05 Nov 2014
Fundraising and Board Changes
Independent Oil and Gas plc (“IOG”), (AIM:IOG.L), the North Sea focused oil and gas company, updates shareholders on its recent financing activities and announces changes to the board of directors (“the Board” or “the Directors”).
IOG is pleased to announce it has raised £450,000 (the "Subscription Proceeds") through the issue of 4,090,910 new ordinary shares of 1 pence each in the capital of the Company (“IOG Shares”) at an issue price per IOG Share of 11p (the "Issue Price"), representing a 0.25p discount to the closing mid-price of an IOG Share on 4 November 2014 ("New IOG Shares"). The Directors are subscribing for, in aggregate, £100,000 of New IOG Shares, with the balance of the New IOG Shares having been subscribed for by new and existing institutional and other investors. The Subscription Proceeds, alongside IOG’s existing cash resources, will provide sufficient working capital for IOG’s activities for at least the next six months.
As stated in IOG’s interim report, published on 30 September 2014, the Board has been exploring a number of routes to funding its portfolio, including farm outs, debt funding, further equity issuance and other corporate activity. The Directors believe that the acquisition of existing producing assets, funded substantially or entirely by debt, should significantly reduce IOG's long term funding requirements and accordingly remains a top priority.
Changes to the Board of Directors
Mehdi Varzi has informed the Board of his decision to retire as Chairman and resign as a director of the company with immediate effect, in order to devote his time fully to other interests. Mark Routh, IOG’s CEO will become interim Executive Chairman of the Board, whilst the Company considers the most appropriate structure of its Board.
Full details of the subscription by and the resultant shareholdings of each Director are as follows:
IOG has a stated aim of operating from a low cost base and accordingly the Board continues to defer part or all of their respective salaries to minimise the cash outflows from the business. Accordingly the outstanding fees to the Directors will shortly be converted into options over IOG Shares (“the Options”), based on the weighted average mid-market price per IOG Share for the periods September 2013 to February 2014 and March 2014 to August 2014 of 30.53p and 30.30p respectively.
The Options to be granted to each Director are included in the notes below.
The participation of each Director in the Fundraising is a related party transaction pursuant to AIM Rule 13. Since all of the Directors are participating in the fundraising, there are no independent Directors for the purposes of AIM Rule 13. IOG's nominated adviser, finnCap Limited, is satisfied that the terms of the Directors' subscription are fair and reasonable insofar as shareholders are concerned.
New IOG Shares
Application has been made for, in aggregate 4,090,910 (four million, ninety thousand, nine hundred and ten) New IOG Shares to be admitted to trading on AIM. Admission is expected to occur at 8:00 am on 19 November 2014.
Following Admission, there will be 69,247,759 IOG Shares in issue. Accordingly this number may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in the Company under the FCA's Disclosure and Transparency Rules.
Mark Routh, CEO and Interim Executive Chairman of IOG said:
We are pleased to have closed this fund raise despite the difficult market conditions. We will continue to look at all options to funding and developing our discoveries with the aim of getting them into production as soon as we possibly can. All members of the management team are significant shareholders in IOG and are aligned with all shareholders to deliver value. We look forward to providing further updates in due course.
It is with regret that Mehdi has decided to retire from the Board to fully devote his time to pursuing other interests. On behalf of all of the Directors and the wider IOG team, I extend my gratitude to Mehdi for his invaluable input over the last few years. We wish him all the best for the future.
Directors’ Salary Sacrifice Share Conversion Options Details:
As announced at the time of admission to AIM in September 2013, members of the Board agreed to sacrifice part or all of their fees or salaries due into New IOG Shares. The conversion price is calculated every six months at the volume weighted average price at which shares were traded in each six month period. For the first two six month periods since AIM Admission the conversion price is 30.53p and 30.30p. The number of shares thus calculated are to be awarded as 1p options to compensate for the salaries or fees sacrificed. This assists in keeping the company overheads to a minimum.
The number of ordinary shares under option awarded and due to directors of IOG are as follows:-
Salary Sacrifice Options at 1p exercise price granted on 19 November 2014 exercisable by 1 June 2015:
|Name||Salary Sacrifice Period||Number||Conversion|
|Mark Routh||Sept 2013 - Feb 2014||162,114||30.53p|
|Peter Young||Sept 2013 - Feb 2014||122,814||30.53p|
|Marie-Louise Clayton1||Sept 2013 - Feb 2014||24,563||30.53p|
|Michael Jordan2||Sept 2013 - Feb 2014||24,563||30.53p|
|Mark Routh||1 March-31 August 2014||218,672||30.30p|
|Peter Young||1 March-31 August 2014||71,405||30.30p|
|Marie-Louise Clayton1||1 March-31 August 2014||45,699||30.30p|
|Michael Jordan2||1 March-31 August 2014||24,754||30.30p|
|Paul Murray||10 March-31 August 2014||51,878||27.80p|
|Mehdi Varzi||1 June-31 August 2014||41,256||30.30p|
- This option has been granted to Clayton Consulting Partners Limited, a company in which Marie-Louise Clayton is a majority shareholder and a director.
- This option has been granted to Acura Oil & Gas Limited, a company in which Michael Jordan is the majority shareholder and director.
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 five 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.
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%) 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.