Operational Update

RNS Number : 9825J

IOG PLC

03 May 2022

 

3 May 2022

IOG plc

Operational Update

IOG plc ("IOG", or "the Company"), (AIM: IOG.L), the Net Zero UK gas and infrastructure operator focused on high return projects, provides a full operational update ahead of its Annual General Meeting today.

Andrew Hockey, CEO of IOG, commented:  

"I am pleased to provide an update on the initial weeks of Blythe and Elgood production. As we address early facilities issues and control liquids handling onshore, production is currently stabilising at 55-65 mmscf/d gas and 800-1,000 bbl/d condensate, with steadily improving uptime rates. Meanwhile, drilling progress continues at Southwark while we prepare for the two follow-on appraisal wells at Goddard and Kelham North/Central."

Blythe & Elgood

Facilities, Infrastructure & Reservoirs

Over the initial seven weeks of production, the Bacton terminal operator Perenco (UK) Limited (PUK), IOG and its Pipeline and Facilities Duty Holder ODE Asset Management (ODEAM) have been jointly establishing the full functionality of the end-to-end Saturn Banks infrastructure. Offshore, the chemical injection fault on the Blythe topsides has been temporarily addressed, giving an aggregate production capacity of 75 mmscf/d, which will increase to design capacity once modifications are installed over coming months.

Onshore, the first Saturn Banks hydrocarbon liquids were received on 7 April. The Bacton terminal operator has been working to integrate these efficiently into existing Bacton liquid streams. This entails processing the liquids through the dedicated Saturn Banks slugcatcher (reception vessel) and modifying the terminal condensate stabilisation unit's operation to suit this transient composition of fluids.

As previously noted, reservoir data from the early months of production will be required to make a reliable assessment of subsurface performance and inform forward guidance on Blythe and Elgood. Subject to operations, this guidance is therefore expected to be provided by late Q2, approximately three months from First Gas.

Production

The PUK, ODEAM and IOG teams are working jointly to optimise onshore liquids handling and improve offshore reliability to maintain stable production rates. Currently, stable gas production from Elgood and Blythe has been established in the 55-65 mmscf/d range on a gross basis. Over the final week of April, aggregate production averaged 60 mmscf/d, with a maximum daily rate of 64 mmscf/d and 100% uptime on both assets. Since First Gas from both wells in mid-March to end of April, overall average aggregate gas production was 37 mmscf/d, with average uptime of 68% at Elgood and 33% at Blythe. This primarily reflects the chemical injection fault outage before the Blythe well was reopened in mid-April, among other shorter temporary outages.

Under its gas sales agreement with BP Gas Marketing Ltd, IOG receives pricing closely linked to the UK National Balancing Point (NBP) day-ahead price. The volume weighted average realised gas price was 232 p/therm for March and 161 p/therm for April. Amid very high LNG imports and limited UK storage capacity, temporary constraints on the UK-Belgium interconnector pipeline pulled prompt NBP prices in April significantly lower than European gas benchmarks (which are usually highly correlated to NBP).

Average aggregate condensate arrivals into Bacton have been in the 800-1,000 bbl/d range since first liquids flowed onshore on 7 April. Condensate production was well above 1,000 bbl/d in the final week of April but is expected to be largely front ended with a relatively rapid decline rate. Condensate is sold to a petrochemical offtaker at prices linked to naphtha and gasoil.

Southwark

Drilling of the two development wells, Southwark east and west, is scheduled to continue into Q4 2022. Final hook-up and commissioning is then expected to deliver Southwark first gas later that quarter. Upon resumption in mid-April after seabed remediation, the Southwark east well remained in good condition with no further rig stability issues encountered, enabling drilling to continue as planned.

Clearance of the 6km 24" pipeline extension route from the Saturn Banks Pipeline System to the Southwark platform is expected in May, followed by laying and trenching by Subsea7's Borealis vessel in June. All regulatory consents are in place for these key remaining Phase 1 subsea works.

Southwark accounts for the majority of 2022 net capital expenditure, which is currently expected to be within the £70-85 million range. This figure incorporates projected Goddard, Kelham North/Central and Nailsworth expenditure.

Further Phase Activities

The appraisal wells at Goddard and Kelham North/Central are planned to be drilled in direct continuation from the Southwark east and west development wells, using the Noble Hans Deul rig and with Petrofac continuing as Well Operator. The purpose of these wells to prove up two incremental gas hubs and obtain sufficient subsurface data to fully optimise the developments.

The geophysical site surveys for both appraisal wells were completed in March, with the Nailsworth area also incorporated in the same campaign. Geotechnical surveys are planned for later this quarter.

Basis of designs for the two appraisal wells are complete and detailed well planning, contracting and long-lead procurement is well underway in preparation to execute the appraisal wells in Q4 2022.

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 / Finlay Thomson / Oliver Clark	[phone]

About IOG:

IOG is a Net Zero UK gas and infrastructure operator focused on high-return projects. The Company's operations are currently concentrated around its offshore and onshore Saturn Banks infrastructure in the UK Southern North Sea. Phase 1 of its Saturn Banks Project, which started production in March 2022, entails the commercialisation of the Blythe, Elgood and Southwark gas fields through this infrastructure. Phase 2 of the Saturn Banks Project entails the Nailsworth, Goddard and Elland gas discoveries, which are subject to future investment decisions and expected to be commercialised through the same export infrastructure. The Company also holds further licences with additional assets including the Abbeydale, Panther and Grafton gas discoveries, the Kelham North, Kelham Central, Thornbridge and Thornbridge Deep prospects, and part of the Orrell gas discovery. Currently, all IOG's licences are held 50:50 with its joint venture partner CalEnergy Resources (UK) Limited and operated by IOG. In addition, the Company continually evaluates further opportunities for accretive portfolio additions to help generate additional shareholder returns. Further details are available at www.iog.co.uk .  

 

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