Harvey and Redwell Update

RNS Number : 2370X

Independent Oil & Gas PLC

18 December 2019

 

18 December 2019

Independent Oil and Gas plc

Harvey and Redwell Update

Independent Oil and Gas plc ("IOG" or the "Company"), the development and production company focused on becoming a substantial UK gas producer, provides an update on management's analysis of the results of the Harvey appraisal well 48/24b-6 in the UK Southern North Sea.

Highlights:

• Post-well mapping indicates northern part of pre-well Harvey structure is likely to hold gas volumes of approximately 40 Bcfe mid-case recoverable
• IOG's nearby Redwell discovery appears to be larger, with midcase recoverable volumes of approximately 100 Bcfe
• Both estimates require further analysis and modelling work to inform the potential for a Redwell-Harvey area development off the back of the Core Project
• 49ft gas column at the 48/24b-6 well location appears to be a sub-commercial discovery
• Brief results analysis presentation is available on IOG website
• IOG has agreed to extend the CalEnergy Resources Limited ("CER") Harvey option exercise period to 27 February 2020

As announced on 11^th September, the Harvey well 48/24b-6 reached a total depth of 7,537 ft Measured Depth (MD) in the Permian Leman Sandstone reservoir, meeting the Initial Term work commitment for Licence P2085. The top of the Leman Sandstone was encountered at 7,086 ft MD. Two 90 ft cores were acquired in the Leman Sandstone along with a full suite of wireline logs, including pressure test and fluid samples, as well as Vertical Seismic Profiling (VSP). Analysis of the wireline data demonstrated the presence of a 49 ft vertical gas column at the top of the reservoir, in contrast to pre-drill estimates of a 211 ft gas column.

The Company experienced a technical issue in integrating the VSP data into the existing seismic dataset which hindered the initial analysis of the comprehensive dataset acquired from the well. However, this has now been resolved, enabling seismic remapping and an initial technical assessment of gas volumes to be completed. This remapping indicates that the Harvey structure as described on the pre-stack depth migration (PSDM) map prior to the well is likely to be compartmentalised into more than one structure.

On this basis, the results of the 48/24b-6 well are mixed. The 49ft gas column encountered at the well location appears to be a small independent pocket of gas of limited areal extent, resulting in what the Company believes to be sub-commercial volumes. However, the updated mapping based on the well data also indicates the presence of a larger structure at Harvey up-dip to the northeast of the previous 48/23-2 well, i.e. the northern part of the pre-well PSDM Harvey structure. The size of this structure implies mid-case recoverable volumes of approximately 40 Bcfe, analogous to Blythe. Additional short-term technical work can provide further definition on the updated mapping and the Company will proceed with this as the next step.

Furthermore, the well results have been integrated into the seismic data covering the area of the Redwell discovery (previously Wherry) in IOG's P2441 licence, to the immediate east of the P2085 Harvey licence. This indicates that Redwell extends further to the northwest than previously estimated, incorporating both the Redwell discovery and Woodforde prospect into a single structure with management estimated mid-case recoverable resource volumes in the region of 100 Bcfe. The wells drilled at Redwell by previous operators prior to 2006 demonstrated a low-relief discovery of good reservoir quality. Further reservoir modelling work will now be undertaken to confirm estimates of gas in place (GIIP), potential resources and deliverability at Redwell. This will then inform whether there is scope for a future development in the Redwell-Harvey area (P2085 and P2441 licences), potentially benefitting from direct tie-in to the by-then operating Thames Pipeline export route or tie-back to Core Project infrastructure such as the Southwark or Blythe platforms.

To further illustrate the updated understanding of the area summarised above, IOG has released a brief Initial Harvey Well Analysis presentation on its website, available at the following link: www.iog.co.uk/investors/results-reports-and-presentations/ 

Alongside the farmout transaction with its partner CER which completed in October 2019, IOG agreed an option for CER to acquire 50 per cent of the P2085 and P2441 licences within three months of completion of the Harvey appraisal well. Exercise of the option entails a £20 million payment to IOG and a £0.95/MCF royalty on all of CER's life-of-field net gas production from Harvey. Given the time required to assess and integrate the Harvey well results, IOG has agreed that CER will now have until 27 February 2020 to finalise their own technical analysis and decide whether to exercise the option.  

Andrew Hockey, CEO of IOG, commented:

"The Harvey well has provided us with an invaluable data set and enhanced geological knowledge of the area which may unlock a new development opportunity for IOG, and has reinforced the benefit of a highly focused regional presence. To achieve a robust initial interpretation of the Harvey well results, it was critical to ensure the integrity of the well data analysis and we have now done that. This gives us an updated subsurface view which can be further clarified by additional technical work. Although the gas accumulation at the 48/24b-6 well location is sub-commercial, our updated post-well mapping indicates that the northern section of the pre-well Harvey structure is likely to contain commercial volumes of gas and that Redwell has fairly substantial gas in place. We now intend to undertake the further modelling necessary to evaluate the potential for a commercial development in these licences which would leverage their proximity to our fully-funded Core Project infrastructure. Meanwhile, progress on development of Core Project Phase 1 continues on track following FID in late October."

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                                                    [phone]

Andrew Hockey (CEO)

Rupert Newall (CFO)

James Chance (Head of Corporate Finance & IR)

finnCap Ltd                                                                              [phone]

Christopher Raggett, Simon Hicks (Corporate Finance)

Camille Gochez (Corporate Broking)

Peel Hunt LLP                                                                          [phone]

Richard Crichton

David McKeown

Vigo Communications                                                             [phone]

Patrick d'Ancona

Chris McMahon

Simon Woods

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 continues to pursue value accretive acquisitions to generate significant shareholder returns.

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

²ERC Equipoise Competent Persons Report: October 2018

Competent Person's Statement

In accordance with the AIM Note for Mining and Oil and Gas Companies, IOG discloses that Andrew Hockey, IOG's CEO, is the qualified person that has reviewed the technical information contained in this document.  Andrew Hockey has an MSc in Petroleum Geology and has been a member of the Petroleum Exploration Society of Great Britain since 1983.  He has over 35 years' operating experience in the upstream oil and gas industry.  Andrew Hockey consents to the inclusion of the information in the form and context in which it appears.

 

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