TIDMIOG
RNS Number : 1126Z
Independent Oil & Gas PLC
08 January 2020
8 January 2020
Independent Oil and Gas plc
Corporate Update
Independent Oil and Gas plc ("IOG" or "the Company"), (AIM:
IOG.L), the development and production focused oil and gas company,
is pleased to provide a corporate outlook at the start of 2020,
during which the primary focus will be progressing the core
development project ("Core Project") in the Southern North Sea
("SNS").
Key achievements - 2019
-- Successful farm-out ("Farm-out") of 50% of Core Project to
CalEnergy Resources Limited ("CER")
o GBP40 million up-front payment with GBP125 million of
development carry
o IOG maintaining operatorship of all its assets
o Alliance with CER for further SNS business development
-- Successful EUR100m bond issuance, listed on Oslo Børs
-- GBP19 million Institutional equity fundraise, including
Board/management subscription and open offer
-- Acquisition of the onshore Thames Reception Facilities ("TRF") at Bacton Gas Terminal
-- Conversion, repayment and restructuring of previous debt facilities
-- Strengthening of board and management team
-- Final Investment Decision ("FID") taken with full funding secured
-- Core Project development underway (including first carry drawdown)
o First gas expected in July 2021
o Free cashflow from Core Project expected in October 2021
-- Harvey appraisal well drilled, with initial analysis
indicating c.40 Bcfe mid-case recoverable volumes at Harvey and
c.100 Bcfe at nearby Redwell
-- Number of licences applied for in 32(nd) Offshore Licensing Round in alliance with CER
Outlook - 2020
-- Phase 1 Field Development Plan ("FDP") approval
-- Formalisation of Phase 1 Platform & Subsea Infrastructure contracts
-- Start of physical platform construction
-- Offshore pipelay campaign
-- TRF refurbishment works at Bacton Gas Terminal
-- Rig contracting
-- Subsurface evaluation of Redwell-Harvey Area
-- CER decision on Redwell-Harvey Area option exercise
-- 32(nd) Round results
-- Focused business development
2019 Review
IOG achieved significant progress in 2019, delivering a series
of milestones to create a strong platform from which to deliver the
Core Project. Following the restructuring of existing debt
facilities, in Q2 the Company raised GBP19 million in equity from
institutional investors, a Board/management subscription and a
fully subscribed open offer. The board was also strengthened with
key appointments of two new high quality non-executive directors
and a new CFO.
In Q3 there followed the two major transactions of the year: the
signing of the GBP165 million Farm-out of 50% of the Core Project
assets (excluding Harvey) to CER and the EUR100 million bond issue
(subsequently listed on the Oslo Børs). These two transactions
fully funded the Core Project, paving the way for FID in October
2019. Core Project first gas is expected in July 2021 with first
free cashflow later that year.
A key element in reaching FID was the Thames Reception
Facilities (TRF) acquisition, for a nominal sum, which also
completed in Q4 alongside the Farm-out. The TRF contains gas and
liquids reception equipment for the Thames Pipeline and is to be
refurbished and recommissioned as part of the Phase 1
development.
Finally, IOG drilled the appraisal well at Harvey in Q3 2019 in
under two months with no HSE or Lost Time Incidents. Interpretation
of the well data to date indicates an approximately 40 Bcfe
structure at Harvey - analogous in size to Blythe - and the Redwell
discovery extending further than previously thought to an estimated
mid-case recoverable 100 Bcfe.
2020 Outlook: Phase 1 Core Project Development
Initial Phase 1 platform and Subsea, Umbilicals, Risers and
Flowlines ("SURF") work has been underway since FID, along with
further design and engineering work on the Bacton Terminal
modifications. SURF and Platform contracts are being finalised and
are expected to be announced upon approval by the UK Oil and Gas
Authority (OGA) of the Phase 1 FDP, which is expected in Q1.
The joint venture with CalEnergy Resources Limited ("CER") is
fully operational, with the GBP40 million up-front payment received
and first amounts of the Phase 1 development carry drawn down.
Given the shallow water depths (20-35 metres), IOG's unmanned
platforms are planned to be low cost and low CO footprint
facilities. Installation of both Phase 1 platforms, at Southwark
and Blythe respectively, is scheduled for the first half of 2021.
Meanwhile, summer 2020 will see the pipelay programme for the 24"
extension from the Thames Pipeline to the Southwark platform and
the other smaller diameter lines which will connect up the Phase 1
fields. Onshore planning work is accelerating for the Thames
Reception Facilities refurbishment works at the Bacton Terminal,
where reuse of existing facilities is in line with IOG's cost
conscious and CO -efficient business model. The other major element
of the Core Project Phase 1 is the five well drilling programme due
to commence in Q1 2021. IOG is building an in-house drilling team
to deliver this and expects to engage in detailed rig and services
contract discussions early this year.
2020 Outlook: SNS Growth Strategy
Alongside the primary focus of delivering the Core Project on
time and on budget, the Company sees a number of routes to further
growth. The strategy is to deliver focused, value-accretive growth
in a cost-conscious way, leveraging the opportunity value of the
Core Project infrastructure.
Licensing rounds are one particular route to add value with
relatively low up-front costs. IOG applied for a number of blocks
in the 32(nd) Offshore Licensing Round jointly with CER under the
Area of Mutual Interest ("AMI") agreement. The Company took a
disciplined approach, focusing only on those licences with
sufficient subsurface potential lying in range of tie-back to the
Thames Pipeline. Awards are expected to be announced in mid-Q2
2020.
Discoveries on existing IOG acreage offer another value creation
route. Further modelling and analysis is underway to provide
greater clarity and definition to the c.40 Bcfe Harvey and c.100
Bcfe Redwell resource volume estimates in order to assess the
commercial potential of the Redwell-Harvey Area, which lies between
the Blythe and Vulcan Satellites hubs. Furthermore, CER will by 27
February 2020 decide whether to exercise its option to farm in to
the Redwell-Harvey Area, in exchange for a GBP20 million up-front
payment and a GBP0.95/MCF royalty on its life-of-field net gas
production from Harvey. Alongside this, IOG is also undertaking
further evaluations of its Goddard Flanks and Abbeydale assets.
More widely, acquisition and development or re-development of
other non-owned assets in the SNS could offer further upside value
for the portfolio. IOG is evaluating a number of opportunities
through the primary lens of creating shareholder value via high
return incremental investments. The infrastructure and hub-led
strategy provides competitive advantage in the area, reduces the
commerciality threshold in terms of asset size and enables
opportunities for high return investments.
Andrew Hockey, CEO of IOG, commented:
"After an exciting year of progress in 2019 which culminated in
declaring FID in Q4, 2020 will be a very busy period for IOG with
numerous further milestones to deliver. I am delighted to have
CalEnergy Resources alongside us in the project as a motivated and
financially robust Joint Venture partner.
We have further strengthened the team to ensure that as Operator
we execute this substantial project on time and on budget. I look
forward to updating you on progress throughout the year.
Our SNS gas development strategy can provide healthy returns by
delivering multiple gas assets to the highly import-reliant UK
market, in both a cost and carbon conscious way. While remaining
firmly focused on delivering our Core Project with maximum
efficiency, we also see a variety of paths to build further
shareholder value by realising the full potential of our gas hub
approach and infrastructure ownership both on and offshore."
Enquiries:
Independent Oil and Gas plc
Andrew Hockey (CEO)
Rupert Newall (CFO)
James Chance (Head of Corporate Finance & IR) +44 (0) 20 3879 0510
finnCap Ltd
Christopher Raggett (Corporate Finance)
Simon Hicks (Corporate Finance)
Camille Gochez (Corporate Broking) +44 (0) 20 7220 0500
Peel Hunt LLP
Richard Crichton
David McKeown +44 (0) 20 7418 8900
Vigo Communications
Patrick d'Ancona
Chris McMahon
Simon Woods +44 (0) 20 7390 0230
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 Bcfe(1) + 2C gas
Contingent Resources of 108 Bcfe(2), 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 Bcfe(2) at
Goddard. Alongside this IOG continues to pursue value accretive
acquisitions to generate significant shareholder returns.
(1) ERC Equipoise Competent Persons Report: October 2017,
adjusted by Management to account for updated project timing and
compression
(2) ERC Equipoise Competent Persons Report: October 2018
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END
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