of the key Phase 1 infrastructure, both onshore and offshore, has been suitably reinforced, with an ongoing focus on project optimisation. In parallel, a high-calibre drilling department has been established, ensuring the Company possesses the right in-house expertise to lead the design and execution of the Phase 1 and subsequent drilling campaigns. The drilling team is working with top tier contractors, including Petrofac, Noble Corporation and others yet to be announced.

IOG has also built an experienced in-house subsurface team comprising all relevant disciplines to optimise its asset base and evaluate further opportunities. Other key areas including Health, Safety and Environment, Contracts and Procurement, and Finance have likewise been strengthened via new hires with deep and relevant experience. This organisational build-out is central to the Company's plans to deliver multiple phases of growth as a best-in-class, low-carbon North Sea operator.

IOG's relationship with its joint venture partner CalEnergy Resources (UK) Limited (CER), the subsidiary of Berkshire Hathaway Energy Company, has proven to be effective and constructive over its initial year, pointing to the potential for a long and fruitful collaboration.

Covid-19

As the Covid-19 pandemic necessitates a further lockdown, IOG is adapting dynamically to the practical challenges during this key phase, with platform construction ongoing in the Netherlands, subsea installation offshore in the SNS, onshore refurbishment at Bacton and planning for forthcoming drilling operations. In that context, our three fundamental priorities remain as throughout: protecting our people, delivering the project and ensuring business continuity.

The Company is continually assessing the right balance between these key objectives as government guidelines and business needs evolve. Appropriate measures are being determined primarily by the nature and usual location of work undertaken, with management activities differentiated from physical construction and installation operations. While every effort is being made to maintain business as usual, a prolonged disruption to working practices over coming months could put additional burden on the supply chain and impact the Company's ability to operate most effectively.

Core Project Phase 1

Platforms

· Fabrication of the Phase 1 Southwark and Blythe platforms at HSM's yard in Schiedam continues on track for mechanical completion in Q1 2021 and installation in Q2 2021

· Southwark and Blythe deck stacking and internal fit-out is progressing and both jackets are also well underway

· Covid-19 restrictions have been strengthened at the yard given the increased risks over recent weeks, but work to date has not been interrupted

SURF

· Pipelay campaign for the 6-inch Elgood and Blythe 12-inch lines connecting to the Blythe platform and 24-inch Thames Pipeline respectively is expected to complete later in November

· This follows extensive preparatory work at IOG's pipeline routes and at crossing points for other lines, as per regulatory requirements, and line pipe welding and spooling onshore at Subsea 7's Leith base

· Weather conditions during the campaign to date have been relatively unsettled, resulting in some challenging conditions offshore

· Other required subsea tie-in equipment and the Elgood umbilical are being fabricated or available for installation

Drilling

· Contract signed with Noble Corporation for the Noble Hans Deul jack-up rig to drill the five Phase 1 wells, with options for up to two further wells on favourable terms

· Detailed well design and permitting on track to complete ahead of spudding of first well in Q1 2021

· Other key drilling services, logistics and tangibles also being contracted in parallel 

· Petrofac approved as Phase 1 Well Operator by the Oil and Gas Authority (OGA)

Onshore

· Refurbishment works progressing on the Thames Reception Facilities (TRF) at Bacton Gas Terminal (BGT)

· Working closely with terminal operator Perenco to maximise efficiency of TRF recommissioning and minimise requirement for new equipment

· Clean-out and inspection of TRF slug catchers completed to pave the way for re-use

· Key tie-in activities to be undertaken during the scheduled BGT shutdown this quarter  

· Competitive gas sales tender process to be concluded during first half of 2021

Portfolio and Business Development

The programme of 3D seismic reprocessing to Pre-Stack Depth Migration (PSDM) on the Company's portfolio is getting closer to completion, with an aggregate area of over 1200km² covered. Interpretation of this new data will materially enhance subsurface understanding of the Company's assets, helping to optimise field developments and inform well designs. An initial update on this work is anticipated before year end.

In the recent 32^nd Licensing Round the Company enjoyed another 100% success rate, being offered every block for which it applied. Most notably this includes two new operated gas discoveries, Panther and Grafton, which lie adjacent to the existing portfolio, as 50% operator in partnership with CER (50% non-operator). These discoveries have management estimated 46 Bcfe and 35 Bcfe mid-case recoverable gas resources respectively. Upon acceptance, formal licence awards will follow in due course.

Andrew Hockey, CEO of IOG, commented:  

"I am proud of our extensive progress on many fronts since we completed the farm-out to our partner CalEnergy Resources and took FID this time last year. Whilst recognising the challenges of Covid-19, I am equally excited about the year ahead with the transition to production and cash flow from Q3 2021. With a greatly strengthened team working hard to deliver Phase 1 while progressing plans for our pre-development asset portfolio, we are laying the foundations to deliver sustained value to shareholders.

The ongoing technical re-evaluation of the full IOG portfolio by our in-house subsurface team - who have extensive SNS experience - will underpin our wider growth ambitions, enabling further value creation via incremental investments, additional licensing and other potential nearby redevelopments and acquisitions."

Certain information communicated in this announcement was, prior to its publication, inside information for the purposes of Article 7 of Regulation 596/2014.

Enquiries:

Independent Oil and Gas plc Andrew Hockey (CEO) Rupert Newall (CFO) James Chance (Head of Corporate Finance & IR)	[phone]
finnCap Ltd Christopher Raggett Simon Hicks	[phone]
Peel Hunt LLP Richard Crichton David McKeown	[phone]
Vigo Communications Patrick d'Ancona Chris McMahon Simon Woods	[phone]

About IOG:

IOG owns and operates a 50% stake in substantial low risk, high value gas reserves in the UK Southern North Sea. The Company's Core Project targets a gross 2P peak production rate of 140 MMcfe/d (c. 24,000 Boe/d) from gross 2P gas Reserves of 302 Bcfe¹ + 2C gas Contingent Resources of 108 Bcfe², via an efficient hub strategy. In addition to the independently verified 2P reserves at Blythe, Elgood, Southwark, Nailsworth and Elland and 2C Contingent Resources at Goddard, IOG also has independently verified best estimate gross unrisked prospective gas resources of 73 Bcfe² at Goddard. Alongside this IOG has management estimated mid-case recoverable gas volumes of 40 Bcfe and 100 Bcfe at the Harvey and Redwell licences and continues to pursue value accretive acquisitions to generate significant shareholder returns. In September 2020 IOG was also offered four further Southern North Sea blocks adjacent to its existing portfolio which it had applied for in the 32^nd Offshore Licensing Round.

¹ ERC Equipoise Competent Persons Report: October 2017, adjusted by Management to account for updated project timing and compression

² ERC Equipoise Competent Persons Report: October 2018

 

END

 

 

UPDKKNBBBBDBDDK