REG - IOG PLC - Blythe H2 First Gas

IogAnnouncement

13/06/2023 07:00

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RNS Number : 4745C  IOG PLC  13 June 2023

13 June 2023

 

IOG plc

 

Blythe H2 First Gas

 

IOG plc ("IOG", or "the Company"), (AIM: IOG.L) confirms that First Gas has
been safely delivered from the Blythe H2 well and provides an update on the
planned near-term intervention.

 

Rupert Newall, CEO, commented:

 

"IOG's Drilling, Operations and Engineering teams have done an excellent job
to bring the Blythe H2 well onstream within one week of our initial
three-month guidance, despite losing over a month to the well control event.
Strong collaboration with Petrofac (Well Operator), Shelf Drilling (rig
contractor), ODEAM (infrastructure Duty Holder) and Perenco (terminal
operator), among others, has enabled safe and efficient execution of this
important well.

 

We are expediting equipment to the rig to resolve the apparent downhole
mechanical blockage, which if successful could increase H2 flow rates by
around month end to the 30-40 mmscf/d range that we guided pre-well. In
addition, we continue to work very actively on next steps beyond H2 and expect
to provide further updates shortly."

 

H2 First Gas

·      First sales gas safely delivered from H2 into the Saturn Banks
Reception Facilities and Bacton terminal on 12(th) June

·  H2 brought onstream in three months and one week from spud date, versus
initial guidance of approximately three months, despite 34 days lost to the
well control event

o  Hook-up and commissioning ("HUC") completed well ahead of schedule

·      The well is in the ramp-up phase towards an expected initial
maximum rate

o  Maximum well test dry gas rate was 22.8 mmscf/d and 280-336 bbl/d
condensate at the export pipeline pressure of 1250psi

 

Planned H2 intervention

·     During testing, H2 flow appeared to be choked back below the
levels indicated by reservoir properties by a downhole restriction

·   Analysis of pressure and temperature data from the well test indicates
a downhole restriction above the reservoir is choking back production

·    Pressure build-up data since the test indicates reservoir
permeability is in line with pre-drill expectations - further supporting the
view that the issue is mechanical rather than reservoir driven

·    Analysis of combined pressure and temperature data infers that a
potential cause for the restriction may be a partially activated downhole
valve

·    H2 is intended to be flowed at initial rates until specialist
downhole equipment arrives on the rig within the next two weeks to assess and,
if necessary, manually actuate this valve

·    This intervention would likely take up to a week at an estimated
incremental cost net to IOG of c.£0.5 million

·     If successful, the intervention would be expected to increase H2
flow rates to the previously guided 30-40 mmscf/d range

 

Production plan

·    The H1 well was shut in as planned during the final H2 HUC.
Post-intervention, the plan remains to produce initially from H2 only, to
flush formation water out of the Saturn Banks Pipeline System and reduce
associated opex

·     No faults or fractures were encountered in the H2 reservoir
section and no formation water was observed on testing

·     Following a period of shut in to allow the water levels to
re-equilibrate, the plan is to reopen H1 periodically at lower rates to flow
gas and condensate with limited water production

Corporate and financial update

·    The Company remains in discussions with an ad-hoc group of
bondholders as stated on 7(th) June and will keep the market updated
accordingly on progress

·      Management continues to be fully focused on maximising production
and managing costs very tightly

·    Over June to date, UK NBP Day-ahead gas pricing has remained very
volatile, ranging from its year-to-date low of 54 p/therm on 1(st) June back
to 80 p/therm by 9(th) June

·     While this recent increase is encouraging, significant volatility
and uncertainty persist

 

UK fiscal regime

·      IOG also notes the UK government's announcement on 9(th) June of
price floors for the Energy Profits Levy ("EPL"), whereby oil must remain
below $71.40/bbl and gas below 54 p/therm ($40.7/boe) for six consecutive
months in order for the EPL to be suspended

·    The Company welcomes the introduction of EPL price floors, however
expects the actual impact to be minimal given the particularly low gas floor
and the requirement for both gas and oil floors to be met

·    The change looks likely to favour larger integrated energy
businesses with international production and LNG trading capabilities at a
time when greater focus is needed on developing domestic low carbon gas
supplies to displace higher carbon intensity LNG from overseas and improve
security of supply

·     The North Sea is a relatively mature basin and the UK gas market
is increasingly dependent on imports. The Company continues to advocate for
the reintroduction of a small fields allowance which would specifically help
to stimulate much-needed further investment in lower carbon intensity domestic
gas fields to displace imported LNG

 

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                                            +44 (0) 20 7036 1400

 Rupert Newall (CEO)

 Dougie Scott (COO)

 James Chance (Head of Capital Markets & ESG)

 finnCap Ltd                                        +44 (0) 20 7220 0500

 Christopher Raggett / Simon Hicks

 Peel Hunt LLP                                      +44 (0) 20 7418 8900

 Richard Crichton / David McKeown

 Vigo Consulting                                    +44 (0) 20 7390 0230

 Patrick d'Ancona / Finlay Thomson

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 (http://www.iog.co.uk)
.

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