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RNS Number : 5434E IOG PLC 11 March 2022
11 March 2022
IOG plc
Gas Sales Agreement
IOG plc ("IOG", or "the Company"), (AIM: IOG.L), the Net Zero UK gas and
infrastructure operator focused on high return projects, is pleased to update
on gas sales arrangements and progress towards resumption of Southwark
drilling.
Gas Sales Agreement
The Company has executed a new gas sales agreement ("GSA") with BP Gas
Marketing Limited ("BPGM"). This covers its equity gas from all of the Saturn
Banks Phase 1 fields (Blythe, Elgood, Southwark), plus the Nailsworth and
Elland fields which are part of Phase 2, on a long-term basis with break
clauses after September 2023. The GSA replaces the gas sales agreement
originally signed with BPGM in February 2014, which covered the Blythe field
only, on improved terms for the Company.
Under this GSA, gas will be sold on a day-ahead daily nomination basis at a
price linked to the National Balancing Point (NBP, the UK traded gas
benchmark). The GSA incorporates the potential, subject to credit approval,
for physical gas hedging up to 50% of forecast production over various
periods, in line with the Company's hedging strategy.
Under this hedging strategy, the Company expects to start executing a prudent
wedge-shaped hedging programme, using simple structures, to reduce cashflow
volatility whilst allowing shareholders to retain appropriate gas price
exposure. This would entail a higher proportion of forecast production hedged
over earlier periods reducing to a lower proportion hedged over later periods,
on a rolling basis. IOG has not undertaken any hedging prior to production and
therefore currently is fully exposed to prevailing UK NBP gas prices.
Southwark
The Company has in parallel been making good progress with the required
regulatory and commercial processes to implement the rock dumping solution to
the seabed scour issue at the Southwark field location. Resumption of
Southwark drilling therefore remains targeted for later this month,
potentially moving to mid-April due to the interplay of logistical factors and
tidal conditions. On that basis, Southwark First Gas currently remains
targeted for Q3 2022.
Andrew Hockey, CEO of IOG, commented:
"It is another very positive step for IOG to have this more comprehensive Gas
Sales Agreement in place with a highly credible counterparty in BP Gas
Marketing with whom we have enjoyed a long relationship already.
In parallel, I can confirm that the backgassing and ready for start-up
processes have been proceeding this week as planned. It is also important to
note that we have been making good progress in overcoming the necessary
hurdles to resume safe drilling at Southwark over the coming weeks."
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
Andrew Hockey (CEO)
Rupert Newall (CFO)
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 / Chris McMahon / Oliver Clark
About IOG:
IOG's Saturn Banks Project targets a gross peak production rate of 140 mmscf/d
(c. 24,000 Boe/d) from gross 2P gas reserves of 302 Bcfe¹ and management
estimated 2C gas Contingent Resources of 132 Bcfe, via an efficient hub
strategy based on co-owned infrastructure. In addition to its 2P reserves at
Blythe, Elgood, Southwark, Nailsworth and Elland and 2C contingent resources
at Goddard, it has management estimated gross 2C contingent resources of 23
Bcfe at Abbeydale and gross unrisked mid-case prospective resources of 36 Bcfe
at Kelham North, 42 Bcfe at Kelham Central, 58 Bcfe at Thornbridge, 31 Bcfe at
Southsea, 28 Bcfe and 19 Bcfe in the two Goddard flank structures. The Orrell
discovery, with management estimated gross 2C contingent resources of 42 Bcfe,
also lies approximately 50% on the P2442 licence held 50% by IOG. IOG also
holds a 50% operated stake in Licence P2589, containing the Panther and
Grafton gas discoveries with management estimated gross mid-case contingent
resources of 46 Bcfe and 35 Bcfe respectively. In addition, IOG continues to
pursue value accretive acquisitions to help generate further significant
shareholder returns.
¹ERC Equipoise Competent Persons Report: October 2017, adjusted by Management
to account for updated project timing and compression
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