Significant progress made towards securing funding

RNS Number : 0248A

Independent Oil & Gas PLC

24 September 2015

 

24 September 2015

Independent Oil and Gas plc

Significant progress made towards drilling the Skipper well and securing funding

Independent Oil and Gas plc ("IOG" or the "Company"), (AIM: IOG.L), the North Sea focused oil and gas company, is pleased to provide an update on its drilling plans on the Skipper licence and on its funding.

Highlights:

·    Positive progress made towards drilling the Skipper well.  Planning is now at an advanced stage and essential long lead items have been ordered to facilitate drilling later this year.

·    Advanced discussions ongoing with a number of service companies including rig owner, well operator, subsea equipment supplier and an essential rig services provider.

·    All service providers committed either to part-fund the well, defer payment or to provide loans to secure their participation.  Total commitment estimated at approximately £7m.

·    Sale and purchase agreement with Alpha Petroleum for purchase of remaining 50% of Skipper extended to 7 December 2015.

·    Discussions with several funders ongoing and Darwin Strategic has agreed to extend the loan to 7 December 2015.

The Board of IOG is pleased to announce that significant progress has been made towards drilling the Skipper well.  Alpha Petroleum has agreed to extend until 7 December 2015 the date for satisfaction of the conditions precedent relating to the acquisition by IOG of for the remaining 50% of Skipper.  The sale remains subject to Oil and Gas Authority ("OGA") approval which will require IOG to be fully funded for the well.

To this end, IOG has terms agreed in principle for a semi-submersible rig contract with the day rate on the rig expected to be substantially deferred.  IOG has also agreed terms with AGR Well Management ("AGR") which is expected to be the designated Well Operator.  IOG has made a formal request to the OGA that AGR take on this role upon completion of the Skipper acquisition and in conjunction with IOG becoming the licence operator.

IOG has also signed a Letter of Interest with a global equipment supplier for the Skipper appraisal well and subsequent expected development.  The Letter of Interest envisages the provision by the supplier of a £2m loan to IOG.

Good progress is also being made with a large service company to provide essential services on the rig including the oil sampling.  Part of these costs are also expected to be deferred.

The various service contractors and suppliers supporting IOG now are all expected to be granted security over the Skipper, Blythe and Elgood licences and will also become preferred partners in the anticipated subsequent Skipper development.  All deferrals and loans accrued will be payable at the end of September 2016.

The main aim of the well is to retrieve an oil sample in order to design the optimum field development plan.  Skipper has independently verified gross 2C resources of 26.2 MMBbls, based on a 19% recovery factor, which IOG believes to be conservative.  The appraisal well will also target two exploration prospects directly beneath the Skipper oil discovery which the Competent Person estimates may contain additional oil in place of 46 MMBbls.

As well as the above mentioned industry funding, discussions with several investors to fund any shortfall in the well costs are ongoing.  In addition, Darwin Strategic has agreed to extend the outstanding balance of its loan amounting to £358,000 to 7 December 2015 without any interest or penalties.  Darwin will retain the right to convert into equity on the same terms as previously advised effective from 4 October 2015 if it has not been repaid.  IOG currently has sufficient funding until late October 2015.

Mark Routh, CEO of IOG commented:

"I am very pleased with the indications of support we have had from the contractor and oil service community towards getting this transformational yet low risk well, funded and drilled, which could increase our reserves from 3 MMBoe to more than 30 MMBoe.

"We are working hard to address our funding position with significant progress being made.  I look forward to providing an update shortly."

-ENDS-

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 Mann	[phone]

Notes

About Independent Oil and Gas:

IOG is an oil and gas company with established assets focused on 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.  After the completion of the Skipper acquisition from Alpha Petroleum Resources Ltd. ("Alpha") and the previously announced Cronx acquisition, the combined estimate of 2P reserves and 2C resources net to IOG will be 38.6 million barrels of oil equivalent ("MMBoe").

Post completion of the Cronx acquisition IOG will have five licences in the North Sea.  Four of these licences will now be owned 100% by IOG and subject to DECC/OGA approval will be operated by IOG.  The Blythe licence is co-owned 50% with Alpha which is the operator.  IOG has a 100% working interest in two other licences, one awarded in the 27^th licensing round and another in the recent 28^th licensing round.  One is to the east of Blythe containing the Truman prospect and Harvey discovery and the other is between the Blythe and Cronx licences which contains the Elgood and Hambleton discoveries and the Tetley and Rebellion prospects.  Both these 100% owned licences have potential resources that could be tied back to nearby infrastructure or to the Blythe development.

Further information can be found on www.independentoilandgas.com

About Blythe:

The Blythe gas discovery straddles Blocks 48/22b and 48/23a in the Southern North Sea in licence P1736 which is 50% co-owned by IOG and Alpha (operator).  Blythe needs no further appraisal and has independently verified gross 2P reserves of 34.3 BCF (6.1 MMBoe) which is 17.2 BCF (3.0 MMBoe) net to IOG.  (Source: ERC Equipoise Competent Person's Report ("CPR") dated September 2013.)

The partnership is working towards submitting a Field Development Plan for Blythe by the end of 2015.

About Skipper:

The Skipper oil discovery is in Block 9/21a in the Northern North Sea in licence P1609.  Skipper needs further appraisal by drilling a well to retrieve an oil sample in order to design the optimum field development plan.  Subject to the completion of the previously announced acquisition of Skipper from Alpha, IOG can now progress to the appraisal and development stage of this asset.  Skipper has independently verified gross 2C resources of 26.2 MMBbls.  The appraisal well will also target two exploration prospects directly beneath the Skipper oil discovery which may contain oil in place of 46 MMBbls.  (Source: AGR Tracs CPR dated September 2013.)

About Cronx:

IOG has agreed to acquire 100% of Cronx (Block 48/22a, licence P1737) which is subject to completion.  The Cronx gas discovery is 14km north-west of the Blythe field in which IOG owns 50%.  Cronx was discovered in 2007 by well 48/22b-6 drilled by Perenco UK Ltd.

IOG commissioned an independent CPR by ERC Equipoise on Cronx in July 2012 which shows a base case expected gas recovery of 17.6 BCF or 3.4 MMBOE 2C resource.  IOG anticipates drilling a well in 2016, subject to rig availability, the necessary permits and funding.  IOG expects the well to confirm the recoverable resources, which IOG believes has the potential to be larger than the 17.6 BCF base case in the CPR.  IOG is currently evaluating options for the development and export of the Cronx gas.

About Elgood and Hambleton:

The Elgood discovery (IOG 100%) (Block 48/22c, licence P2260) 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 of existing 3D seismic across 48/22a and 48/22c is required 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.

 

END

 

 

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