31 Dec 2015
Cronx Licence Extension and Southern North Sea UpdateIndependent Oil and Gas plc (the "Company") (AIM: IOG.L), the North Sea focused Oil and Gas Company, is pleased to provide the following update on its Southern North Sea portfolio.
The Oil and Gas Authority (“OGA”) has extended the Cronx licence by one year to 9 January 2017. IOG has also agreed to extend the Sale and Purchase agreement with Swift Exploration by 9 months to 30 September 2016. The Cronx licence has a firm commitment to drill a well and so IOG would take on that obligation at completion. IOG remains keen to complete the Cronx acquisition when circumstances allow. IOG believes a commercial development well can be drilled and would most likely be tied back to the Blythe development in due course.
Truman and Harvey
IOG has now received formal confirmation from the OGA that licence P2085 containing the Truman prospect and the Harvey discovery has been extended by twelve months to 20th December 2016.
The Blythe partnership is considering various ways to improve the economics of the project and has not yet committed to an offtake route. Despite the low gas price environment IOG believes Blythe to be economic on a standalone basis and would provide an attractive return if co-developed with IOG’s other discoveries. The partnership is in regular dialogue with the OGA on several potential variants to the development plan and the Field Development Plan can only be completed and submitted once the optimal plan is agreed by the partnership and the OGA.
IOG anticipates carrying out a full 3D seismic reprocessing from the original seismic data across our whole Southern North Sea portfolio in 2016. The reinterpretation work carried out over the Cronx and Elgood discoveries in 2015 has been useful, but it is felt prudent to not revise any specific resource estimates until we have a consistent set of maps across the whole portfolio. Key aims of this work will be to demonstrate commerciality or otherwise of the Harvey and Hambleton discoveries and to better define the Truman prospect. IOG is fully funded for this work programme.
Mark Routh CEO of IOG commented:
Our Southern North Sea gas portfolio remains a core part of our business on which we believe can make attractive returns despite the current challenging price environment. We are delighted that the OGA has allowed us the appropriate licence extensions to keep the portfolio intact. We are funded to carry out a full 3D seismic reinterpretation over the portfolio which should allow us to revise resource estimates for the discoveries and prospects. We shall continue to look for new development and production opportunities to enhance the portfolio in 2016.
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”), the combined estimate of 2P reserves in Blythe and 2C resources in Skipper net to IOG will be 37.1 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 27th licensing round and another in the recent 28th 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
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 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. IOG management estimates that the recoverable oil from Skipper is 34.1 MMBbls based on a recovery factor of 25%, compared to the historic CPR estimate of 19%. Successful flow tests from nearby heavy oil fields substantiate the company’s estimate of a 25% recovery factor. 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.)
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.
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 and Interim Executive Chairman 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.