18 Dec 2014
Cronx Licence Extension builds IOG’s SNS Gas HubIndependent Oil and Gas plc (“IOG”), (AIM: IOG.L), the North Sea focused Oil and Gas Company, is pleased to update shareholders on progress with the Company’s Southern North Sea Gas Hub, which includes the Blythe, Cronx and Elgood Gas discoveries, containing 2P reserves of 3.0 MMBoe and 2C resources of 8.7 MMBoe net to IOG.
IOG is pleased to announce that the Department of Energy and Climate Change (“DECC”) has extended the Cronx licence by a full 12 months to 31 December 2015. The Sale and Purchase Agreement has also been amended to allow completion of the acquisition by 30 June 2015.
It remains IOG’s intention to complete the acquisition and to meet the licence commitments by drilling a well as soon as possible thereafter. These plans remain subject to financing, however as previously announced, IOG has signed an MOU with AGR Well Management Ltd to deliver the Cronx well. The term sheet agreed with BP Gas Marketing Ltd for a secured bridging loan to part fund the commitment well will expire on 31 December 2014 but the Company is currently in discussions to extend this date or pursue alternative financing options.
The base case recovery estimate for Cronx is 17.2 BCF, based on the Competent Person’s Report (CPR) by ERC Equipoise.
P2260 - Elgood
IOG was recently awarded licence P2260 which includes the Elgood discovery adjacent to and between the Cronx and Blythe licences. Subject to the receipt of appropriate quotes, IOG anticipates carrying out some seismic reprocessing work that should confirm if both the Elgood and Cronx discoveries could be developed via a single horizontal well and also potentially determine whether other discoveries within our core SNS licence area that have currently been mapped as small, could in fact be commercially developed as part of the hub strategy. The base case recovery estimate for Elgood is 15 BCF, based on IOG internal estimates.
Mark Routh, CEO and Interim Executive Chairman of IOG said:
The current environment provides great opportunities for IOG. This is the right time to increase the size of the commercial resources in our Southern North Sea Hub centered on the Blythe discovery and take advantage of the relatively favourable gas price environment and the falling rig rates, reducing development costs.
We continue to pursue opportunities to acquire producing assets and to grow the portfolio by M&A activities.
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.
Post completion of the Cronx acquisition IOG will have six licences in the North Sea: The Blythe and Skipper licences are co-owned 50% with Alpha Petroleum Resources (formerly ATP Oil and Gas UK Ltd). IOG has a 100% working interest in two other licences awarded in the 27th licensing round. One is to the west of and adjacent to Skipper, which contains the Theakston and Moorhouse prospects and the other is to the east of Blythe containing the Truman prospect and Harvey discovery. Both these 100% owned licences have potential resources that could be tied back to developments at Skipper and Blythe respectively. The Blythe owners are preparing for the submission of the Blythe Field Development Plan.
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 Petroleum Resources Ltd (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 dated September 2013.)
The partnership is working towards submitting a Field Development Plan for Blythe as soon as possible. IOG is targeting first gas from the Blythe field in Q4 2016 or Q2 2017 (depending on whether a platform is required) but the final development schedule has yet to be formalised.
The Skipper oil discovery is in Blocks 9/21a in the Northern North Sea in licence P1609 which is 50% co-owned by IOG and Alpha Petroleum Resources Ltd (operator). Skipper needs further appraisal by drilling a well to retrieve core and oil samples in order to design the optimum field development plan for the field. Skipper has independently verified gross 2C resources of 26.2 MMBbls which is 13.1 MMBbls net to IOG. 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 Competent Person’s Report dated September 2013.)
The Cronx acquisition (IOG 100%) (Block 48/22a, licence P1737) is subject to completion. The Cronx gas discovery is 14km north-west of the Blythe field in which IOG holds 50%. Cronx was discovered in 2007 by well 48/22b-6 drilled by Perenco UK Ltd.
IOG commissioned an independent Competent Person’s Report (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 pilot well in 2015, subject to rig availability, the necessary permits and funding, which IOG currently estimates to be £6.1m. 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. The well would be reused and extended into a producing well as part of the field development. IOG is currently evaluating options for the development and export of the Cronx gas.
The Department of Energy and Climate Change announced the provisional award of block 48/22c, licence P2260 to IOG at 100% working interest on 6 November 2014.
The Elgood Field was discovered in 1991 by well 48/22-4, drilled by Enterprise Oil. It is a good quality Rotliegend Leman sandstone reservoir that tested gas at rates in excess of 17 MMscfd. Gas was also tested from the Hauptdolomit interval 700 feet above the Leman interval but at low rates without stimulation.
IOG estimates the most likely gas in place in the Elgood Leman discovery is 14 BCF with a further 5 BCF in the Hauptdolomit interval. There are also two prospects identified on the block which IOG refers to as Tetley and Rebellion.
Competent Person’s Statement:
In accordance with AIM Note for Mining and Oil & 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 33 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.