REG - IOG PLC - Operational Update

IogAnnouncement

25/01/2022 07:05

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RNS Number : 4533Z  IOG PLC  25 January 2022

25 January 2022

 

IOG plc

 

Operational Update

 

IOG plc ("IOG", or "the Company"), (AIM: IOG.L), the Net Zero UK gas and
infrastructure operator focused on high return projects, provides a further
update on Phase 1 operations.

 

Andrew Hockey, CEO of IOG, commented:

 

"I am on site again today at Bacton onshore terminal reviewing the latest
progress, which is now 93% complete. Although it is very frustrating that it
has been slower than planned, we are making every effort with the terminal
operator Perenco to facilitate the fastest possible resolution. An expanded
team is working days and nights aiming to be ready for back-gassing in
mid-February, with First Gas expected approximately a week later.

 

Meanwhile, working with our drilling contractors and expert consultants, we
have also been proactively engineering several options to resume safe drilling
operations at Southwark. The timeline is expected to become clearer once we
have analysed newly acquired seabed survey data this week.

 

We will keep shareholders regularly updated through these important final
steps in bringing Phase 1 onstream."

 

Saturn Banks Reception Facilities (SBRF) at Bacton Gas Terminal

 

SBRF construction and pre-commissioning works, which are controlled by Bacton
Gas Terminal operator Perenco UK Limited (PUK) on behalf of IOG, were 93%
complete by Sunday 23 January. IOG senior management is in continuous dialogue
with their PUK counterparts to expedite onshore completion as fast as
possible. Work continued throughout the year end 2021 period and the on-site
team has been expanded, albeit total personnel numbers are limited by the
terminal operator's safety limits and have also been affected by Covid-19
related absences.

 

However, progress is being made and full readiness for commencement of
back-gassing of the offshore pipeline system is targeted for mid-February.
First Gas from both Blythe and Elgood is expected approximately a week
thereafter. An important recent milestone was the handover of Blythe platform
communications and Elgood subsea controls to the Bacton control room following
successful testing of the integrated control and safety systems. The remaining
work to complete primarily consists of the final electrical and
instrumentation, construction and pre-commissioning, and system leak testing,
all of which are being executed on both day and night shifts.

 

Southwark

 

As previously announced, earlier this month the Noble Hans Deul rig was
obliged to suspend drilling operations at Southwark as seabed conditions were
causing excessive movement relative to the platform. Since then, the Company
and its drilling contractors, assisted by technical experts experienced in
similar situations, have been working constructively together to urgently
investigate a range of potential solutions. Meanwhile, on 15 January the rig
was moved to a safe location in the Elgood 500m zone where routine inspections
are underway. Initial indications are that the rig remains fully serviceable.

 

Data from a new Southwark seabed survey is now being analysed to inform
relocation and remediation options. The optimal plan would potentially enable
the rig to safely resume Southwark drilling in the next 4-6 weeks, with scour
protection applied after arrival. However, this remains subject to further
investigation and an alternative plan may be required. Next steps and timing
are likely to be clearer once survey data analysis is completed this week.

 

Further updates will be made as appropriate on SBRF completion at Bacton,
Blythe/Elgood start-up and resumption of Southwark drilling.

 

Capital expenditure

 

The Company previously indicated that the gross outturn total Phase 1 capital
expenditure was anticipated to exceed the original £305.5 million Field
Development Plan (FDP) budget by up to 10%. Unplanned interruptions to the
drilling campaign, additional requirements for offshore pre-operating
activities and the need for an expanded scope of subsea and pipeline
installations over recent months have now increased the anticipated gross
outturn total Phase 1 capital expenditure to up to 20-25% over the FDP budget
once the Southwark wells have been completed. However, based upon our revised
project schedule no additional financing requirement is currently expected to
be required to bring all three Phase 1 fields onstream. As a prudent
additional measure, the Company also recently signed a €5 million working
capital facility with a recognised international bank. Meanwhile, despite
recent volatility, the UK NBP gas forward curve currently remains
significantly above its long-term historical annual average. Further guidance
will be issued in due course.

 

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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