TIDMIOG
RNS Number : 9816X
IOG PLC
02 May 2023
2 May 2023
IOG plc
Corporate and Operational Update
IOG plc ("IOG", or "the Company"), (AIM: IOG.L) provides a
corporate and operational update ahead of its Annual General
Meeting which is being held at 10.00am this morning. An
accompanying presentation is available at the IOG website and can
be accessed via this link: https://bit.ly/3LuKbPW
Highlights
-- Blythe H1 producing steadily at 17 mmscf/d gross rate, averaging 14.9 mmscf/d year to date
o 95.4% Operating Efficiency and 86.4% Production Efficiency
-- Steady progress towards resolution of Blythe H2 drilling issues highlighted on 18 April
o Targeted onstream by end of Q2, then expected to build up to
30-40 mmscf/d
o Additional cost impact net to IOG estimated to be GBP2-3
million
-- Central Cluster: additional conventional gas resources and
several new prospects identified on P2589 licence (32(nd) Round)
following interpretation of reprocessed 3D seismic
-- Southern Cluster: advanced planning for Kelham North/Central appraisal well
-- Northern Cluster: farm-out process launched for up to 50% of
Goddard with joint venture partner
-- Interviews with regulator on nine 33(rd) Round SNS licence
applications due later this month
o If successful, these would add valuable discovered resources
to each cluster
-- Cash balance of GBP31.9m at end of April, of which GBP6.8m was restricted
-- Carefully assessing forward capital allocation and evaluating balance sheet options
Rupert Newall, CEO, commented:
"While Blythe H1 continues to produce steadily through our
co-owned infrastructure, our team have worked closely with Petrofac
and Shelf to handle the complex well control challenge on H2 safely
and professionally. After coming onstream, H2 production is
expected to reach an initial peak 30-40 mmscf/d, enhancing our cash
flow. Meanwhile, we continue to carefully manage costs, optimise
the portfolio and evaluate future investment options alongside our
joint venture partner.
In that context, we continue to enhance the portfolio via our
low-cost strategy of licensing rounds and 3D seismic
reinterpretation. For example, we have identified valuable further
undeveloped discovered conventional gas resources and exploration
upside on our 32(nd) Round P2589 licence, part of the Central
Cluster and within short tie-back distance to the Southwark
platform. Additionally, our nine 33(rd) Round licence applications
are also progressing, potentially adding discovered resources to
all four of our production clusters."
Dougie Scott, COO, commented:
"The gas/oil kick encountered from the Hauptdolomit has now been
controlled without needing to sidetrack, despite three challenging
complications: significant associated drilling fluid losses, a
stuck drill string and a plugged drillpipe. The 8 1/2 " hole
section has now been drilled to a revised depth above the
reservoir, where the 7" liner will be run and cemented to isolate
the overpressure. This will enable the well to continue to the
reservoir in the planned 6" hole size."
Production: Blythe H1 well
-- The current gross unconstrained H1 production rate is approximately 17 mmscf/d
-- Over 2023 year to date, average gross production has been
14.9 mmscf/d, factoring in liquid letdowns alongside other Bacton
gas streams and planned H2-related shutdowns
-- Operating Efficiency year to date has been 95.4% and Production Efficiency 86.4%(1)
-- Safe hook-up and commissioning of the H2 well is expected to
require 3-5 days of planned downtime in both May and June
respectively
Drilling: Blythe H2 well
-- Substantial progress made in resolving the well control
challenge in the Hauptdolomit formation above the reservoir
highlighted on 18 April, limiting the likelihood of needing a
sidetrack
-- The situation has been uniquely challenging given the
confluence of abnormal formation pressure with an influx of
hydrocarbons, drilling fluid losses, the bottom-hole assembly
becoming stuck and drill string being plugged
-- However, close collaboration between key IOG personnel and
the Petrofac and Shelf Drilling teams has enabled the latter two
issues to be resolved, materially improving the situation
-- Two cement plugs as well as specialist Lost Circulation
Materials have been deployed, significantly mitigating the drilling
losses
-- The 8 1/2 " hole section has been drilled to a revised depth
and 7" liner will be run and cemented to isolate this section,
enabling continuation of drilling into the reservoir as planned
-- On that basis, the well is targeted onstream by the end of
Q2, at an estimated additional cost impact of GBP2-3 million net to
IOG
o The initial well cost estimate was GBP13 million net to IOG,
including associated platform modifications, before any potential
tax shelter or investment allowances
-- In a success case, H2 would deliver several key benefits:
o Gas production rates initially expected at 30-40 mmscf/d after
a ramp-up a period of displacing liquids in the Saturn Banks
Pipeline System
o Lower aqueous liquid arrivals into Bacton, reducing associated
operating costs
o Increase in ultimate recovery of Blythe gas reserves
Central Cluster (P1915, P2342, P130, P039, P2589)
-- The Central Cluster entails potential development of at least
five contiguous licences in the broader Vulcan and Jupiter areas of
the SNS
-- This includes the Southwark, Nailsworth, Elland and Grafton
fields plus several clearly identified potential additions
containing both conventional and tight gas resources
-- The P2589 Grafton licence, acquired in the 32(nd) UK Offshore
Licensing Round, has undergone 3D seismic reprocessing to Pre-Stack
Depth Migration (PSDM)
-- Interpretation of this data has identified two structures
containing undeveloped conventional gas within the Europa field,
which IOG has renamed Kinnegar
o Produced by ConocoPhillips over 2000-16, Kinnegar lies
approximately 13km north-east of Southwark and directly south of
Grafton
o These structures initially appear to be of commercial size;
further analysis is underway to establish an estimated contingent
resource range
o Several further exploration targets also identified between
Southwark and Kinnegar
-- The Southwark platform would be the key gathering
infrastructure for the Central Cluster, providing the conduit to
the 24" Saturn Banks Pipeline System into Bacton
-- A technical working group including third-party experts is
progressing a deep-dive assessment of the potential deliverability
of the Southwark A1 and A2 wells, as well as the future Nailsworth
and Elland wells
-- If successful, the JV's 33(rd) Round licence applications
would add highly synergistic further discovered gas resources to
the Central Cluster
Southern Cluster (P2442)
-- Planning is well advanced for drilling of the Kelham
North/Central appraisal well in continuation from Blythe H2,
subject to final JV approval
-- The appraisal well is intended to prove up a high-return,
fast-payback Southern Cluster potentially including Kelham North,
Kelham Central, Abbeydale, Orrell (which lies partly on block),
Thornbridge and Thornbridge Deep, plus potential 33(rd) Round
additions
-- The gross success case appraisal well cost is estimated at
GBP14-18 million (GBP7-9 million net to IOG) before any tax shelter
or investment allowance
o Benefits from attractively priced extension option on the
Shelf Drilling Perseverance rig
-- The current licence term expires on 31 March 2024, following a six-month extension
Northern Cluster (P2438)
-- The joint venture (JV) of IOG and CalEnergy Resources (UK)
Limited (CER) has initiated a farm-out process to bring in an
additional partner for, in aggregate, an up to 50% working interest
of the P2438 Licence (up to 25% each)
-- Goddard is one of the largest undeveloped SNS gas discoveries
(gross 2C: 115 billion cubic feet), with several potential export
routes including the Saturn Banks infrastructure
-- Advanced planning is underway to drill the Goddard appraisal
well in continuation from Kelham North/Central, at an estimated
gross cost of GBP14-18 million, before any tax shelter
-- The well would enhance the commerciality of Goddard by
confirming reservoir quality and deliverability, defining the
gas-water contact and obtaining pressure data
-- Goddard is intended to be the core field in a Northern
Cluster potentially including two adjacent Goddard Flank structures
and the Southsea prospect, plus potential 33(rd) Round
additions
-- The current licence term expires on 31 March 2024, following a six-month extension
Corporate
-- The Company held GBP31.9m in cash at the end of April, of which GBP6.8m was restricted
-- Given the current lack of Southwark production, management
continues to carefully control costs, assess all future capital
allocation and evaluate options to optimise the balance sheet
(1) Operating Efficiency factors in unplanned downtime and
Production Efficiency factors in both planned and unplanned
downtime.
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
Rupert Newall (CEO)
Dougie Scott (COO)
James Chance (Head of Capital Markets & ESG) +44 (0) 20 7036 1400
finnCap Ltd
Christopher Raggett / Simon Hicks +44 (0) 20 7220 0500
Peel Hunt LLP
Richard Crichton / David McKeown +44 (0) 20 7418 8900
Vigo Consulting
Patrick d'Ancona / Finlay Thomson +44 (0) 20 7390 0230
About IOG:
IOG is a UK developer and producer of indigenous offshore gas.
The Company began producing gas in March 2022 via its offshore and
onshore Saturn Banks production infrastructure. In addition to its
production assets, IOG operates several UK Southern North Sea
licences containing gas discoveries and prospects which, subject to
future investment decisions, may be commercialised through the
Saturn Banks infrastructure. All its assets are co-owned 50:50 with
its joint venture partner CalEnergy Resources (UK) Limited. Further
details of its portfolio can be found at www.iog.co.uk .
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