Initial Results of Seismic and Update on Cronx

RNS Number : 9589N

Independent Oil & Gas PLC

01 November 2016

 

1 November 2016

Independent Oil and Gas plc

Initial Results of Southern North Sea Seismic Reinterpretation

and Update on Cronx Acquisition

Independent Oil and Gas plc ("IOG" or the "Company"), the development and production focused Oil and Gas Company, is pleased to announce that it has received initial results from new interpretations of 3D seismic data covering the Blythe Hub licences in the Company's Southern North Sea ("SNS") portfolio and also provides a further update on the Cronx acquisition.  The data, which is being reinterpreted and comprises 250km² of 3D seismic from the 1990s, has been reprocessed by Schlumberger WesternGeCo to create a more consistent set of maps over the area.

The Company's initial interpretation of the reprocessed data across these licences suggest that the estimates of Gas-Initially-In-Place ("GIIP") and therefore recoverable gas reserves are greater in aggregate than previously estimated.  However, the Company's interpretation of the reprocessed data on Cronx suggests that the GIIP on Cronx is likely to be slightly lower than the estimates in the ERC Equipoise Competent Persons Report dated July 2012.

Following the Vulcan Satellites acquisition and the expectation of an increase in our estimate of the resources in the Blythe hub licences, the materiality of Cronx is expected to have diminished in our portfolio.  Accordingly, the Board believes that committing to a firm well along with near term completion payments, seismic uplift payments and future milestone payments would not be the optimal use of the Company's funds.  The Board is focused on achieving superior returns for investors and as such has chosen not to complete the acquisition of the Cronx licence.

A second phase of reinterpretation work is now being completed over the Harvey and Hambleton discoveries and the Truman prospect and the company anticipates making a market update in relation to the seismic reprocessing exercise in relation to these areas once the work has been completed in full.

Mark Routh CEO of IOG commented:

"The seismic reprocessing studies completed so far has involved a great deal of hard work by the IOG team.  Prior to this work the Cronx resources comprised less than 5% of our estimated recoverable 2P and 2C gas resources and it has now become less material.  The reprocessing work completed to date has proved very helpful in enabling us to focus on the most value-adding assets and not completing on the acquisition of Cronx will be more than compensated for elsewhere in the portfolio.  We have discussed our latest thinking with the OGA who remain very supportive of our SNS strategy which is fully in line with the UK agenda of Maximising Economic Recovery, particularly from previously overlooked assets."

"If, following completion of the seismic reprocessing work, we are able to conclude that there is greater materiality across fewer assets in the Blythe Hub, development costs should also be streamlined.  Even before the completion of these resource updates, we believe we have the right strategy to achieve excellent returns from our core Southern North Sea gas hubs and all the more so if the recent UK gas price recovery is sustained in future.  I look forward to making further updates on the progress of our developments in due course."

-ENDS-

The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.

Enquiries:

Independent Oil and Gas plc Mark Routh (CEO) Peter Young (CFO)	[phone]
finnCap Ltd Matt Goode/Christopher Raggett (Corporate Finance)	[phone]
Camarco Billy Clegg / Georgia Edmonds	[phone]

Notes

About Independent Oil and Gas:

IOG is an oil and gas company with established assets in the UK North Sea.  The company's strategy is to deliver near term development and production assets in North West Europe, through its extensive technical and commercial expertise, whilst maintaining some exposure to exploration upside.  The company is looking to grow both organically and through acquisition.

All of IOG's licences are owned 100% and operated by IOG.

Further information can be found on www.independentoilandgas.com 

About the Vulcan Satellites:

The Vulcan Satellites consist of three fields, Vulcan East, Vulcan North West and Vulcan South, which hold independently estimated 2C resources of 77.4 BCF, 131.3 BCF and 112.0 BCF respectively, 320.7BCF collectively.  These fields lie in Block 49/21a (Licence P039), Block 49/21d (Licence P2122), Block 48/25b (Licence P130) and Block 49/21c (Licence P1915) in the UK sector of the Southern North Sea.  They lie approximately 30-45km east of IOG's 100%-owned Blythe field and are considered ready for development with no further appraisal required.  IOG is progressing exclusive discussions regarding an export route for these fields and once that is in place the Company will prepare a Field Development Plan.  IOG has assumed liability for decommissioning a suspended well on Vulcan East, which in April 2015 was independently estimated to cost £3.0 million as part of a development campaign, based on prevailing rig rates at that time.

The acquisition of the Vulcan Satellites is for an initial consideration of £1 million payable at Completion, subject to interim period adjustments for the period between the Effective Date and Completion, followed by £0.75 million payable nine months after Completion, £1.75 million payable within 30 days of OGA approval of a Field Development Plan on the licences, and £1.5 million payable within 30 days of the production of first gas from the licences (defined as a minimum period of seven days of continuous production). The aggregate consideration, allowing for any interim period adjustments, is therefore £5 million. 

About the Blythe Hub:

The Blythe hub licences comprise Blythe, Elgood, Hambleton, Truman and Harvey.

About Blythe:

The Blythe gas discovery in the Rotliegendes Leman formation straddles Blocks 48/22b and 48/23a in the Southern North Sea in licence P1736.  The Blythe Leman reservoir needs no further appraisal and has independently verified 2P reserves of 34.3 BCF (6.1 MMBoe).  (Source: ERC Equipoise Competent Person's Report ("CPR") dated September 2013.)

Gas tested to surface from three separate intervals in the Carboniferous beneath the Blythe Leman gas discovery from one of the Blythe discovery wells, 48/23-3 drilled by Arco in 1987.  The maximum rate achieved was 0.9 MMcfd from an unstimulated vertical test.  (Source: End of well report 48/23-3 - November 1987.)  This was deemed uncommercial at the time, before the advent of horizontal multi-fracture stimulated wells.  Further technical work including seismic reprocessing and remapping needs to be completed to evaluate this potential resource to refine the gas-in-place estimates which are between 70 BCF and 310 BCF.  (Source: Tullow Oil 48/23a Relinquishment Report - May 2009.)

Oil has flowed to surface from the naturally fractured Zechstein Carbonates in the Hauptdolomit formation above the Blythe Leman gas discovery from two wells.  Well 48/22-1 drilled by Burmah in 1966 flowed 39° API oil at rates up to 2,000 barrels per day (Source: Composite well log 48/22-1 - October 1966) and well 48/23-3 drilled by Arco in 1987 at flowed 38° API oil at a maximum rate of 1,128 barrels of oil a day.  (Source: End of well report 48/23-3 - November 1987.)  The extent of the structure and potential oil resources in the Hauptdolomit remains unknown.  Previous estimates considered that the mapped closure was probably small.  Oil-in-place has been estimated between 2 MMBbls and 4 MMBbls.  (Source: Tullow Oil 48/23a Relinquishment Report - May 2009.)  Further evaluation and re-mapping is now underway now that a development will proceed on the main Blythe gas discovery.

About Truman and Harvey:

IOG has a 100% working interest in licence P2085 awarded in the 27th licensing round to the east of Blythe containing the Truman prospect and Harvey discovery (Blocks 48/23c & 48/24b).  IOG estimates potential resources in this licence of 16 BCF or 3.1 MMBoe.  These 100%-owned fields have potential resources that could be tied back to nearby infrastructure being developed for the Blythe development.

About Elgood and Hambleton:

IOG has a 100% working interest in a licence awarded in the 28th licensing round to the west of Blythe containing the Elgood discovery (Block 48/22c, licence P2260).  Elgood was drilled by Enterprise Oil in 1991 and tested gas to surface at 17.6 MMcfd but was not progressed by Enterprise due to size and gas prices at that time.  IOG's estimate of the recoverable reserves in Elgood is 2.1 MMBoe.

The Hambleton discovery, to the south of the same licence, was drilled by Century Exploration in 2005 but also was not progressed to development.  IOG estimates that Hambleton has recoverable resources of 6 BCF (1 MMBoe).  IOG believes that the reprocessing of existing 3D seismic data could increase recoverable resources up to 26 BCF.

There are prospective resources on licence P2260 of 5.3 MMBoe in the Tetley and Rebellion prospects.  Reprocessing and reinterpretation of existing 3D seismic across 48/22a and 48/22c is ongoing to determine whether Elgood connects to Cronx which would boost recoverable reserves significantly.  The new seismic interpretation will also determine the likely size of Hambleton.  IOG is now working on the potential development plans and will commission a CPR‎ to confirm the resources over this area.

About Skipper:

The Skipper oil discovery is in Block 9/21a in the Northern North Sea in licence P1609.  IOG owns 100% of the Skipper licence P1609 and is the Operator.  In July/August 2016 the Company successfully drilled its first operated appraisal well and retrieved oil samples, in order to design the optimum field development plan.  Skipper has independently verified gross 2C resources of 26.2 MMBbls.  Following the results from the appraisal well, IOG management's estimates of the oil in place in the Skipper reservoir are minimum/most likely/maximum 119.3/142.6/168.3 MMBbls.  Recovery factor estimates will be revised during the full field reservoir simulation studies which will now commence.

Competent Person's Statement:

In accordance with the AIM Note for Mining and Oil and Gas Companies, IOG discloses that Mark Routh, IOG's CEO is the qualified person that has reviewed the technical information contained in this announcement.  Mark Routh has an MSc in Petroleum Engineering and has been a member of the Society of Petroleum Engineers since 1985.  He has over 35 years' operating experience in the upstream oil and gas industry.  Mark Routh consents to the inclusion of the information in the form and context in which it appears.

 

END

 

 

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