Gas Sales Agreement

RNS Number : 5434E

IOG PLC

11 March 2022

 

11 March 2022

IOG plc

Gas Sales Agreement

IOG plc ("IOG", or "the Company"), (AIM: IOG.L), the Net Zero UK gas and infrastructure operator focused on high return projects, is pleased to update on gas sales arrangements and progress towards resumption of Southwark drilling.

Gas Sales Agreement

The Company has executed a new gas sales agreement ("GSA") with BP Gas Marketing Limited ("BPGM"). This covers its equity gas from all of the Saturn Banks Phase 1 fields (Blythe, Elgood, Southwark), plus the Nailsworth and Elland fields which are part of Phase 2, on a long-term basis with break clauses after September 2023. The GSA replaces the gas sales agreement originally signed with BPGM in February 2014, which covered the Blythe field only, on improved terms for the Company. 

Under this GSA, gas will be sold on a day-ahead daily nomination basis at a price linked to the National Balancing Point (NBP, the UK traded gas benchmark). The GSA incorporates the potential, subject to credit approval, for physical gas hedging up to 50% of forecast production over various periods, in line with the Company's hedging strategy.

Under this hedging strategy, the Company expects to start executing a prudent wedge-shaped hedging programme, using simple structures, to reduce cashflow volatility whilst allowing shareholders to retain appropriate gas price exposure. This would entail a higher proportion of forecast production hedged over earlier periods reducing to a lower proportion hedged over later periods, on a rolling basis. IOG has not undertaken any hedging prior to production and therefore currently is fully exposed to prevailing UK NBP gas prices.

Southwark

The Company has in parallel been making good progress with the required regulatory and commercial processes to implement the rock dumping solution to the seabed scour issue at the Southwark field location. Resumption of Southwark drilling therefore remains targeted for later this month, potentially moving to mid-April due to the interplay of logistical factors and tidal conditions. On that basis, Southwark First Gas currently remains targeted for Q3 2022.

Andrew Hockey, CEO of IOG, commented:  

"It is another very positive step for IOG to have this more comprehensive Gas Sales Agreement in place with a highly credible counterparty in BP Gas Marketing with whom we have enjoyed a long relationship already.

In parallel, I can confirm that the backgassing and ready for start-up processes have been proceeding this week as planned. It is also important to note that we have been making good progress in overcoming the necessary hurdles to resume safe drilling at Southwark over the coming weeks."

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the company's obligations under Article 17 of MAR.

Enquiries:

IOG plc Andrew Hockey (CEO) Rupert Newall (CFO) James Chance (Head of Capital Markets & ESG)	[phone]
finnCap Ltd Christopher Raggett / Simon Hicks	[phone]
Peel Hunt LLP Richard Crichton / David McKeown	[phone]
Vigo Consulting Patrick d'Ancona / Chris McMahon / Oliver Clark	[phone]

About IOG:

IOG's Saturn Banks Project targets a gross peak production rate of 140 mmscf/d (c. 24,000 Boe/d) from gross 2P gas reserves of 302 Bcfe¹ and management estimated 2C gas Contingent Resources of 132 Bcfe, via an efficient hub strategy based on co-owned infrastructure. In addition to its 2P reserves at Blythe, Elgood, Southwark, Nailsworth and Elland and 2C contingent resources at Goddard, it has management estimated gross 2C contingent resources of 23 Bcfe at Abbeydale and gross unrisked mid-case prospective resources of 36 Bcfe at Kelham North, 42 Bcfe at Kelham Central, 58 Bcfe at Thornbridge, 31 Bcfe at Southsea, 28 Bcfe and 19 Bcfe in the two Goddard flank structures. The Orrell discovery, with management estimated gross 2C contingent resources of 42 Bcfe, also lies approximately 50% on the P2442 licence held 50% by IOG. IOG also holds a 50% operated stake in Licence P2589, containing the Panther and Grafton gas discoveries with management estimated gross mid-case contingent resources of 46 Bcfe and 35 Bcfe respectively. In addition, IOG continues to pursue value accretive acquisitions to help generate further significant shareholder returns.

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

 

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